What is diversification when it comes to Super?
‘DON’T PUT ALL YOUR EGGS IN ONE BASKET’ and that’s not just because it’s Easter.
Investing your money across different asset classes – such as Australian & international shares, property, bonds and fixed interest helps reduce the risk of any one asset class not performing.
Furthermore superannuation funds diversify even further by investing with multiple different types of managers for example, if you buy shares, often your super will be financials (banks), resources (mining), healthcare and energy.
Benefits of Diversification
Diversification lowers your portfolio’s risk because different asset classes do well at different times. For example, when interest rates fall, bond prices rise, while shares generally do poorly at this time.
Risks of Diversification
Different assets carry different types of risk and return – generally the lower the risk, the lower the return. How you balance your risk often depends on how long you’re willing to keep your money invested.
Steps to take:
1. Review your investments
List all of your current investments and what they’re worth. This could include:
- cash in a savings account
- shares
- managed funds
- property
- your home
- your Super
This will identify which asset classes you’re investing in and from there you can see where you can diversify.
2. Identify Gaps and Research Other Asset Classes
If most of your money is in one or two asset classes, research other asset classes.
Check your superfund’s website or annual statement to see how they invest.
You could look at investing overseas or through a managed fund.
3. Get Help with Diversification
Choosing the right investment strategy can be challenging. If you need some help to build a diversified portfolio, talk to your Financial Adviser or call us on 54510022.
“Got any questions? The FAA Team are here to help!”
John Hehir
