Why playing it safe with your money comes at a cost
Making a conservative choice is often seen as the safe choice, but not taking on risk when you're young could see you fall short of your retirement investment goals.
"You have to start with education and information, and understand the long-term investment decisions in the context of the last 100 years of investment market returns," says Daryl La'Brooy from Hillross.
"There have been periods of poor returns, but if you take a longer perspective, especially regarding superannuation, young people must be invested in a balanced fund or something more aggressive with shares and property."
Younger people should favour growth assets, which give the best chance of providing exactly that over a long time horizon. Worst case, if everything goes pear-shaped young people have years of income generation to recoup losses.
"Young people will get a much better long-term outcome having growth rather than defensive assets, especially through the next decade when interest rates could stay down for an extended period of time.
"If you're getting five per cent in shares and property and one per cent in interest-based investments, you'll be five times better off."
The important caveat is that the underlying investments are diversified and of high quality.
Like the devil whispering in one ear, short-term volatility poses a dangerous distraction to long-term investing. This noise is hard to get away from, given the news cycle's focus on daily market movements.
"Yes volatility represents risk, but only if you sell. As long as the money is long-term then you're in a much better position."
When it comes to driving returns, asset allocation should be the number one priority.
Research by Vanguard Investments found that from January 1990 to June 2016, 89.3% of their return variations were attributable to asset allocation.
"Broadly diversified portfolios with limited market-timing tend to move over time in tandem with overall financial markets," says Vanguard's Robin Bowerman.
"Market-timing and actual security selection had a relatively small impact on return variability over the long term."
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