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What’s risk? Generally the level of risk you’re happy to accept has an impact on the returns you receive in the long-term.Risk is the amount by which the value of your investment may fluctuate over time. When making an investment choice, you need to understand the risks involved as well as how much risk you feel comfortable with or the financial security you’re seeking over both the short and long term.Generally, there’s a trade-off between risk and return. For example, low-risk investments generally offer lower returns, but greater security. On the other hand high-risk investments offer the potential for higher returns, but generally less security.This relationship between risk and return is shown in the chart below.

Risk/return indicator graph

In other words, when your investments are low-risk, you’ll generally see small changes in the value of your investment in the short term, and a lower return over the longer term compared to higher risk options. Although higher-risk investments are exposed to more volatility, over the long-term they generally produce higher returns.

Market volatility is part of having money in superIt’s understandable in times of market volatility that you start to ask what you should do with your super.Markets will always move up and down and the way you react to that volatility can make a big difference in the long-term.For most people, super is something that can’t be accessed for a long time. For this reason, super should be looked at and treated as a long-term investment.When you look at your investments and feel uneasy, try to focus on the longer term returns for your super investment options. To show the impact of time on investment returns, consider the chart below. This shows how the Tasplan Balanced option performed before, during and after the Global Financial Crisis.

Market volatility

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The market’s taken a hit, shares are down, and the unit prices aren’t looking great. Worried? What action should you take?

Global Financial Crisis

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What’s the chance of a negative return? Negative returns are always possible with any type of investment, whether it be a low risk asset such as cash, or higher risk assets such as international shares. Naturally, they’re more likely to occur with higher risk assets due to the relationship between risk and return. Generally, if you have a longer term investment time horizon, you should be less concerned with short term volatility in returns. Over the longer term, positive returns should more than offset any short term negative returns.

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It should be noted that lower-risk investments can still generate negative returns, however this is less likely than with higher-risk investments. Shares and property are examples of higher-risk investments which are expected to provide higher returns over time. Cash is generally the investment with the lowest risk and provides the lowest return over time.Tasplan has a number of options that have various levels of risk, which allow members to select the appropriate level of risk for their particular life stage. It’s important to make sure you’re comfortable with where your super is invested and the level of risk you’re taking. To show the difference risk can make on returns the below chart shows the long-term performance of Tasplan’s Cash investment option compared to Tasplan’s Balanced investment option which is considered more risky.

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What does Tasplan do to protect members?At Tasplan, we protect our investments through diversification. We also encourage you to consider the benefits of diversification, to be patient and to maintain a longer-term view for investing your super.Diversification spreads your risk around a number of different assets whose prices aren’t always affected by the same conditions. If the Australian stock market falls, it doesn’t follow that bond prices will fall, or that international infrastructure will also fall. The diversification built into our options means you’re likely to be holding assets that will be rising in value if share markets fall.Over time the returns will be smoother, and any falls in your super balance won’t be the same as the stock market you just read about.You may be tempted to react to short-term market falls by changing investment options, typically by switching to cash. Unfortunately, this often proves to be a poor decision. Moving after the market has fallen means missing out on the recovery. Usually the best approach is to stay on track and stick to a long-term plan.

Staying on trackOur MySuper default investment option, Tasplan OnTrack1®, changes with you over your life to help you achieve your retirement goals. In this option, your investment strategy shifts in four life-stages from long-term growth when you’re younger, to a safer approach as you age.With Tasplan OnTrack, we automatically reduce your investment risk as you age.1 Tasplan OnTrack is only available to Tasplan Super members.

® Registered to Tasplan Pty Ltd ABN 13 009 563 062.

What should I do?You should carefully consider your circumstances and avoid making impulsive decisions in challenging times.For younger members with time on your side, there’s more chance of market reversals. And because you’re consistently contributing to super, you’ll also be investing at lower prices right after a market fall.For those of you closer to retirement, there’s less chance that a large downturn will be reversed, so it’s important to review the level of risk in your super option. Tasplan offers 11 investment options, each with different investment strategies with varying levels of expected risk and return. You may need to consider choosing a more secure lower-risk option if a major fall could hurt your standard of living when you retire and this risk makes you uncomfortable.

Tasplan Risk profilerHead to our website and have a look at our Risk profiler. The quick, easy questionnaire may help you better understand risk. Your investment risk profile will depend on the type of investor you are, your investment timeframe and the level of risk you’re prepared to take. See tasplan.com.au/risk for more information.

So just rememberMarkets rise and fall, diversification and a long-term approach are key to reaching your retirement goals. You should also make sure that your current level of risk is appropriate for your stage of life – before the markets have a rough day.

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The trustee of Tasplan Super (ABN 14 602 032 302) is Tasplan Pty Ltd (ABN 13 009 563 062). AFSL 235391, RSE L0000680. © 2019 Tasplan Pty Ltd. All rights reserved.

6 August 2019

Past performance isn’t a reliable indicator of future performance.

This fact sheet contains information or advice that’s intended to be general in nature and which was prepared without taking into account your personal objectives, financial situation or needs. Because of that, before acting on any information or advice in this fact sheet, please consider whether it’s appropriate to your personal circumstances, talk to a financial planner and consider our guides, available at tasplan.com.au/pds or by calling 1800 005 166, before making a decision about whether to acquire the products.