12/3/2020 What are the different types of investments?

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Investing basics

What are the different types of investments?

There are four main investment types, or asset classes, that you can choose from, each with distinct
characteristics, risks and benefits.

Once you are familiar with the different types of assets you can begin to think about piecing together a mix that
would fit with your personal circumstances and risk tolerance.

Growth investments
These are more suitable for long term investors that are willing and able to withstand market ups and downs.

Shares
Shares are considered a growth investment as they can help grow the value of your original investment over the
medium to long term.

If you own shares, you may also receive income from dividends, which are effectively a portion of a company’s profit
paid out to its shareholders.

Of course, the value of shares may also fall below the price you pay for them. Prices can be volatile from day to day
and shares are generally best suited to long term investors, who are comfortable withstanding these ups and downs.

Also known as equities, shares have historically delivered higher returns than other assets, shares are considered
one of the riskiest types of investment. Top

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Property
Property is also considered as a growth investment because the price of houses and other properties can rise
substantially over a medium to long term period.

However, just like shares, property can also fall in value and carries the risk of losses.

It is possible to invest directly by buying a property but also indirectly, through a property investment fund.

Defensive investments
These are more focused on consistently generating income, rather than growth, and are considered lower risk than
growth investments.

Cash
Cash investments include everyday bank accounts, high interest savings accounts and term deposits.

They typically carry the lowest potential returns of all the investment types.

While they offer no chance of capital growth, they can deliver regular income and can play an important role in
protecting wealth and reducing risk in an investment portfolio.

Fixed interest
The best known type of fixed interest investments are bonds, which are essentially when governments or companies
borrow money from investors and pay them a rate of interest in return.

Bonds are also considered as a defensive investment, because they generally offer lower potential returns and
lower levels of risk than shares or property.

They can also be sold relatively quickly, like cash, although it’s important to note that they are not without the risk of
capital losses.

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Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to
buy, sell or hold. Past performance is not indicative of future performance. This information is not advice and has been prepared without
taking account of the objectives, financial or taxation situation or needs of any particular individual. For this reason, any individual should,
before acting on this information, consider the appropriateness of the information, having regards to the individual's objectives, financial or
taxation situation and needs, and, if necessary, seek appropriate professional advice. Commonwealth Securities Limited ABN 60 067 254
399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124
AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.
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