Tag Archives: Women in Finance
What happens to your super when you retire?
By Robert Wright /November 21,2025/
Superannuation is one of the important pillars of savings in retirement for most Australians. After years of working and contributing to your super fund, retirement is when you are finally able to access it. Whether retirement is just around the corner or still a few years away, it’s worth understanding your options.
In this article, we’ll walk you through your options on what do with your super when you retire, how is it taxed and what happens if there’s any left when you pass away.
When can you access your super?
You can usually access your super when you reach your preservation age (currently age 60) and retire. Alternatively, you can start accessing it once you turn 65, even if you’re still working.
There are other special circumstances where you might be able to access it earlier, like severe financial hardship or permanent disability but generally speaking, retirement is the key trigger.
Your options once you have access to your super
Once you retire and meet a condition of release, your super becomes accessible for you to withdraw but that doesn’t necessarily mean you have to withdraw and use all of it.
You’ve got a few main options and you may prefer a combination of these:
- Leave it in your super fund (Accumulation phase)
Yes, you can actually choose to leave your super where it is, in its accumulation phase even after you retire.
If you don’t need to access the money straight away, you can leave your super invested in the fund’s accumulation account. Your money can keep growing (taxed at 15% on earnings) and you can access it when you’re ready.
So, while this may suit short-term plans, it may usually not be the most tax effective option when compared to other options like starting a superannuation pension in retirement, which is often tax free and funded with money from your superannuation savings.
- Take a lump sum
Where access to funds is required, you may prefer withdrawing a lump sum from super. This can help you in various ways like paying off a mortgage, clearing credit cards or personal loan debt, covering medical costs, funding travel expenses or investing elsewhere (e.g. property, shares outside of super).
However, this decision should be carefully considered as withdrawing a lump sum or lump sums can reduce how long your super lasts. It’s also worth considering how that money will be managed outside super, as it may be subject to different tax treatment or may impact any Centrelink entitlements like the Age Pension.
- Start a superannuation pension (account-based income stream)
An account-based pension lets you convert your accumulated super into a regular income stream. However, once an income stream is started with a set balance, you cannot add more monies to the ongoing account-based pension unless the pension is commuted and restarted again. If you need access to your superannuation savings, starting an income stream is a popular option which can be tax effective.
Where access to the super savings is required, an income stream can be a good option because:
- You can receive regular and flexible payments (monthly, quarterly, etc).
- You can choose how much to set as regular income for your pension payment (subject to government set minimum limits).
- Earnings are tax free once you’re in pension phase.
- Payments can be adjusted as your needs change.
- You keep control over your investment strategy.
You can still withdraw lump sums if needed but many people like the idea of a steady income, much like a salary. However, consider that the ongoing income payments can reduce your account balance over time.
- Can a lifetime annuity help?
One of the biggest concerns for retirees is running out of money.
If you want income for life, no matter how long you live, lifetime income streams such as a lifetime annuity can help you achieve that.
Unlike an account-based pension (which relies on how long your money lasts), a lifetime annuity is more like an insurance product. You invest a lump sum from your super and in return, receive a regular income for the rest of your life.
Some retirees consider using a combination of a pension and an annuity – the pension provides flexibility and the annuity can provide peace of mind. However, lifetime annuities are designed to be held for life. Although there may be flexibility to access a lump sum if needed, there may be break cost considerations.
Can I combine these options?
Absolutely and many retirees choose to do so.
You might prefer to consider:
- Leaving some of your super invested in accumulation phase.
- Taking a lump sum to pay off debts.
- Starting a super pension to draw regular income.
- Using part of your super to start a lifetime annuity.
The right mix will depend on your lifestyle, goals, health, family situation and other sources of income, including the Age Pension. There are many more options we have not discussed.
The Age Pension and Super: How they can work together
The Age Pension is a government payment designed to help eligible Australians in retirement. As of 2025, you can apply for the Age Pension from age 67.
There are also concessions and benefits that come with it, such as reduced utility bills and medical costs, so it’s well worth checking your eligibility.
Eligibility is also based on your means – your income and assets. Centrelink includes your super in the assets and income tests. However, the assessment can differ if your super is converted into an income stream like a lifetime annuity.
Age Pension, combined with other sources of super based income like an account-based pension and/or a lifetime annuity, can help make your money last longer. It acts as a safety net if your super runs down over time. This can be a powerful way to stretch your retirement savings further.
How is my super taxed when I retire?
