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What Are ‘Growth’ And ‘Defensive’ Assets And Investments?

Generally speaking, growth assets are higher risk and higher reward investments. Defensive assets are lower-risk lower-reward.

However, everyone has a different interpretation of ‘risk’ and ‘reward’. Most academic literature says ‘risk’ is volatility.

Risky Versus Defensive Assets / Investments

Risky AssetsDefensive Assets
Australian sharesAustralian fixed income (e.g. bonds)
International sharesInternational fixed income (e.g. bonds)
CryptocurrenciesCash management trusts
PropertyGovernment guaranteed deposits
InfrastructureGovernment bonds (from a developed country)
Private EquityCash
Venture capital 
Most other ‘alternative’ strategies 
Real assets (e.g. office buildings or farms) 
Hybrid notes / Convertible notes 
“Junk” bonds 

Does More Risk = More Reward?

That depends on how you define risk. If you ask me, volatility isn’t risk.

The random ups and downs (volatility) of an investment’s price is only a concern if you’re investing for the short term (e.g. less than 3 years) or if you rely on your investments for income (e.g. dividends).

But you wouldn’t sell out if the price of your house fluctuated by 1%, 2% or 3% each day, week or month… would you? 

To me, a business person and long-term investor (3+ years), risk should be defined as “losing your entire investment”. But, obviously, everyone is different and your tolerance and willingness to take on risky investments will depend on many things, such as your:

Your risk profile should not be based on:

  • What your parents or brother-in-law tell you is right (unless you do your research and agree)
  • Purely what you read online (oh, wait…)
  • What someone else is doing
  • The investment potential, with no consideration of the risks

How does this relate to Superannuation?

Inside your Super account, you have investment options. In the video below, Owen explains these options as well as the things to look at, including:

  • Risk
  • Bad performance
  • Costs
  • Asset allocation (‘how to read the pie charts’)

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