Western Suburbs Weekly - - News -

HAT are the dif­fer­ences be­tween bal­anced op­tions and growth op­tions? Terms such as bal­anced and growth can be con­fus­ing but they are very im­por­tant to un­der­stand.

When we talk about su­per, bal­anced and growth op­tions are both re­fer­ring to in­vest­ment styles in su­per­an­nu­a­tion.

All in­vest­ments come with two types of risk: the risk of not re­tain­ing pur­chas­ing power over time due to the ris­ing cost of liv­ing and the risk of los­ing money as in­vest­ments fall in value.

In gen­eral, ‘safer’ in­vest­ments that don't risk los­ing your cap­i­tal have lower re­turns over time.

Whereas a ‘riskier’ in­vest­ment, such as shares, has a greater chance of los­ing cap­i­tal in the short term, but in the long term, should earn a much higher re­turn.

As the name sug­gests, the bal­anced op­tion is try­ing to achieve a bal­ance be­tween the risk of short-term losses and the longer term risk of hav­ing lower re­turns.

It does that by gen­er­ally in­vest­ing up to 70 per cent in lo­cal and overseas shares, in­fra­struc­ture and prop­erty, with the rest in­vested in cash and fixed in­ter­est.

A growth in­vest­ment op­tion will gen­er­ally in­vest up to 85 per cent in shares and prop­erty, while a con­ser­va­tive op­tion will have 30 per cent in shares and prop­erty and a cash or cap­i­tal guar­an­teed op­tion will be fully in­vested in cash and fixed in­ter­est.

The chances of suf­fer­ing an an­nual loss in the growth and bal­anced op­tions are about five years in ev­ery 20, and zero for the con­ser­va­tive and cash op­tions.

Choos­ing the right op­tion is a mat­ter of bal­anc­ing the risk level you are com­fort­able with and the time left un­til your re­tire­ment.

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