The earnings on your super are usually taxed at a maximum rate of 15% whilst the super remains in accumulation phase. Where an account-based pension is started, the earnings in the pension phase are tax free.
If you’re age 60 or over, any withdrawals from your super (lump sum or income) are usually tax free if you’ve permanently retired.
However, if you’re under 60 or receiving certain types of benefits (like defined benefit pensions), tax rules may be a little different. It’s worth speaking to a financial adviser to understand your situation.
How do I make my super last?
Australians are living longer than ever, and therefore it is important to strategise and ensure that your retirement savings can last for a long time.
Here are a few strategies to consider:
- Budget and plan – Work out how much income you need as opposed to how much you want. Consider your spending habits and lifestyle goals to help ensure you don’t withdraw more than you need. Work out how long your super will last.
- Stay invested – Your money doesn’t have to stop working for you when you retire. Draw appropriate amounts based on your retirement objectives and consider keeping the balance invested in an option that suits your risk tolerance and goals.
- Mix your income sources – Layering your income can help your super last longer. One way you could consider meeting your essential expenses throughout retirement, the Age Pension can work together with a secure, lifetime income stream, such as a lifetime annuity, to provide regular income payments for life. Once your essential expenses have been met through a combination of the Age Pension and a lifetime income stream, you could meet your additional desired expenditure goals with income from an account-based pension.
- Review your investments – Ensure they match your risk tolerance and income needs in different phases of your retirement.
What happens to my super when I die?
If you don’t use all your super before you pass away, the remaining balance is generally paid out to your beneficiaries, either as a lump sum or income stream (depending on your instructions and their eligibility) or your estate.
This is known as a death benefit and it can be left to your spouse or partner, your children, certain dependant or interdependents or your estate. It can either be paid as a lump sum or can be paid as an income stream. The tax treatment depends on who receives the benefit. For example, a lump sum payment to a spouse is tax free.
To make sure your wishes are followed, it’s important to nominate your beneficiaries with your super fund. You can make a binding death benefit nomination to ensure your super goes exactly where you want it to. Otherwise, your super fund will decide (within legal guidelines).
Steps toward a stronger retirement
Super can be one of the most flexible and tax effective ways to fund your retirement but simply reaching retirement age doesn’t mean your financial decisions stop. In fact, how you choose to access and manage your super can shape your lifestyle for decades to come.
Whether you choose a lump sum, a regular income or a combination, planning ahead is essential. Think about how long your money needs to last, how to make the most of your tax benefits and how to combine super with other income sources like the Age Pension. A financial adviser can help you tailor your retirement needs with the right options.
Super is more than just savings. The right strategy can help your super last longer, support your quality of life, and give you peace of mind.
Source: Challenger
Higher deeming incomes, Age Pension asset test limits and payments from 20 September
By Robert Wright /November 21,2025/
Deeming rates changed for the first time in five years in September, which will affect the income the government estimates retirees earn from their investments. At the same time, Age Pension payments and part Age Pension cut off limits have also increased.
Deeming rates used to estimate the income Age Pension recipients receive from their financial investments increased from 20 September for the first time since being frozen during the COVID-19 pandemic.
The increase means retirees will be deemed to receive more income than previously from the same amount of financial investments.
Pension payments are reduced by 50 cents for every dollar of additional income. But while that will see Age Pension payments reduced for some, it may be offset for many by an increase in Age Pension entitlements.
There has also been an increase in the part Age Pension cut off limit and in the income limit for the Commonwealth Seniors Health Card – but once again, that change may be offset by the increase to the deeming rates.
Many people mistakenly assume they’re not eligible, so it’s worth checking if you qualify under the new rules. Eligibility for the government Age Pension starts at age 67, though you can apply up to 13 weeks earlier.
What are the new deeming rates and why do they matter?
The deeming rate increased from 0.25% to 0.75% for the first $64,200 a single pensioner receives and the first $106,200 a couple receives.
The higher deeming rate, which applies to the balance of any financial assets, increased by the same amount, from 2.25% to 2.75%.
Age Pension payments increased in September 2025
Here are the maximum Age Pension payment rates that are in effect as of 20 September, paid fortnightly, along with their respective annual equivalents. Single payments rose by $29.70 per fortnight, while combined payments for couples increased by $22.40 per person.
