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Asset Class - Big Sky Financial Solutions

Asset Class



The main types of investment classes are:

  • Cash (including short term bank/ credit union accounts)
  • Fixed Interest (bonds & mortgages)
  • Shares (Australian & International)
  • Property

Each asset class offers a varying degree of risk/volatility and return.

Returns

Different asset classes also offer different types of returns, income or growth, or a combination of the two.

An income return is the amount of money you earn from your investment (eg interest, dividends or rent) whereas growth return is the amount your capital (original investment) grows over a period of time.

Cash deposits have a very low level of risk and offer low average returns compared to other asset classes like shares and property. Cash investments tend to produce income but no growth. In the long term the income generated is eroded by the effects of inflation.

Risk/Volatility of asset based investments

Every investor should be prepared for risk/volatility of asset based investments. It is also important to adopt a long term view of market volatility and expected returns.

Market movement and other factors influence the value of asset based investments at any point of time. Varying degrees of volatility can be expected from each asset class. Historically, high performing asset classes like shares have a higher degree of volatility and returns associated with them. However, the level of volatility you see can be reduced by adopting a long term view.