The biggest driver of investment returns (before fees) is the type and mix of assets you choose. In other words, how much of your money is invested in shares is more important than the amount allocated to (say) Telstra. This is called asset allocation. 

Get your asset allocation right to get the return you need at a risk you are prepared to accept. 

Generally, if you target a higher return you need to accept a higher level of risk. If you are not prepared to take an appropriate level of investment risk, you may need to make greater contributions to deliver the same level of retirement income.

Some asset types (like cash and bonds) tend to produce low but steady returns with a low risk of losing money. These are referred to as Defensive Assets. Others like Shares, produce higher returns with more variability and the chance of losing value. These are known as Growth Assets.

For long term investments like Super, mixing Defensive and Growth assets in the right proportion can deliver higher long term returns with less variability and risk. Too little growth and inflation will erode the buying power of your savings while too much in Growth assets can create volatility potentially leading to panic reactions.

The risk in any investment choice is usually described as being in one of 7 categories. Each one has a target return and the expected number of years in which it will lose money (see table below).

Sherpa says: Find out about Risk and what it means for your investments.

Get your Money Personality Profile to understand your risk tolerance.

Understanding RISK

      Risk level                            What it means for you
  • Very High07

    High Growth/Aggressive

    0-5% Defensive / 95-100% Growth

    Negative return is 6 years in every 40

    Target returns should exceed CPI+5% (7.5%+)

    For those able to tolerate a lot of short-term ups and downs

  • High06

    Balanced Growth

    20% Defensive / 80% Growth

    Negative return is 4-6 years in every 40

    Target returns CPI+5% (7.5%)

    For those able to tolerate more short term ups and downs

  • Med-High05


    25% Defensive / 75% Growth

    Negative return is 3-4 years in every 40

    Target returns should exceed CPI+3% (5.5%)

    For those happy to tolerate some short-term fluctuations

  • Medium04


    35% Defensive / 65% Growth

    Negative return is 2-3 years in every 40

    Target returns CPI+2% (4.5%)

    For those not able to tolerate short-term fluctuations

  • Low-Med03

    Capital Stable

    65% Defensive / 35% Growth

    Negative return is 1-2 years in every 20

    Returns may keep pace with inflation, little opportunity for growth

    For medium term investors

  • Low02

    Cash Plus

    80% Defensive / 20% Growth

    Negative return is 1 year in every 20

    Returns close to bank deposits, may not keep pace with inflation

    For investors with a short-term goal

  • Very Low01


    100% Defensive

    Negative return is 1 year in every 40

    Target return bank deposits, will not keep pace with inflation

    For investors with a short-term goal

These allocations and approaches vary slightly from fund to fund and the descriptions aren’t necessarily consistent. A target return of inflation plus 3-5% (5-7.5% total return at current inflation rates) is a reasonable level to expect from a balanced or balanced growth fund.

At LifeSherpa we use 7.5% annual returns to determine our Super benchmarks. 

Over 10 years the top balanced funds (with between 60% and 76% growth assets) have delivered over 8% per year, the average of the top quarter was 7.6%, the median fund delivered 7%, while the worst performing quarter of balanced funds delivered 6.1%. 

While past performance may not be a reliable predictor of future performance, picking the right manager can make a big difference.


1.  Update your details in MyFinancialLife

2. Visit the Advice Centre for a Super Review
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