Maximum Age Pension payments from 20 September 2025
| Payment Type | Fortnightly* | Annually* | Previous fortnightly payment | Previous annual payment |
| Single | $1,178.70 | $30,646.20 | $1,149.00 | $29,874.00 |
| Couple (each) | $888.50 | $23,101.00 | $866.10 | $22,518.60 |
| Couple (combined) | $1,777.00 | $46,202.00 | $1,732.20 | $45,037.20 |
Department of Social Services Indexation Rates September 2025. *Includes basic rate plus maximum pension and energy supplements.
Payments last increased in March 2025 and are likely to change again when they are next assessed in March 2026.
Tip: Many people assume they’re not eligible for either a part or full Age Pension and therefore apply late or miss out on this and other government benefits.
Age Pension income and assets test thresholds increase
The government reviews the Age Pension income and assets test thresholds in July each year. The upper limits, also known as thresholds, increase in March and September each year in line with Age Pension payment increases.
Whether you are eligible for the Age Pension depends on your age, residency and your income and assets.
If your income and assets are below certain thresholds you may be eligible.
When determining how much you’re entitled to receive under the income and assets tests, the test that results in the lower amount of Age Pension applies.
Here are the income and assets test thresholds that apply as at 20 September, compared with previous thresholds.
Assets test thresholds
The lower assets test threshold determines the point where the full Age Pension starts to reduce, while the upper assets test thresholds determine what the cut off points are for the part Age Pension.
If the value of your assets falls between the lower and upper assets test thresholds, your entitlement will be reduced. The higher your assessable assets, the lower the amount of Age Pension you are eligible to receive.
Your family home is exempt from the assets test but your investments, household contents and motor vehicles may be included.
Asset test thresholds from 20 September 2025
| Payment type | Full Age Pension limit | Part Age Pension cut off | Previous full Age Pension limit | Previous part Age Pension cut off |
| Single – homeowner | $321,500 | $714,500 | $314,000 | $697,000 |
| Single – non-homeowner | $579,500 | $972,500 | $566,000 | $949,000 |
| Couple (combined) – homeowner | $481,500 | $1,074,000 | $470,000 | $1,047,500 |
| Couple (combined) – non-homeowner | $739,500 | $1,332,000 | $722,000 | $1,299,500 |
Source: Services Australia Age Pension Assets test thresholds
Income test thresholds from 20 September 2025
The lower income test threshold determines the point where the full Age Pension starts to reduce, while the upper income test threshold determines what the cut off point is for the part Age Pension.
Income includes things like payment for employment or self employment activities, rental income and a deemed rate of income from financial investments such as managed funds, super (if you are over the Age Pension age) or account-based pensions commenced after 1 January 2015.
Income doesn’t include things like emergency relief payments.
Income test thresholds from 20 September 2025
| Payment type | Full Age Pension limit | Part Age Pension cut off | Previous full Age Pension limit | Previous part Age Pension cut off |
| Single | $218 per fortnight | $2,575.40 per fortnight | $212 per fortnight | $2,510.00 per fortnight |
| Couple (combined) | $380 per fortnight | $3,934.00 per fortnight | $372 per fortnight | $3,836.40 per fortnight |
Source: Services Australia Age Pension Income test thresholds
If you have income between the lower and upper income test thresholds, your entitlement will reduce as your level of income rises.
For example, the Age Pension payment for a single person earning more than $218 per fortnight will reduce by 50 cents for each dollar earned over $218.
For a couple earning more than $380 per fortnight combined, the Age Pension payment for each person will reduce by 25 cents for each dollar earned over $380.
Tip: The Work Bonus allows you to work and earn up to $300 per fortnight without affecting your Age Pension. If you don’t work, this amount accrues up to a maximum Work Bonus balance of $11,800.
Commonwealth Seniors Health Card income limit increases
From 20 September 2025, the income limit to qualify for the Commonwealth Seniors Health Card (CHSC) will be:
- Single: $101,105 per annum (an increase of $2,080).
- Couple (combined): $161,768 per annum (an increase of $3,328).
You must be Age Pension age and meet some other requirements to be eligible for the CSHC.
Source: Colonial First State
Your guide to gearing
By Robert Wright /August 21,2023/
There are a number of considerations when it comes to gearing, the investment assets you may choose to gear and the way you structure your debt.
A gearing strategy can be set at three levels:
- Positive gearing – where income from the investment exceeds the interest payable on the loan.
- Neutral gearing – where income from the investment is equal to the interest payable on the loan.
- Negative gearing – where the income from the investment is less than the interest payable on the loan. The excess interest expense is an allowable deduction against other assessable income, which for a taxpayer on the top marginal rate is currently worth 47% (inclusive of the Medicare levy).
