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Investment Options for Super

Investment Options for Super

When considering investment options for super, there are several factors to think about. This therefore is the very reason that you should consult with your financial adviser before making those all-important investment decisions.

For example, let’s first examine the different types of investments and returns.

Investment Options for SuperDEFENSIVE INVESTMENTS

Defensive investments are deemed to be lower risk investments. Reason being is that they aim to provide income while protecting the capital invested.

Consequently, cash and fixed interest are thought of as defensive investments.

They’re typically used to:

  • Meet short-term financial goals (up to two years).
  • Diversify a portfolio.

In brief, their characteristics are:

Cash –  
  • Includes bank accounts, high interest savings accounts and term deposits
  • Used to protect wealth and diversify a portfolio
  • Very low risk of losing money
  • Time frame: short term, 0–3 years
Fixed Interest –
  • Includes government bonds, corporate bonds, debentures and capital notes
  • Used to earn a steady rate of income and diversify a portfolio
  • Low risk of losing money
  • Time frame: short term, 1–3 years

GROWTH INVESTMENTS

Growth investments are generally higher risk and offer a higher potential return when compared to defensive investments.

As such, they aim to give capital growth and some provide income (for example, dividends for shares or rent for property). However, the price of growth investments can be volatile over short periods of time.

Growth investments are typically used to:

  • Earn a higher rate of return (though this comes with higher risk).
  • Meet longer-term financial goals, e.g., five years plus.

Growth investments include shares, property and alternative investments.

In summary, their characteristics are:

Property – 
  • Includes investing in residential, commercial and industrial property
  • Used to earn a steady rate of income (rent) plus offer capital growth
  • Medium-to-high risk of losing money
  • Time frame: long term – at least 5 years.
Shares –
  • Investing in a company. You get to vote on management and share in the profits.
  • Offer capital growth and some provide income (dividends)
  • High risk of losing money
  • Time frame: long term, at least 5 years.

Alternative Investments –

  • Includes private equity, infrastructure, commodities (including precious metals) and other investments that don’t fall into the investment classes above
  • Most aim to provide capital growth. Some have the potential for steady income
  • Many alternative assets are high risk
  • Returns differ depending on the type of alternative investment.
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