It might be natural to think that as your pension pot is important, you want to keep it safe and don’t want to take any risk with it by investing in anything that can rise and fall too much in value.
But if you want your investments to grow, that’s difficult to achieve if you only choose lower-risk investments, such as cash or bonds.
Company shares have historically performed better than cash or bonds over the longer term, but be aware that there are no guarantees they’ll always do that.
While all funds are designed to grow over the medium to long term, the investment types that a particular fund invests in will have an effect on determining the fund’s risk profile. This basically means whether the investments in the fund will be low, medium or high risk.
Funds that invest in higher risk investment types have the potential to produce higher investment returns over the longer term.
But they might lose value due to the volatility of the investment market. This means that they could be severely affected by market downturns and other factors.
Lower risk funds might be less volatile, but over the longer term could produce lower returns than higher risk funds.