Investing in growth assets such as shares or property using borrowed funds can be one of the most effective ways to accumulate wealth over the long term.
Investors are solely relying on a future capital gain when undertaking a negative or neutral gearing strategy. Negative gearing is tax effective in that the interest expense is fully deductible against the income generated by the geared investment and other assessable income. There are also other tax breaks such as the deductibility of depreciation (for property) and franking credits (for shares) to help subsidise the cost of the investment. In addition, for individuals, 50% of any capital gain is exempt from tax where the investment is held for at least 12 months.
Examples
Positive gearing strategy
If $100,000 were invested for a year in assets that produced a return on investment of 10% per annum, the total return on investment would be $10,000.
If the investor had also used a gearing strategy and borrowed $50,000 (at a cost of 7% per annum) and invested this in the same assets producing the same 10% per annum return, the return on investment would be 10%, less the cost of finance (7%) – that is, a net additional return of $1,500 using someone else’s money.
The net return can be greater than this when the tax deductibility of interest is taken into consideration.
The below examples of negative gearing illustrate how the negative cash flow from the investment can be offset by the deductibility of interest plus other tax breaks.
Negative gearing an investment property
Sarah earns a salary of $200,000 and borrows $400,000 to buy an investment property. The property generates rental income of $20,000 per annum while interest expense on the loan (interest only with no principal repayments) is 7% or $28,000 per annum. In addition to the deductible interest expense, there are the following ‘non-cash’ deductions:
- $2,500 depreciation
- $4,500 building amortisation (2.5% based on a construction cost of $180,000)
| Financial position | Without negative gearing strategy | With negative gearing strategy |
| Salary | $200,000 | $200,000 |
| Rental income | – | $20,000 |
| Non-cash property deductions | – | $7,000 |
| Interest expense | – | $28,000 |
| Taxable income | $200,000 | $185,000 |
| Tax payable (incl. Medicare levy) | $64,667 | $57,617 |
| Net cash | $135,333 | $134,383 |
The difference in cash flow of only $950 has been assisted by the $7,000 tax deduction for the non-cash depreciation and building amortisation expenses.
These examples demonstrate the worth of tax deductions to an individual on the top marginal tax rate in the first year of a negative gearing strategy. Over time, negatively geared investments can become positively geared – especially when rental income or dividends are reinvested.
Couples with one person on a higher marginal tax rate than the other, should carefully consider who should be the borrower and owner of investments over the long term. While initially it may be tax effective to have a negatively geared investment in the name of the person with the highest tax rate, if it’s expected to become positively geared in the future, it may be more effective to have the loan and investment in the name of the person with the lower marginal tax rate from the outset. Especially when you consider the potential capital gains tax, stamp duty and loans fees that might be incurred in transferring the investment and loan.
Trusts and companies can also negatively gear investments, however the following should be considered:
- Trusts and companies cannot distribute losses, they need to be carried forward and offset against future assessable income.
- While the company tax rate is 30% for companies that are not base-rate entities which have a tax rate of 25%, companies are fully assessed on capital gains as opposed to the 50% discount applied to assets held for 12 months or more by individuals and trusts.
Negative gearing a share portfolio
Sarah earns a salary of $200,000 and borrows $400,000 to invest in a share portfolio. The share portfolio generates a dividend yield of 4% fully franked, while the interest expense on the loan (interest only loan) is 7% per annum under a line of credit secured against her home.
The below table illustrates the impact the negative gearing strategy has on Sarah’s cash flow.
| Financial position | Without negative gearing strategy | With negative gearing strategy |
| Salary | $200,000 | $200,000 |
| Dividend | – | $16,000 |
| Imputation gross up | – | $6,857 |
| Interest expense | – | $28,000 |
| Taxable income | $200,000 | $194,857 |
| Tax payable (incl. Medicare levy) | $64,667 | $62,250 |
| Franking credit | – | $6,857 |
| Tax payable (incl. Medicare levy) and after franking credit | $64,667 | $55,393 |
| Net cash | $135,333 | $132,607 |
The difference in cash flow is $2,726 which is approximately 0.7% of the investment portfolio. Sarah hopes that her after-tax capital gain will be greater than this cash flow loss.
Source: BT
Understanding your investment options
By Robert Wright /August 21,2023/
Investing is full of jargon and technical terms that can make getting started or managing your investments seem intimidating. Here are some of the key terms to help you better understand the different options available to you.
