The principle of compounding
The principle of compounding
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The first is from the contributions that you or your employer make. The second is through investment returns. The advantage of investment returns is that they benefit from compounding. That is, the more investment returns you receive, and the higher your account balance, the more investment returns you will receive.
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Here’s how compounding works…
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| Number of Years | Investment Return | ||
| 4% |
5% |
6% |
|
| 1 | $104 | $105 | $106 |
| 5 | $122 | $128 | $134 |
| 10 | $148 | $163 | $179 |
| 15 | $180 | $208 | $240 |
| 20 | $219 | $265 | $321 |
Remember, investment returns can be negative from time to time. When this happens, it may take some years for your investment to regain its previous value.
However, it is important to remember that when this occurs:
- Any decrease in value is only on paper, which isn’t ‘locked in’ unless you decide to switch investment options, or you withdraw funds from your investment; and
- Depending on what option/s you are invested in, lower markets may represent an excellent opportunity to invest additional funds (that is, purchase additional units while the price is low).
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Help making your choice
Ultimately, you need to do what is best for you. If you need help with making your investment choice or with planning for your financial future, you can always discuss your situation with a licensed financial planner.We’re here to help. Register now for a webinar to find out more.
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The schemes administered by Super SA are exempt public sector schemes and therefore we are not required to hold an Australian Financial Services licence to provide advice on our products.The information given in this presentation by Super SA is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs.Super SA strongly recommends that you refer to the relevant Product Disclosure Statement (PDS) and seek independent financial advice before making any financial decisions.
If you intend to invest in the Super SA Income Stream or Flexible Rollover Product, please refer to the relevant PDS for details of your cooling off rights.
This document is current at 1 January 2021.
