Should I worry about the impact of world events on my savings?

Your retirement fund invests your contributions, after deductions, in investment portfolios to make your money grow. Investment returns mean the amount by which your retirement savings account has increased. However, during times of uncertainty and market volatility, your investment portfolios can also experience negative returns, meaning your money has decreased.

Retirement fund savings are long-term, and you should typically invest more in growth asset classes like equities that have the potential for high growth, inflation-beating returns over time. So over time, the return you should receive from your investment portfolios should be quite a bit higher than a savings account with the bank or other shorter-term savings, even though the value of your retirement savings may move up and down over time.

An investment portfolio can be a basket of mixed asset classes made up of equities, property, bonds, cash, and other specialised asset classes.

It’s important to have a diversified investment portfolio when it comes to investing your retirement savings. This means that instead of putting all your money into a single company, industry sector or asset class, the experts that manage your money and make it grow spread the money across a range of suitable companies, industries, and asset classes. In this way, when one investment does not perform well, another better-performing investment can compensate for that.

This strategy helps to manage risk. It’s a bit like not putting all your eggs into one basket.

An asset class is a group of investments that have similar characteristics and are subject to the same rules. The main asset classes for retirement savings are equities, bonds, and cash.

Bonds are an important asset class for retirement fund members. With a bond, you are like a bank. You lend your savings to a borrower, like the government or a company, who promises to pay you the money back in full with regular interest payments on specified dates. These regular payments are your return on investment (ROI) that can grow your retirement savings.

Cash is another asset class retirement fund members could consider as part of their investment portfolio. A low risk, low return asset, cash is usually the safest asset class in the short-term as its value does not fluctuate.

Equities, also known as shares, are one of the main asset classes that your retirement savings could be invested in. Investing in equities means buying a share in a company. These high-growth assets increase in value as the company’s value increases.

Equities tend to earn high, inflation-beating returns over time. This makes them a great place for long-term investments like retirement savings because your money maintains its purchasing power and can grow into a much larger amount. But the value of equities can go up and down in the short-term in line with the market.

You can also learn more about the terminology on fact sheets.open_in_new