Common investing terms
There are a few terms that you’ll see repeated when we’re talking about investing.
Bonds – Bonds are a way for corporations or governments to receive a loan from investors for a promised rate of return over a specific period. Bonds can be issued to pay debts, build new facilities or raise funds for future growth.
Cash – Cash investments are savings accounts and other easy to access funds like cash management trusts and money market funds. Cash investments are stable and low risk, generally growing slower than inflation or the increase in prices of goods and services over time.
Diversification – Having a diverse group of investments means that you spread your investments across different companies or sectors (for example, shares or fixed interest). This way, if one sector underperforms or has a loss, you have other investments that may perform better and help balance out any losses.
Another way we diversify our investment options and portfolios is by using different investment managers, with different approaches to investing. In some cases we use multiple investment managers in the same option. These are called multi-manager portfolios.
Dividends – Dividends are a portion of profits or earnings paid to shareholders. They are paid on a regular basis and in some cases can be reinvested into the business in the form of more shares. This can provide shareholders with ongoing income.
Domestic Markets – Domestic markets, shares or companies refers to the variety of investments that are connected to that country, either through where they operate or the investment exchanges on which they reside. In Australia, we would refer to Australian bonds as domestic bonds. Likewise, a US-based fund would refer to the US stock market as the domestic market.
Environmental, Social and Corporate Governance (ESG) – ESG is the consideration of an investment beyond its financial performance. It often includes social and environmental factors, like its impact on the climate, the gender or cultural diversity of staff and leadership or general benefit to society. Investors are increasingly applying these considerations as part of their investing decisions.
Equities – Equities are another name for shares. Equities can be bought directly on the share market or through an investment option.
Fees – A fee is the amount charged by a fund to manage your investments. Fees may vary based on factors including the cost to manage an option, the size of the investment and the management style.
Geared Investments – Geared or ‘leveraged investing’ is a way to borrow money in order to increase the size of an investor’s original investment. Geared investments are often made with higher risk assets like shares and property.
International and Emerging Markets – International markets can give investors access to a variety of investments including shares, securities, property or bonds from nations other than their own.
International markets can be volatile because of international trade relations or fluctuations in currency value. There is more risk with less stable countries, like those in economic or political turmoil, and less risk in more stable countries.
Emerging markets are international markets that focus specifically on growing and developing economies like China, Brazil or India.
Investment Manager – An investment manager is a professional person or organisation who has been appointed to manage money in an investment option on behalf of investors. One or multiple investment managers may be appointed to an investment option. They generally have specialised expertise in the area they represent, like property, bonds or shares.
Investment managers are selected for their strengths in certain areas as well as organisational stability, solid investment process and a history of strong performance. We also use a specialist investment consulting and research firm when selecting managers.
Managed Fund – A managed fund pools your money together with other investors to buy a variety of assets like shares, bonds or property. Managed funds can be invested in single or multiple asset classes and have single or multiple investment managers.
Risk – Risk in investing is about understanding, anticipating and accepting the potential for financial loss in an investment. All investing has an inherent level of risk.
Risk can be seen as an option underperforming against expectation. Investors can spread their risk by diversifying their investments.
Securities – A security is a way to purchase a portion of an asset such as infrastructure, a property, loan or business. For example, shares are type of security that makes it easy to purchase a portion of a business.
Securities can be bought, sold or traded. The value can change based on market conditions, the value of the asset, expected income or general market conditions.
Share – A share or stock represents the purchase of a portion of a business. The value can increase or decrease based on a variety of factors including general market conditions as well as industry and company performance and challenges.
Some shares have lower volatility and provide strong regular dividends without necessarily increasing in value.
Short Selling – Short selling, or shorting, takes place when an investor believes the price of an equity (like a share) will go down. They arrange to sell shares on the market with intention of repurchasing them for a lower price later on. A short position is generally very high risk and can result in large losses if the price of the equity increases.
Mandate – A mandate is an agreement with an investment manager that sets out how money will be invested. It includes performance benchmarks and expectations, acceptable investments and investment ranges.
A mandate’s structure means that the investments are managed in a unique way for our investors, different from the investment manager’s options with other organisations. This gives CFS greater flexibility around the option including administration and reporting to investors.
Product Disclosure Statement – A Product Disclosure Statement (PDS) is a review of all relevant product information for an investment option. You should always read the PDS before making any decisions about the relevant products. It offers information including the investment managers, risk measures, objectives and minimum suggested timeframe.
