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Investment Risk

All investing involves risk.

The value of investments is influenced by many factors, such as economic and market conditions, government policy, interest rates, currency movements, inflation and the performance of the fund managers engaged by Funds SA.

Some important risks are:

Inflation

Inflation may exceed the return you receive on your investment.

Market

Economic, technological, political or legal conditions may affect the value of investments. Market sentiment may also alter the value.

Manager performance

The risk that individual investment managers under perform.

Interest rates

Changes in interest rates may also affect investment returns positively or negatively.

Foreign currency

For overseas investment there is a risk that the value of other currencies may change in relation to the Australian dollar and reduce the value of the investment.

Derivatives

Derivatives are financial contracts used in the management of investments whose value depends on the value of specific underlying investments. Their value can fluctuate, sometimes away from the expected value, and they are also subject to counterparty risk.

Counterparty risk

Counterparty risk is the risk that an organisation contracted to provide an investment service is not able to do so.  This may result in loss of value.

Underlying investments

The value of each option’s underlying investments can rise as well as fall.  Some of the most common influences on underlying investments include:

  • Australian shares. Individual shares are affected by factors affecting the share market generally and also by the profits and expected profits of individual companies.
  • International shares. There are similar risks as for Australian shares. Additionally, they are affected by political factors and the currency exchange rate of the country where the shares are held.
  • Property. Economic factors such as inflation and unemployment will affect the return on property as well as the location and quality of the property itself.
  • Diversified fixed interest investments. Changes in interest rates, as well as the risk of loan repayment default, will result in a change in value of this investment.

Other risks specific to super investments include changes to super or taxation laws, which may affect the accessibility or value of your investment.

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