When choosing the best asset type, a clear understanding of the characteristics and risks involved should be undertaken before making an investment decision. Each asset type has their expected returns and risks, and management of these two are important to meet the market cycle and your current financial structure. Here are the different types of investments:
This is perhaps one of the most stable asset class as the income and risk are usually low. This is suitable for people who would like to invest in the short term and have very low tolerance for risk. Asset types can include bank and term deposits, savings accounts and cash management trusts.
These are fixed interest assets that are more volatile than cash, but are still considered stable. The income from this asset class comes from interest from income return for an agreed timeframe. These includes government and corporate bonds, mortgages and securities.
This asset type is ideal for those thinking of long term investments, as this is less liquid than other asset types. Although it has higher risk than Cash and Bonds, investing in residential, commercial and industrial properties can have significant returns for as long an effective risk management plan is in place.
Investors of this asset type generate income through capital growth through dividends. This is the most volatile asset class and there is considerable risks involved, as you have to invest in either Australian or International equities and you have to be at least a part owner of a company to share in the profits and growth.
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