Units and Unit Pricing – The unit price tells you the value of the package of investments it contains. Investments are packaged in units that are made up of a variety of assets, like shares, bonds and property. Investing this way gives you the ability to invest in ways that you may not otherwise be able to access as an individual investor.
Reading an investment option
We use a standard description to quickly review and compare different investment options. Here’s what you should look for:
Objective
A sentence or two on what the investment option is designed to achieve and the timeframe to achieve it.
Minimum suggested timeframe
How long an investment professional suggests you hold, or remain invested in, an option in order to achieve the stated investment objective.
This is only a suggestion and should not be considered personal financial advice. Because financial markets can be volatile and unpredictable, it’s good to regularly review your investments with a financial adviser to ensure they meet your needs.
Risk
A snapshot of the expectation that an investment option will deliver a similar number of negative annual returns over a 20-year period.
Generally, the higher the level of risk an option has, the higher its return is expected to be. You should review the associated risks to see if the option is suitable for your needs.
Strategy
A description of the way the investment option is structured with some details about its contents and the reasons why those investments were chosen.
Investment category
A quick way to organise different options by their typical range. These categories are not standardised across the investment industry, so what is considered ‘growth’ in one organisation might be considered ‘moderate’ by another. You should read the full details of an option before making an investing decision. We’ll break down the different investment categories a bit later.
Allocation
A quick view of the different assets, or types of investments, contained in an investment option. In some cases, the assets are given a range, (i.e. between 15-25%), which indicates the minimum and maximum ranges that may be held in the option at any time. The investment manager may make changes within that range for different reasons including market volatility. Not all investments offer an allocation benchmark.
Underlying investment managers
These are the professional investment managers and organisations that have been appointed to manage the money in the investment option. There may be one or more, which is known as a multi-manager fund.
Investment categories and asset classes
There are a few different ways we organise and categorise investments to make it easy to understand how they are structured.
Cash and deposits
Cash is invested in reasonably stable domestic currency, like bank bills. Cash is liquid, making it easier to quickly access funds as required. It also includes term deposits (money invested for a set period) and money market securities. Cash and deposits are generally low risk and provide a low, stable return.
Less liquid than cash and deposits, enhanced cash is invested in money market securities and some fixed interest securities.
Fixed interest
Fixed interest investments are investments made with a guaranteed rate of return. These are usually issued by corporations, governments or financial institutions to raise funds. They have a set rate of return, which is usually higher than cash but lower than higher-risk options like shares. The return comes from interest payments from the bond issuer. The amount of that return can change based on interest rate repayments.
Alternatives
Alternative funds may include a diverse mixture of investments including hedge funds or commodity trading like oil or livestock. Basically, anything that falls outside of the traditional shares, property, infrastructure, cash or fixed interest categories are called alternatives.
Property
Property investing generally involves buying a property or buying a stake in a building through a property security. These properties can be office spaces, industrial properties or retail. A company or trust (a group acting on behalf of the investors) generally hold, manage and develop these properties.
Infrastructure
Infrastructure is a broad term that refers to physical assets. It may include public transportation, toll roads or utilities like water desalination. It may also include social infrastructure investments in public housing, hospitals or prisons.
Infrastructure investments or securities (a portion of the investment purchased on a public market) are generally expensive and have high upfront capital requirements. They also feature low ongoing operating costs and have a reasonably stable return.
Shares
The most recognised method of investing, shares are part ownership of a company. They are generally bought and sold on a public stock exchange. Because of the general volatility of the share markets, shares are considered a high risk asset.
Over time, however, they tend to outperform other asset classes. The amount of risk can depend on the particular company invested in or the industry or region they come from.
Risk measures and categories
Risk is broken down into some general categories in order to help organise different investment options.
Because there is no industry standard around the naming of the categories, the level of risk may vary between funds. What is a conservative investment with one fund may be considered a moderate investment with another.
Risk is generally broken down into the following categories:
| Risk band | Risk Label | Estimated number of negative annual returns over any 20-year period |
| 1 | Very low | Less than 0.5 |
| 2 | Low | 0.5 to less than 1 |
| 3 | Low to medium | 1 to less than 2 |
| 4 | Medium | 2 to less than 3 |
| 5 | Medium to high | 3 to less than 4 |
| 6 | High | 4 to less than 6 |
| 7 | Very high | 6 or greater |
Source: Colonia First State