Investments
Investment risks
All investing involves risk.
In seeking higher returns for your super, the trade-off is taking on increased risk.
Generally, shares and property have higher risk and higher expected returns than fixed interest and cash. Therefore, the asset mix in each investment option is important in assessing the option’s expected return and risk.
“Risk” means the change in value of investments away from expectations. The value of higher risk investments fluctuates more widely and frequently and is more likely to result in loss of value than lower risk investments. Each investment option has a different risk profile.
The value of investments is influenced by many factors, such as economic and market conditions, government policy, interest rates, currency movements, inflation and the performance of the fund managers engaged by Funds SA.
Some important risks are:
Inflation
Market
Manager performance
Interest rates
Foreign currency
Derivatives
Counterparty risk
Underlying investments
The value of each option’s underlying investments can rise as well as fall. Some of the most common influences on underlying investments include:
Australian shares. Individual shares are affected by factors affecting the share market generally and also by the profits and expected profits of individual companies.
International shares. There are similar risks as for Australian shares. Additionally, they are affected by political factors and the currency exchange rate of the country where the shares are held.
Property. Economic factors such as inflation and unemployment will affect the return on property as well as the location and quality of the property itself.
Diversified fixed interest investments. Changes in interest rates, as well as the risk of loan repayment default, will result in a change in value of this investment.
Other risks specific to super investments include changes to super or taxation laws, which may affect the accessibility or value of your investment.