ANZ Smart Choice Super Investor Update : Member Update Summer 2014
12 Whether you’re an experienced investor or a novice dipping your toe in the water, there are some essential concepts to remember. When investing in super, there are four main asset classes that you can invest in – cash, fixed interest, property and shares. These classes can be grouped further into ‘defensive’ and ‘growth’ assets. The return you achieve and the level of risk associated is different for each asset class. You could invest in a combination of these asset classes to diversify your super. The aim of this strategy is to reduce the risk you are exposed to and maximise your return over the long-term. The mix of assets you invest in will depend on a number of factors specific to your situation, including financial goals, investor profile and time horizon. Cash Cash funds include interest bearing deposits and investments in securities such as treasury notes, with a term of less than one year. When it comes to meeting short-term savings needs, such as saving for a holiday, the stability of cash is a great virtue. For cash investments, the risk of capital loss is lower than other asset classes. However, cash investments generally aren’t suitable for long-term investment goals because the returns are likely to be low and may not meet your long-term financial goals, such as a comfortable retirement. Classification: Defensive Risk level: Low Historical returns*: 3.3% p.a. Fixed interest A fixed interest investment or bond is a debt security issued by a corporation or government in return for cash from an investor. The issuer pays interest to the investor at set intervals over the life of the bond as well as the principal when the bond matures (i.e. when the issuer pays back the balance of the debt). Bonds can be issued over any time horizon but generally range from short term (0-2 years), moderate (2-10 years) and long term (greater than 10 years). Interest rates can impact on the value of a bond, therefore they can be a higher risk than cash, but can potentially offer better returns. Classification: Defensive Risk level: Low to medium Historical returns*: 6.3% p.a. (Australian), 7.2% p.a. (Global - hedged) Investment basics 12 How does it work?
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