Asset Classes Within Income Streams
All investments are built on simple elements known as asset classes. It is the mix of specific asset classes that determines the characteristics of any investment options or choices and the overall portfolio.
Assets are generally defensive or growth assets and the proportions of each impacts on the risk and returns to be expected from any investment.
Asset class categories | ||||
---|---|---|---|---|
Defensive assets Defend from capital losses |
Cash, Bonds | Less likely to fluctuate over short term | Provide lower returns over long term | |
Growth assets Grow investment |
Real assets, Shares | More likely to fluctuate over short term | Provide higher returns over long term | |
Other Provide additional returns |
Alternatives, Private markets | Risk and return characteristics of both growth and defensive assets can be found in investments in this category |
- Return
- Investment returns are the change in value of an investment during a period. Returns can be positive (increased value) or negative (decreased value).
- Risk
- Investment risk refers to the chances that the value of your investment may not continuously accumulate, and may even fall in value.
- Volatility
- Volatility refers to the changes in the returns of an investment between periods. Volatility reflects both the scale of the difference between an investment’s highest and lowest returns, as well as the period between those peak values. The returns of the most volatile investments can vary a lot and frequently. The least volatile investments yield almost identical returns across any timeframe.
For investment choices, these concepts (return, risk and volatility) are the guiding lights, best viewed in relative terms to compare available investments and investment needs.
Though the future of any investment is uncertain, history shows us trends to help in locating higher or lower returns, attracting higher or lower risks, and enduring greater or lesser volatility.
See Understanding AvSuper’s asset classes for more.
The Main Asset Classes
Managing investment risk
To some extent, managing investment risk within income streams is more complex than investing retirement savings in superannuation for your retirement decades away. This is because of the mixed timeframes involved.
Ideally, investments will be organised to defend the value of money you plan to access and spend in the next couple of months or years, as well as looking to grow your investments for later in your retirement, which may still be decades away. Our fact sheet Structuring Income Streams in Retirement looks in detail at approaches to the mix of timeframes for retirees.
Your attitude to investment risk will depend on many factors including your investment objectives, your investment timeframe, your age, and other personal circumstances. Achieving investments with corresponding levels of risk, volatility and potential returns may require more careful attention than deciding a mix of asset classes. Diversification and regular rebalancing are important aspects of managing investment risks within income streams.
For those members who have their income stream spread across multiple investment options and are taking their regular income payments from the cash option, short term fluctuations in different asset classes are factored into the long term investment strategy. This reduces the risk of regularly switching options based on emotion or opinion.
For those who do not use this system, short term fluctuations can be detrimental to the long term performance of their income stream.
Investors often make the mistake of investing in the previous year’s best performing asset class. Historically, the previous year’s best performing investment option can often be the worst performing asset class in the following year. This is why it is important to diversify investments and have a spread across multiple asset classes.
All asset classes will move through different cycles so having a good spread and ensuring that your regular income stream drawdowns are made from a stable option makes a lot of sense.
Ask about our annual financial check program. It is a great way to keep your income stream on track.
Call our member services team on 1300 128 751 to make your appointment for personalised advice.

Email: avsinfo@avsuper.com.au | Local call: 1300 128 751 | Phone: 02 6109 6888 | www.avsuper.com.au
This information is of a general nature only and does not take into account your personal objectives, situation or needs. Before making a decision about AvSuper, you should consider your own requirements and the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD). For a copy call us or visit the AvSuper website, www.avsuper.com.au. AvSuper Pty Ltd (ABN 46 050 431 797, AFSL 239078) is the Trustee of the AvSuper Fund (ABN 84 421 446 069). FS3000.5 02.2021