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Understanding investment risk

investment risk mindset

16 March 2022

Understanding your attitude to risk is important when deciding how you would like your superannuation invested.

All investments have different level of risks and returns associated with them. Investment risk can be defined as the chance that an actual return will differ from an expected return.

Your super is a long-term investment, and over time it will be exposed to different levels of risk. Knowing how much risk you are comfortable with can help you achieve your financial goals.

Different risks and return

Generally, investments can be categorised according to risk and potential returns:

  • Higher risk investments – can offer high potential long-term returns, but there can be short-term fluctuations and negative returns due to short-term market volatility.
  • Lower risk investments – are more stable and less likely to fluctuate in value during short-term market volatility, but they tend to offer low potential long-term returns.

When choosing an investment option or options, a key factor to consider is the length of time until your retirement.

If your timeframe to retirement is long, market volatility in the short-term would generally have less of an impact, so you may be able to take more risk and potentially receive higher returns over the long term.

If your timeframe to retirement is short, you may need to reduce your risk to avoid the impact of any market volatility, and potentially receive lower returns.

What is your risk tolerance?

The level of risk that you are comfortable with is known as your risk tolerance.

Everyone’s risk tolerance changes over time. Understanding your risk tolerance at your current stage of life can help you choose the best investment option for your super.

While your investment timeframe is a key consideration, other factors can include:

  • Your financial goals.
  • How you would react to market volatility.
  • Your attitude to risk versus return.

Case study: John

John is 60 years old. He would like to retire at 65 years, so his timeframe to retirement is short. John decides to talk to an LGIAsuper financial adviser to decide what the best investment strategy for his super would be. He tells the adviser that he wants to protect his super from any market volatility or downturn to preserve the value as much as possible and protect his balance from any losses.

John explains to the adviser that this late stage in his working life he is not prepared to accept negative returns in the hope of longer-term positive returns.

The adviser explains to John that his risk tolerance is low. He recommends that John chooses an investment strategy that is low risk and are made up of a high proportion of risk-controlling assets such as cash and fixed interest.

Case study: Kirra

Kirra is 45 years old. At this stage she plans on retiring at 65 years, so she has a medium investment timeframe.

Kirra decides to talk to an LGIAsuper financial adviser to decide what the best investment strategy for her super would be. She tells the adviser she would like a balance between higher returns over the medium to long term and possible short-term losses. During the conversation the adviser determines that Kirra is prepared to accept lower or negative returns during periods of short-term market volatility.

The adviser explains to Kirra’ that her risk tolerance is medium, and recommends that she chooses and investment strategy that includes a fairly equal combination of return-seeking assets (such as shares and property) and risk-controlling assets (such as cash and fixed interest).

Case study: Amanda

Amanda is 30 years old. As she doesn’t plan to retire until at least age 65, her timeframe to retirement is long. Amanda decides to talk to an LGIAsuper financial adviser to decide what the best investment strategy for her super would be.

She tells the adviser she is keen to maximise returns over the long-term, and that she is prepared to accept lower or negative returns during any short-term market volatility for the chance to increase her returns in the long term.

The adviser explains to Amanda that hers risk tolerance is high, and recommends she chooses an investment strategy that includes a high proportion of return-seeking assets such as shares and property. These types of assets have a high chance of negative returns over short periods, but generally achieve higher investment returns over long periods.

To learn more about your risk tolerance, you can try our Investment risk profiler. This is a short online questionnaire which can help you choose an investment strategy.

After answering the questions, you can download a report explaining the results of your risk profile.

Please note that this is general information only, and does not take into account personal financial situations, individual needs or other factors which may be relevant.

Our range of investment options

LGIAsuper has a wide range of investment options to cater for different risk tolerances.

You can build your own investment strategy using our single asset class options, or choose from one of our ready-made options.

You can change your investment options at any time, although we urge members to seek financial advice before making decisions about investment options.

Full details about all our investment options are provided in our Investment Choice Guide – versions for each type of account type are available to download from our website.

Financial advice

Our financial advice service* can help you plan for a better financial future.

Our members can receive limited advice on topics related to superannuation, including investment choice, at no additional cost. More comprehensive financial advice is also available, for which fees will vary.

Call us on 1800 444 396 to discuss a financial advice option that suits you best.


* ESI Financial Services Pty Ltd (ESI Financial Services, ABN 93 101 428 782) (AFSL 224952) is a wholly owned entity of LGIAsuper. ESI Financial Services has engaged Industry Fund Services Limited (IFS) ABN 54 007 016 195 AFSL 232514 to facilitate the provision of financial advice to members of LGIAsuper. LGIAsuper Financial Advisers are Authorised Representatives of IFS. In limited circumstances, a LGIAsuper Financial Adviser may also be an Authorised Representative of ESI Financial Services. Additionally, LGIAsuper has also engaged Link Advice Pty Limited ABN 36 105 811 336, AFSL 258145 to provide LGIAsuper members with access to limited personal advice over the phone in respect to LGIAsuper and Energy Super products.

This article has been produced by LGIAsuper Trustee (ABN 94 085 088 484, AFSL 230511) as trustee for LGIAsuper (ABN 23 053 121 564) and may contain general advice, which has been prepared without taking into account your objectives, financial situation or needs. As such, you should consider the appropriateness of the advice to your objectives, financial situation and needs before acting on the advice. You should also obtain and consider the Product Disclosure Statement (PDS) for your account before making any decision to acquire or contribute additional amounts to your LGIAsuper account – available to download at or call us on 1800 444 396 to request a copy. This email contains information that is up to date at the time of publishing. Some of the information may change following its release. Any questions can be referred to LGIAsuper by calling us on 1800 444 396 or by emailing us at

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Superannuation investments