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Conservative, balanced or growth: Which super investment option is right for you?

You make a thousand little decisions every day –  home cooking or takeout, reply or ignore, spend or save, go out or stay in. When you’re constantly deciding on little things sometimes the important decisions, like choosing the right super investment option, can be put to the bottom of the pile.

To help ensure present-you makes the right decision for future-you, we’ve put together a quick guide on the three basic super investment options.

Which super investment option will help you reach your goals?

What is investment risk?

Before we head straight into discussing the range of investment options, it’s best to have a good understanding about risk. To put it simply, all investment options invest in one or more asset classes (such as shares, property, bonds and cash); investment risk is determined by the proportion of risky assets that are included in your portfolio.

If your investment mix has a high level of risky assets (eg shares, property), then it may be considered as a high risk or growth option. On the other hand, a portfolio that has a high allocation of stable or low risk assets (such as cash, fixed interest investments), is generally considered as low risk or a conservative investment option.

Growth investment option: risk and reward

The growth investment option involves a higher level of risk and volatility than other options but aims to provide better returns over the long term. Because of the slightly higher level of risk associated with this investment option, it’s often better suited to long-term investors who are prepared to take a hit in the short term to achieve larger gains in future.

If you’re still young and you’re not planning to withdraw your funds in the next seven-plus years, it may be worthwhile considering growth investment options. These options generally invest heavily in property and shares, which means if the market is strong or weak at any given time, your investment will perform likewise.

Balanced investment option: the best of both worlds

Balanced or MySuper investment options in most funds offer a middle ground between growth and conservative options.

Balanced investment options sit in the middle of growth and conservative portfolios in terms of volatility, risk and potential return. They’re for investors who are cautious of the volatile behaviour of growth options but aren’t prepared to sacrifice the potential for returns.

This option could suit medium-term investors who have a minimum investment timeframe of five years or those who are cautious of risk in general. Usually, the asset mix of balanced options are similar to that of growth options, although with a lower percentage invested in asset classes like property and shares, and higher percentage allocated to bonds or infrastructure.

Conservative investment option: safe as houses?

Conservative investment options generally have a lower level of risk and consequently produce lower and more stable returns. This option may be ideal for those who are considering withdrawing their funds in the next three years, as your money will be less exposed to volatility and therefore less likely to dip in the short term. Conservative funds generally invest more into defensive assets such as cash and fixed interest investments such as bonds.

When it comes to choosing a super investment option, your future could depend on the decisions you make now – so take a little time to make sure you’ve made the right choices by weighing up the options around investment strategies, timeframe, asset-mix, risk-return and volatility, to name a few. If you’re still unsure, get in touch with us here at Club Plus Super to make sure you’re on the right track.