Each of our Model Portfolios are diversified across four key asset classes:
- Fixed Interest / Bonds
- Australian Shares
- International Shares
Cash is a defensive asset. We keep cash in our portfolios to provide liquidity to cover any short-term cash needs; and to reduce risk. Cash is a risk-free asset. Holding cash reduces the risk of the total portfolio.
Bonds, also known as fixed interest, are a defensive asset and an important part of any portfolio.
Bonds are an agreement to make a set interest payment (e.g. 5%) on a regular basis (e.g. annually) and to repay the initial investment (e.g. $1000) on a set date (e.g. in five years’ time).
Bonds can be contrasted with shares, which pay no set dividend and where there is no agreement to repay your initial investment. Bonds are a defensive asset, because they are not as volatile as shares.
Generally, bonds have lower risk, and therefore a lower return, than shares. Including bonds in your portfolio can help reduce volatility and protect your investment during market downturns.