Choosing the right investments

There are a number of factors to consider before you can decide which investments will best suit you.

Where are you going?

Choosing the investment that's best for you comes down to knowing where you’re headed. So whether retirement is forty years away or forty weeks away, start by mapping out some of your broader retirement goals:

• When do you plan to retire?
• How far away is that day, and how long does it give you to save?
• Do you plan to retire completely, or continue to work part-time?
• How long could your retirement last?

Once you've figured out your broad retirement goals, start thinking about the specifics.

How much super will be enough?

The amount of super you'll need depends on your idea of a 'comfortable retirement'. Will you be happy with a modest lifestyle that provides you with the basics, or would you prefer a lifestyle that includes extras like eating out, holidays and hobbies?

As a rule of thumb, experts generally advise that you aim for an annual retirement income of around 65% of your final annual salary.

How long do you have to save?

It's also important to consider the length of time you have to save before you need to access your super. The longer you have, the more likely you'll be able to ride out the short-term ups and downs associated with assets like shares, property or alternative investments and enjoy the potential for higher long-term returns.

But if you’re approaching retirement and have a shorter investment time frame (for example, ten years or less), or if you’re already receiving a pension, you may prefer the lower risk/lower return characteristics of asset classes such as cash and fixed interest.

How do you feel about investment risk?

How do short-term fluctuations in the investment market make you feel? Do they worry you, or do you take it all in your stride and focus on long-term performance?

If you don’t like uncertainty, growth assets such as shares and alternative investments may cause you ongoing anxiety. So perhaps an investment option comprising some (or mostly) lower risk asset classes may be more suitable.

On the other hand, you may be happy to ride out the occasional falls in the market and slumps in performance to give your investments the potential to provide higher long-term rewards. In this case, you might be comfortable choosing investment options with higher risk and return profiles.