Asset Classes

Historically, property and equities have greater volatility or variation in the investment returns they have earned over relatively short periods of, for example, one year. That means there can be a significant difference in the returns you will receive from these asset classes from year to year.

Cash and fixed interest tend to provide more stable (less volatile) returns from year to year. However, this lower volatility generally comes with a lower return than property and equities over, for example, a 5 year term.

The table below describes the four main asset classes and their expected levels of risk and return. As any of the investment options you choose will contain one or more of the following asset classes it is important that you understand how they work.

Asset Class	Description	Risk and Return
Cash	Money invested in interest earning deposits that are available at short notice is referred to as a cash investment. The purchase of bank bills to invest in the short-term money market is the most common form of cash investment. Money lodged in term deposits of less than one year is another form of cash investment. Cash investments generate returns in the form of interest and can also be sold.	Cash investments are the most secure but can lose value in real terms as a result of inflation. Cash investments also usually earn a lower rate of return than investments in other assets. The total value of a cash investment does not fluctuate as much as other investments, but it increases slowly.
Fixed Interest (Australian and International)	When someone buys an asset that produces a known amount of income over a specific period of time, it is referred to as a fixed interest investment. For example, home loans return a known amount of income to the lender from repayments over the period of the mortgage. Other forms of fixed interest investments include small business loans and commercial loans that are secured by legal rights over the borrower's assets, and government and commercial bonds. The main source of return from these investments is income, although they can be sold and may generate capital growth if their value has increased.	Fixed interest investments have a moderate level of risk and they normally produce a moderate rate of return. The market value of fixed interest securities fluctuates more than cash, but the interest payments they generate provide a cushion of support.
Property (Direct and Listed Property Securities)	Investments in property can take the form of purchases of established buildings, financing the construction of new buildings, or improvements to sites held for future development. Property investments can produce returns for investors in the form of income from rent and by capital growth when the value of the property increases.	Property provides the potential for higher returns than that provided by cash, mortgages or fixed interest. There is, however, a greater risk that the value of the investment may decline.
Equities (Australian and International)	Someone investing in equities becomes a part owner of the business enterprise in which they invest. They can become part owner of a business by buying shares, buying a direct interest in a company that has not issued shares, or joining a consortium that has been established to undertake a particular enterprise. The equity investments held by Cbus include shares, private equity and infrastructure investments. Equities produce returns for investors in the form of income, when a share of company profits are distributed as dividends, and by capital growth when the enterprise, or its shares, increase in value.	Equities can offer the highest returns, but they can also involve a higher risk. The value of equities can fluctuate dramatically leading to negative returns in a given year. But history shows that over the long term equities increase in value faster than investments in other assets.