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Understanding investments
How you invest your super can make a big difference to your final account balance on retirement. So it's important to have a basic understanding about investments, so you can choose an investment strategy that will help you to meet your retirement goals.
Asset classes
There are four main asset classes and each of them cango up or down. The Fund’s investment options invest inthese asset classes in different amounts. Here’s a quickexplanation of each of them:
Shares (known as a “growth” asset)
When you buy shares (or equities as they’re also called),you’re actually buying a part ownership in a company. You can invest in Australian and international shares.
The price of shares can be infl uenced by many things, including how the company is performing and economic, social and political factors.
Shares usually offer the best chance of achieving growth on your money over the long term. On the other hand, they are the riskiest type of investment, so your return might also be negative.
Property & infrastructure (known as a “yield” asset)
Property investments include those in the commercial, offi ce, retail, industrial and hotel sectors. Investments in infrastructure include facilities and services required by the community and for production (eg roads and railways).
Property is not as risky an asset class as shares and generally provide better returns than fi xed interest and cash over the longer term.
Fixed interest (known as a “defensive” asset)
Fixed interest investments include bonds, bank bills and debentures. The value of a fi xed interest security is linked to interest rates. If interest rates rise, the value of the security falls. If interest rates fall, the value of the security rises.
They are generally less risky than shares and property and usually provide a higher return than cash investments.
Cash (known as a “defensive” asset)
Cash investments can include those in bank accounts and short term money markets. This is the least risky of the asset classes but the most likely to produce the lowest return over the long term.
Source: www.fi do.gov.au, Money Tips Page and About Financial Products Page, October 2007.
