Growth Versus Defensive Investments

Investment is a financial decision, transaction or procedure where you allocate money or capital within a particular area of business in the hopes that it will generate some income or profit in the future. If you have money in your savings account or are earning money from your job, it would be smart if you invest some of it because it could mean that you will have high returns.

But how should you invest your money or assets as capital? How many options are there?

There are two types of investments. The first is growth investments and the second is defensive investments.

A growth investment is for those clients or investors who want to avail profits and risks in the financial market and want to work through its fluctuations for a long time. This investment type is growth-oriented, where you can grow your financial assets and portfolios over a period of time. These will lead to high profits as well as losses because investors will face the instabilities and risks that are inherent in financial situations.

On the other hand, a defensive investment does not carry this level of risks or losses. It is geared to generate income for the investors through measured and focused tactics that do not involve instabilities.

Generally, there are four main asset classes – a term for investment typology – that are available in every financial market throughout the world.

Shares: These include shares. A share is a type of growth investment that involves ownership of shares of a corporation that will generate income from dividends over long periods of time. A dividend is a slice of yearly profit earned by the corporate due to the corporation’s shareholders.

Share valuations are unstable and contingent on the effects of market forces’ up-and-down swings. However, you will earn a significant income as the up-swings generate very high returns for shareholders.

Property: This is another type of growth investment where the property value rises over time with market appreciation. However, you do have the potential to lose money on property if the property depreciates in the middle of a recession.

Cash investments: Investment through interest, cash, and deposits in cash deposits and savings accounts can be great defensive investments. You will not have capital growth through these but you will have stable, dependable options of protecting and saving your finances.

Fixed Interest: A fixed interest investment is the fourth asset class. These consist of bonds from governments or companies that will generate interest as a return on investment.