Becoming familiar with a few key investment principles can help you make sense of your investment choices. Generally, the more you learn, the better prepared you will be to make decisions.
Different types of investments
Investments are generally divided into two groups: defensive assets and growth assets. Within each group are a number of asset classes, or types of investments.
Defensive assets have lower returns over the long term, but are generally more stable and predictable from year to year. Defensive assets include cash and fixed interest.
Meanwhile growth assets have provided higher returns in the past and are expected to continue doing this over the long term, but tend to fluctuate more in value in the short term. Growth assets include shares and property.
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The relationship between risk and return
Diversification, a great way to control risk