Investment Time Frames

Determining your own investment timeframe

While for most people, super is a long-term investment, everyone’s situation is different and that may not be the case for you. Your personal circumstances will influence how long you plan to invest your super (or your investment timeframe), for example:

if you’ve just started working, it may be forty years before you have access to your super;
if you’ve already retired, maybe you plan to spend most of your super to pay off the remainder of your mortgage next month; or
maybe your investment timeframe is somewhere in between.

Keep in mind, just because you’ve retired, that doesn’t necessarily mean your investment timeframe is short. It depends on when you plan to spend each dollar. After all, you might be retired for 30 years (or perhaps even longer!).

Time and volatility

Ever noticed large swings in the value of your super investments? If your super balance tends to change dramatically and unexpectedly over a short period of time, it’s considered to be volatile. These swings in your balance are usually in response to changes in market conditions. High volatility can be a symptom of high-risk investments.

Typically, investments tend to be more volatile over short timeframes, so taking more risk over a short timeframe magnifies this volatility.

If you’re younger and have a longer investment timeframe, some volatility in your investments isn’t necessarily a bad thing. This is because you generally have more time to recover from any losses.

Now let’s say you plan to start spending your retirement savings in 6 months’ time. If you have a short investment timeframe, investing your super in volatile assets may not suit you as you’ll likely want to prevent major losses.

Nearing retirement? Here are some key takeouts to consider:

Try to avoid timing the market: Switching investment options at the wrong time and without advice can lock in losses and risks missing a market rebound.
Diversification: many of Rest’s investment options combine asset classes to help balance risks and smooth returns over time.
Market movements: market changes can take a while to reflect in super balances (both up and down), so impacts may not be immediately visible.
We can help: different strategies are available depending on your retirement stage, so it’s best to have a chat to a Rest Super Specialist.

Investment option	Risk Band	Risk Label
Cash	1	Very Low
Capital Stable	3	Low to Medium
Balanced	5	Medium to High
Growth	6	High
High Growth	6	High

Investment option	Cash
Risk Band	1
Risk Label	Very Low
Investment option	Capital Stable
Risk Band	3
Risk Label	Low to Medium
Investment option	Balanced
Risk Band	5
Risk Label	Medium to High
Investment option	Growth
Risk Band	6
Risk Label	High
Investment option	High Growth
Risk Band	6
Risk Label	High

Looking at the graph, you’ll notice:

Shorter investment timeframes display a greater range of return outcomes, particularly for riskier options (such as Growth or High Growth). Had you invested in the High Growth option for only 1 year, your super balance could have gone down as much as 5% or you may have made a lot of money (as much as 25%!) depending on when you timed your investment.
As the investment timeframe increases, the potential outcomes become less variable.
Generally, shorter investment timeframes exhibit higher volatility and risk. This relationship becomes even more pronounced with riskier investments. That’s why it’s important to carefully consider your investment timeframe before determining the level of risk you're willing to take on.