Updated on 13 March 2025
5 minute read
Your super’s an important part of your future. And how you invest your super will help decide what that future looks like.
All types of investments come with some risks though. Let’s break down what those risks are so you can feel confident about the choices you make.
All investments have some risks. The big one, of course, is that the value of your savings could go down instead of up. That’s volatility, and some people might find it difficult to sleep at night when that happens.
There are other risks that aren’t talked about as much though. Here are the main ones to know about.
Let’s start with the main one that people know about: volatility. This is the risk that the value of your investment will go up or down (rather than just up). This is because financial markets have ups and downs.
The share market is a great example of this because it’s reported on the news almost every day. Let’s say your super money is invested in a particular share that’s worth $100. Tomorrow that share might be worth $95, and the value of your investment will go down. The day after that share might be valued at $105, and the value of your investment will go up. That’s volatility.
Inflation is the rate of change in the price of goods and services. We see it at the supermarket all the time! It means you can’t buy as much with $100 today as you could 10 years ago.
Inflation can be a risk for investments because it can erode the buying power of your money over time. If the return on your investments doesn’t outpace inflation, your buying power will be less than when you started.
You might have heard the phrase “having all your eggs in one basket.” That’s concentration risk.
If you have all your super money in just one asset or asset class, then all your super money will be affected if that financial market goes down.
The opposite of concentration risk is diversification, where you spread your super investments across more than one asset class.
This is, very simply, choosing the wrong time to change your investments. Which is tricky because no one has a crystal ball.
We do have a rear vision mirror though, and that shows us that in the past markets have gone up and down - but that over the long term they have gone up.
So if you panic when there’s a market crash and sell assets when prices are low, it might mean that you lose money for no good reason.
This really just means how important the other risks are based on where you’re at in your life. Some questions to ask yourself are:
Volatility, for example, might be a bigger risk for you if you’re already retired and taking money out of your account. Inflation risk might be a bigger issue for you if you still have another 40 years until retirement.
This is the risk that once you get to retirement, your money might run out before you do!
You can’t get rid of investment risks but there are things you can do to make sure that you’re choosing the right risks and that you’re comfortable with them.
We cover what to think about and how to choose the investment options that best suit you on our Learn hub.
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1. Any advice given is by representatives of Sunsuper Financial Services Pty Ltd (ABN 50 087 154 818, AFSL 227867), wholly owned by the Trustee of ART. As representatives, they may recommend ART products from time to time. Please read the Sunsuper Financial Services FSG - individual for more info about that advice and how they’re paid.
