If you’re the sort of person whose eyes glaze over when people talk about growth and income assets, our quick lesson in investments is for you.
Investments can generally be split into two broad groups:
- Growth assets ; and
- Income assets.
Each of max’s investment options are made up of different proportions of income and growth assets depending on the option you choose.
What are Growth assets?
These ones can go up and down like a dog on a hot tin roof – but as the name suggests, tend to grow significantly given enough time.
Growth assets include:
- Australian shares;
- International shares; and
- Listed property securities (investments in property and property based companies and assets that are listed on the share market).
Share prices generally rise over time as company profits rise and there is economic growth. However, share prices are volatile and can fall from time to time, such as when interest rates rise, the economy weakens, or something else affects the share market in a negative way.
Growth asset values tend to fluctuate more than income assets, making them a more volatile investment option in the short term, although over the long term, they tend to show better returns.
What are Income assets
Steady as she grows – they tend to be able to withstand big market waves, and slowly sail on up.
- Australian fixed interest;
- International fixed interest; and
Fixed interest securities are also known as ‘bonds’, which are loans to governments and companies for a period generally of between 3 and 20 years. Interest is paid (usually) every six months and the amount of interest paid is fixed (hence ‘fixed interest’).
Cash does not mean money kept under the bed! Cash includes short-term (typically less than 6 months) lending to organisations such as banks or major companies (also called ‘bank bills’).
Income assets values tend to be less volatile than growth assets, but their returns tend to be lower over the long term.
For more info on investments check out our PDS.