Income vs Growth
Types of investments
If you’re planning to invest you need to think about why you are investing.
All managed funds have different investment strategies, so having a clearly defined objective will help you make the right choice. Income is generated from the interest and dividends earned from the investment. Bonds and cash are examples of income producing investments and they generally provide stable and regular returns.
Growth assets, such as shares and property, generally suit people who want to invest for five or more years. These types of assets grow your capital with moderate levels of income over time. If you’re investing for the long-term, you may be more attracted to higher risk investments that offer the potential for higher returns. That’s because over a longer period, although you may experience short-term fluctuations you are likely to be rewarded with a higher growth to your wealth.
What is my current life stage?
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Are you looking to build wealth for the long-term?
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Are you saving for a holiday?
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Are you retired and looking for a regular income?
Summary of Asset classes
| Asset class | Typical Investment timeframe | Perceived risk | Type of return | Examples |
| Cash | Short-term 1-2 years |
Low | Income and no growth | Bank accounts Cash Management Trusts |
| Fixed Interest | Short-medium term 3-5 years |
Low-medium | Income and some growth | Bonds Debentures Mortgage trusts |
| Property | Long-term >5 years |
Medium – high | Income and growth | Commercial/Industrial Property Trusts |
| Shares | Long-term >7 years |
High | Growth and some income | Shares listed on the Australian and International markets |
The Australian Securities and Investments Commission¹ suggests that you can expect a negative return on share investments every four years – and every six years for property and every eight years for fixed interest investments.
¹ Source www.fido.gov.au – negative returns: the dark side of investments
