What is your time horizon and risk tolerance?
Your time horizon, or the length or time before you plan to access your investment, plays a large role in determining how you invest. The longer you have, the more aggressively you can invest, since falls in the market in the short term are less important than maximising your returns over the long term. If you need to access some of your funds in the short term, you may want to choose more defensive investments for those funds to protect yourself from the risk of negative returns.
Super is generally considered a long-term investment.
What is your investment time horizon?
Let's look at ways to work out your investment time horizon for your super.
Not everyone will access super in the same way at retirement.
- Some will want to take their super at retirement in one big amount (i.e. a lump sum).
- Others will keep their money invested during retirement and gradually withdraw their savings as a way of producing income in retirement (i.e. a pension or annuity).
- And some people will want a combination of these 2 options by taking a lump sum to meet immediate financial needs, and use the remainder to produce an ongoing income in retirement.
How you choose to take your super will affect your investment time horizon. For that part of your super you take as a lump sum to meet immediate financial needs when you retire, your time horizon is the number of years from now until you retire.
For help in working out your investor profile, call Sunsuper on 13 11 84.
What is your risk tolerance?
Your risk tolerance is the level of risk you are comfortable taking with your investments. Sometimes fear and uncertainty can tempt you to sell an asset if its price has fallen. Alternatively, those who have invested conservatively when growth assets are performing well, may regret not being more aggressive with their choice.
Thinking ahead about how you may feel in relation to the performance of your investments in different circumstances can help you to find your risk tolerance.
