The difference between defensive assets and growth assets

A special kind of investment is called an asset. The probability of profit and loss varies from option to option. Generally, they fall into two broad categories: growth and defense. Most retirement account portfolios consist of growth and defensive assets.

Asset arrangement

Assets fall into three broad categories: low risk, medium risk, and high risk.

Low-risk assets are generally more consistent. They face less risk of financial loss in the long run, but their return on investment will be lower.

A medium risk portfolio consists of higher and lower risk assets.

Riskier investments are less likely to generate returns but more likely to generate losses, especially in the short term.

Growth Assets They are those that have the potential to provide higher returns over the long term. They have a higher degree of volatility, which makes them more vulnerable to economic and market volatility. The opposite of a growth asset is a defensive asset. This value can easily change over time. The risk of an asset varies between low and high. Used to achieve long-term financial goals (five years or more).


Stock returns come from capital growth or a decline in company value, as well as dividends to shareholders. Additionally, the return on shares may come from any profits transferred to shareholders. While stocks typically outperform other asset classes in the long run, stocks involve greater risk and have the ability to grow or fall by often larger margins in the short term.

The term “alternative” is used to describe some investment strategies that differ from traditional asset types such as stocks, real estate, bonds, etc. You can manage them on different online platforms and find ways to accept online payments for transfers, purchases and sales smoothly.

Physical assets:

This category includes investments in real or physical assets, such as real estate and infrastructure, which refer to utilities and businesses responsible for providing services to local people. You can invest directly or indirectly through public listings and private trusts. In addition to capital appreciation that occurs over time, many assets generate income, such as rental income, that increases their returns.


The goal of a multi-asset investment strategy is to increase the likelihood that you will achieve your financial goals over a longer period of time. Investment managers can invest in a wide range of assets, including stocks and bonds, high-yield credit, listed infrastructure, absolute return strategies and cash. These investments can be made with capital growth or capital preservation in mind.

Defensive Assets They are generally less dangerous than growth assets, but may offer lower returns over longer investment horizons. Provide regular returns while increasing portfolio diversification. Low to medium risk is asset related. These are used to achieve more immediate monetary goals (two years or more).


Cash investments include bank deposits and short-term maturity money market instruments. Currency investments are often referred to as “cash investments”. Apart from any rise in the value of the underlying asset (or fall in the case of negative returns) due to any change in interest rates, most of the return on an investment comes from the interest paid on the principal invested. Short-term money market assets differ from bank deposits in that their value can fluctuate at any time.

Fixed rate assets:

Bonds and bonds are examples of investments that generate fixed interest rates, as well as other fixed income products. When investors buy securities at a fixed rate, they are, in effect, borrowing money from a company or government.

Returns come not only from the interest paid on this “loan,” but also from any increase or decrease in the value of the underlying asset, primarily triggered by changes in interest rates.

How do fixed interest investments provide a return on capital?

Interest paid on the principal of the loan generates a return. Changes in the interest rate environment may also affect the value of the underlying securities, which may increase or decrease returns.

Over longer periods of time, fixed-rate investments typically provide greater returns than cash, but lower returns than real estate and stocks. It is recognized that their value is more variable than cash, but less volatile than real estate or stocks.

Learn about capital development

Capital growth is often described as an increase in a company’s value, while capital loss refers to a decline in a company’s value. In general, we expect riskier assets to provide returns in the form of capital appreciation.

For example, as a shareholder, you may be able to receive dividends from the stock you own. Still, most returns are usually created by changes in a company’s value over time, which is reflected in the stock price. These returns are vulnerable to large fluctuations in a short period of time due to market volatility.

Why are defensive assets safer?

If your circumstances change suddenly, you will be protected by defensive assets. It may be safe and better to hold a small amount of defensive assets for further protection when the market crashes.

Defensive investing allows you to stay invested when the market is down.

Behavioral research shows that when you have large losses on paper, you are likely to sell out of fear. This tendency increases with the amount of loss. Loss aversion occurs when you lose 35% to 50% of your wealth (which is roughly equivalent to the stock market crash of 2020 and 2008). Some pension funds and other forms of investment organizations saw a pattern between 2008 and 2020 in which investors, fearing more losses, shifted their focus from holding stocks to cash.

This article has been published in accordance with Socialnomics’ disclosure policy.

Source of information: Compiled from SOCIALNOMICS by 0x information.The copyright belongs to the author Socialnomics Trends, and may not be reproduced without permission

Related Posts