investment basics explained (no jargon!)

Volatility

Volatility is used to describe how much an investment’s value changes.

All investments experience volatility, just like how the stock market moves everyday.

An investment with high volatility is expected to move in value significantly. In contrast, an investment with low volatility is expected to have a more stable price.

Diversification

Diversification is a strategy that spreads investments across a variety of asset classes to help reduce the impact of underperformance by any one class. Each asset class behaves in a different way. As one rises in value, another may fall. By carefully balancing the relationship between asset classes, managers can produce a portfolio with a lower risk for a targeted level of return. This strategy is used to manage diversified portfolios including our Ready-Made options.

Diversification is a core focus in our investment beliefs, which we use to guide our investment decisions. Take a look at our investment beliefs.

Investment Risk Profile

An investment risk profile is a measurement of how comfortable you are to be exposed to investment risk.

Your investment risk profile can be determined by completing a questionnaire about your current financial circumstances and your preferences. Try the HESTA Risk Profiler.

Having an understanding of your risk profile is a great thing, because it helps you make informed financial decisions and choose investments that are suitable for you.

Bull market

A bull market is when assets enjoy a sustained period of rising value. During a bull market, investors are optimistic about continued growth. A bull market can refer to increasing prices of the stock market, property market and/or commodity prices (such as gold and iron ore).

Bear market

A bear market is when assets experience a sustained period of falling value. During a bear market, investors are pessimistic about future growth, and as a result are less willing to invest in shares, property and other assets that may be deemed risky.

At HESTA, we diversify our investments so that we capture opportunities when markets are rising, and protect your investments when markets are falling. You can learn more with our investment beliefs.

Index Fund

An index represents a segment of the financial market, in the same way that Australia represents a segment of all the countries in the world.

For example, the ASX200 index measures the top 200 biggest companies on the Australian stock exchange. The S&P500 index measures the top 500 companies on the American stock exchanges.

An Index Fund is an investment product that reflects the holdings in a particular index, such as the ASX200 or S&P500. An Index Fund allows you to invest in the companies in a particular index.

We offer our members a range of investment options, including an Indexed Balanced Growth option.

Wondering which investment option is best for you? Our friendly advice team can help you work out suitable investment strategies. Get in touch.

Investment

An investment is something you purchase with the goal that it will increase in value over time. People invest in all sorts of things, from property, to companies, and even art.

As a HESTA member, you’re invested in a diverse range of things through your chosen investment option.

Investment return

An investment return is a fancy way of saying how much money your investment has made over time.

You can see how your super is performing anytime in your online account.

Asset

An asset is something you own that’s worth money. If you own a house, a car or have money in super, these are considered your assets.

HESTA invests in all sorts of assets on behalf of our members, including commercial property, large infrastructure projects, technology companies, and government bonds, just to name a few.

You can see what we invest in on your behalf by viewing our Super investment options page.

Shares

A share is when you own part of a company. 

As a part-owner you can get a portion of the profits earnt by the company.

Shares will go up and down in value depending on demand to purchase the shares. Demand is created by how successful people think a company will be going forward.

Another word you may come across for shares is equities. These mean the same thing. 

Shares are part of many of the HESTA investment options.

Risk vs return

You may have heard the phrase “no risk, no reward”. Essentially, this means that to receive a positive financial outcome, i.e. “a reward”, you need to take on some “risk”.

An investment with lots of risk has a wide range of outcomes: both good and bad. For example, investing in a new technology company might provide a high investment return, but it could also go down in value.

Alternatively, an investment with low risk has a small range of outcomes. For example, keeping cash in a savings account will provide you with a small investment return, but it won’t go down in value.

Each person will have their own preference for how much risk they are prepared to take. And your risk preference may change over time, as your circumstances change.