When it comes to choosing an investment option when you join a fund, as well as having a basic understanding of asset classes, there are several key questions you should ask yourself:
- What is my level of comfort with risk?
- What type of return am I looking for?
- How long is my investment timeframe?
All investments are designed to make a return and are subject to risk. This means that, as well as making money, there's also a chance that you could lose it. You might also think of risk as the possibility that your investments don't achieve your financial objectives. As a general rule, the bigger the potential investment return, the higher the investment risk and the longer the suggested investment timeframe.
Consider your age when determining how long you expect your money to remain invested (your investment timeframe). This will help determine the most appropriate investment mix for your circumstances. If you are young, you may be able to invest your money for longer, and can therefore weather the short-term fluctuations that can occur when investing in higher risk options. If you are older and you may need to access your money sooner, it may be more appropriate to protect your money by investing in lower risk options.
While your fund can explain the different investment options available to you, speak to a financial adviser to help you choose one that best suits your personal circumstances.