High return investments
What are high return investments?
When investing, most people think of shares, cash, property, bonds etc. Some types of assets, such as shares, are attractive because they often – but not always – deliver a higher return to investors than, for example, cash or term deposits. The trade-off is that these higher-return investments tend to carry greater risk as they’re exposed to higher levels of volatility.
Generally speaking, assets such as shares and derivatives (e.g. futures, options, etc) are chosen because of their potential for higher returns, through both dividends and the growth in their overall value (i.e. capital).
How do returns outweigh risk?
Most experts agree that the longer your money is invested, the more likely it will be able to cope well with fluctuations in value. This means that if retirement is a long way down the track, then you have more time for the good years to outweigh any bad ones, and it may be beneficial to focus on high-return investments.
Does high risk mean high return?
While many high-return investments have higher risk, not all high-risk investments have high returns.
Similarly, different sub-classes of investment carry different risks and return possibilities. For example, while shares are regarded as higher-risk, blue-chip stocks, such as those in large, well-established Australian or global companies, are generally regarded as being fairly safe, and often appeal to the traditional mum-and-dad investor.
How does this relate to superannuation?
Superannuation funds are some of Australia’s biggest investors. Their investment teams focus on all the major investment areas, both locally and internationally – it’s how your super fund grows your super. This means that as a member of a super fund, you too are an investor.
Just because your super is being invested by your fund’s managers doesn’t mean you have no control over how your retirement funds are used. In fact, as a member of an Industry SuperFund, you could have a lot of control over how much risk your money is exposed to, and you may be able to choose how your funds are invested.
The Industry SuperFund difference
To gain control you can choose an Industry SuperFund that allows you to:
- Make direct investment choices in assets such as Australian or international shares, environmentally/socially sustainable investments, Index Funds
- Choose a pre-mixed option, specially designed to achieve a particular investment outcome or to match a member’s risk profile. These can include conservative or defensive portfolios, balanced allocations, socially aware investments, and high-growth options.
This ability to choose your super investments means that members with a lot of investment know-how can enjoy a more hands-on control over their super, while those who have less knowledge enjoy the peace-of-mind knowing that their super is being looked after by their fund’s investment specialists.
What’s more, Industry SuperFunds on average perform better than retail funds because their investment strategy is different. For example, most industry funds are able to invest in infrastructure projects that are unlisted (i.e. the public can’t buy shares in them). Because of their size, importance, and stable-backing, they can be seen as lower risk, but with the potential for greater returns.
Returns on your returns
Many private investors use the dividends or interest earned from cash as a source of income instead of putting those returns back into their portfolio.
By investing through your super fund however, it is more likely you’ll benefit from compound growth because the returns your portfolio earns while you're working are reinvested, ready for when you retire.