Be prepared to separate fact from fiction. Please find below some important truths to keep in mind.
Whether you’re a seasoned investor or first-timer, there are some investment fundamentals that you should always keep at the front of your mind, to guide you in your investment decisions.
The sooner you start, the more time you have to increase your chances of higher returns. These factors can make a significant difference to your ultimate account balance.
How much will you need in retirement and how long are you going to be an investor for? Think about your retirement and lifestyle goals, put a strategy in place to achieve them, and stick to it.
Generally, investments with low risk generate low returns. Growth assets, such as shares, carry higher risk, but can deliver much higher returns over the long term.
Don’t put all your eggs in one basket. Investing in a range of asset classes, or diversifying, means your overall risk may be lower than if you were exposed to just one.
Even when the market fluctuates, it’s important to stay calm. Over time, the fluctuations smooth out to deliver more consistent long-term returns.
Before you choose the right investment strategy, you need to understand what is right for you.
There are also different phases of investment that corresponds with your stage in life to consider.
The investment strategy that suits you will depend on your appetite for risk, as well as your goals – both short and long term. It will depend on your stage in life, your income levels and your personality too.
To help you understand your investment personality, it helps to consider a few things.
Risk is the chance your investment will lose some or all of its value. The flipside to risk is return, or the potential return you’ll receive on your investment. As investors, we’re striving for the greatest return possible within acceptable risk levels.
Generally, the more risk you take, the higher your returns are likely to be in the long term. And the higher the potential long-term returns, the more volatility you may have along the way.
Everyone has a different attitude to risk, and this attitude is also likely to change depending on your personal circumstances and changing financial needs.
Ask yourself: how much risk are you currently comfortable with? Are you interested in taking on more risk if it means greater return potential? Does your current investment strategy reflect your appetite for risk?
When it comes to investing, time in the market can be a powerful ally that helps you maximise returns with compound interest, and ride out the highs and lows of market volatility. Having a clear, long-term financial plan makes good sense. However, an investment plan isn’t all about locking your money away for years. You may have more than one investment goal - and different time frames in mind. It’s a good idea to regularly review your investment plan to make sure your goals are still current.
The different investment asset classes carry different recommended time horizons. Generally, short-term goals (1-3 years) could be achieved with stable and more conservative investments like cash, whereas a blend of conservative and income-producing or growth investments might be more suitable for medium-term goals (3-5 years).
If your goal is over five years away, it's generally considered a long-term investment goal. An example might be saving an amount for your child’s education, a holiday house or your retirement. With time on their side, long-term investors are generally willing to invest in growth assets such as shares or property.
Ask yourself: what are your short, medium and long-term targets? How much money are you going to need in retirement? Does your investment strategy reflect your goals and timeframes?
The ups and down of the market can have a big impact on your super. The impact of this depends on the investment options you’ve chosen and the length of time that you invest.
Over time markets, and your investments, will experience many fluctuations – some upwards with positive returns year on year, some downwards. When markets are in decline, it can be tempting to react quickly to avoid further exposure. But moving out of the market at the wrong time can mean that your loss is realised, whereas staying in the market allows you to benefit from any upturn.
It helps to remember that time in the market is a powerful ally of successful investors and may be the main factor that irons out the inevitable periods of ups and downs.
Each investment type has a recommended minimum timeframe – with more conservative assets such as cash for short-term, and growth assets such as shares and property at the long-term end of the scale. This is because length in the market can smooth out the market volatility that affects the returns on growth assets.
BT Funds Management Limited ABN 63 002 916 458, AFSL No. 233724, RSE No. L0001090 is the trustee and issuer of interests in BT Super for Life which is a part of Retirement Wrap ABN 39 827 542 991, RSE R1001327.
A Product Disclosure Statement (PDS) is available by logging in to your online banking. You should obtain and consider the relevant PDS before deciding whether to acquire, continue to hold or dispose of interests in the relevant product.
Westpac Life Insurance Services Limited ABN 31 003 149 157, AFSL No. 233728 is the issuer of insurance cover offered through BT Super for Life. Further information about the insurance available through BT Super for Life is included in the PDS.
The relevant Financial Services Guide (FSG) can be obtained by contacting your adviser or from the PDS downloads page.
The above information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. The information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.
Superannuation is a long-term investment. The Government has placed restrictions on when you can access your preserved benefits. The Government has set caps on the amount of money you can add to superannuation each year on a concessionally taxed basis. In addition, the Government has set a non-concessional contributions cap. For more detail, speak with a financial adviser or visit the ATO website. There may be limited circumstances where your employer is not required to accept your Choice of Superannuation fund form e.g. if you have already exercised Super Choice in the last 12 months.