What do the terms ‘growth’, ‘balanced’ and ‘conservative’ mean?

At one end of the scale are 'Growth’ investment options, which mostly invest in growth assets such as shares and property.

Assets like these tend to go up and down in value frequently over shorter time frames of one to two years – the changes in investment value are referred to as volatility.

However, over longer time frames, for example seven years or more, they tend to generally produce higher overall returns as a result of growth in the value of the underlying investment.

At the opposite end of the scale are 'Conservative’ investment options, which mostly invest in defensive assets such as cash and fixed interest.

Assets like these typically provide investors with steady returns in the form of income, and usually experience far less volatility over shorter time frames.

While less volatile than growth assets, the returns they provide are generally lower over longer periods.

And in between Growth and Conservative-style investment options are 'Balanced’ investment options.

They are typically made up of a combination of growth and defensive assets, in roughly equal measure. You should expect periods of negative returns during bad years with Balanced investment options. These periods would be less significant than those you’d expect with ‘Growth’ options, but greater than ‘Conservative’ options.

Why it pays to understand your super’s investment mix