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What is a Risk Profile?
There are six approaches to investing in super and these are called risk profiles. They are High Growth, Growth, Balanced Growth, Balanced and Conservative.
Each of the six approaches has a different mix of assets. For example, if you are an investing dare-devil, you would choose Growth or High Growth which means that your fund would have a greater amount of shares and property in its investment mix and those asset classes typically have a higher return (think of it as a savings account earning between 8.5% and 9.0% per year)
Or, if you are the Conservative type, you may want most of your money in cash and would be happy with a return of 6.0% per year.
If you have never done a risk profile before (and most people haven't), you may well have your super in the wrong risk profile for you!
Find out how much of an investing dare-devil you really are and determine your risk profile for free now.
Risk Profile Definitions
The different risk profiles include varying allocations to 'growth' assets, such as shares or property, and 'defensive' assets, such as cash and bonds. Depending on the asset allocations, each profile has varying degrees or risk. In summary, the risk profiles are:
| High Growth | 90% in Growth Assets |
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We have classified the High Growth options as those with greater than 90% of total assets invested in growth assets and therefore less than 10% invested in defensive assets. Typically you will be comfortable in investing almost all your assets in shares as you seek high long-term returns and are not troubled by frequent negative returns, as you expect them to be offset by frequent high positive returns. Your investment time horizon is likely to be more than 10 years. This is the most volatile type of investment. | |
| Growth | 80% - 90% in Growth Assets |
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We have classified the Growth Options as those with 80% - 90% invested in growth assets and between 10% - 20% invested in defensive assets. Typically, you want to invest the majority of your assets in shares and property, but are comforted by the stabilising influence of some less aggressive investments also. Negative returns will appear from time to time, but less frequently than in the High Growth options. You would expect medium to high returns on average over the longer term. You could have more than seven years to invest. | |
| Balanced Growth | 65% - 79% in Growth Assets |
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We have classified the Balanced Growth Options as those with between 65% - 79% invested in growth assets and between 21% - 35% invested in defensive assets. This option caters for those with a risk tolerance that invests between two-thirds and four-fifths in shares and property and the balance in fixed interest and cash-type investments. The Balanced Growth portfolio is one of the most important portfolios because this is the one that most members are likely to be exposed to over their superannuation savings history and the one that is often selected as the default risk/return option by the fund. | |
| Balanced | 40% - 64% in Growth Assets |
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We have classified the Balanced Options as those with between 40% - 64% invested in growth assets and between 36% - 60% invested in defensive assets. As the name suggests, there is a balance between growth and defensive assets. One would expect smaller investment return fluctuations and steady returns. This is an attractive portfolio for the more conservative long-term investor or mature investors with shorter time horizons to invest. | |
| Conservative | < 40% in Growth Assets |
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We have classified the Conservative Options as those with less than 40% invested in growth assets. This option suits those that are defensive investors. you accept low risk investments and want no negative (minimal negative) returns. This often includes those with short investment time horizons, probably under three years. The risk is traded off for lower to moderate returns. | |
The above descriptions of risk profiles are those generally accepted within the financial services industry. You should consider the description of the profile/s which reflect your current investment strategy.
To help you determine which risk profile is most appropriate to you we have provided a free risk profile questionnaire where you can find out what type of investor you are. It's quick, easy and obligation free.
