Are you using the right super risk profile?

When you open an account with a super fund it will generally want to know what level of risk you are prepared to take with your investments. This can vary depending on your own approach to risk, and where you are on your superannuation journey.

Generally, the younger you are, the earlier you are on that journey, the more you may be prepared to take on a higher level of risk. As you get closer to retirement, and hopefully have built up a nice balance in your super fund, the more you might be prepared to lower that level of risk in your investments.

When you first set up an account with a super fund you will likely be asked a series of questions to help assess your risk profile. For example, you could be asked about your aims and objectives for your super, and how comfortable you are about losses and gains in your investments over time.

Your risk profile will then be used by your fund provider to determine how your super contributions are invested.

It’s important you keep track of your risk profile as it will likely change over time depending on your circumstances, including your age, how you see your fund perform and what returns you see on your investments.

The most common risk profiles

The government regulator ASIC’s Moneysmart website defines risk as the possibility that your investment may fall in value or earn less than expected.

Every investment carries with it some level of risk. Generally speaking, accepting a higher level of risk is supposed to offer the potential for greater returns on your investments, which could help your super grow at a faster rate.

But with that comes a chance that you may not see such great returns, and may even encounter losses, depending on how your super is invested.

A lower level of risk may lead to slower, steadier growth in your investments, but with less of a risk of losing money.

It’s up to each super fund to determine how it describes the various levels of risk members can choose from. They often use terms such as conservative, balanced, growth and aggressive. They may use other terms but the important thing is to look at how each is described.

Here are a few examples of how each level of risk may be defined.

Conservative: low risk

A conservative investor is one who primarily seeks to minimise the risk of losing their accumulated wealth. They are comfortable in accepting lower returns in exchange for a higher degree of stability.

Balanced: medium risk

A balanced investor seeks to both reduce risks and enhance returns. They are willing to accept modest risks to seek higher long-term returns than a conservative investor.

Growth: high risk

A growth investor values higher long-term returns and is willing to accept considerable risk. They are comfortable with short-term fluctuations and/or losses in exchange for the potential of higher long-term returns than a conservative or balanced investor.

Aggressive: very high risk

An aggressive investor values maximising returns and is willing to accept substantial risk. They may endure extensive volatility and significant losses, particularly in the short-term, in the hope of maximising long-term returns.

If you’re comparing superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.

Get to know your risk profile

If you don’t choose a risk profile for your investments then the Association of Superannuation Funds of Australia (ASFA) says you may be allocated to your super fund’s default option. You can change this later to a specific risk profile.

Dr Martin Fahy, CEO of ASFA, told Canstar your investment choice can have a significant impact on your retirement savings.

“Therefore it’s important to take the time to understand the different investment options available and their potential investment earnings,” he said.

“It’s critical for individuals and couples to be clear on how much risk they feel comfortable taking, the level of investment return they are seeking and also their investment timeframe.

“The answers to these questions will guide you in choosing the right investment option or mix of options for your superannuation savings.”

Some super funds have a risk profile calculator available on their website, such as AMP, Hesta and REI Super, to name a few. Use these as a guide only to help you assess what level of risk you are prepared to take with your investments.

If you are considering a change to your risk profile it may be wise to talk to your super fund provider or financial adviser first, to make sure you are making the right choice that suits your circumstances.

Cover image source: EB Adventure Photography/

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