Ever wondered how to invest your money without losing sleep at night? You’re not alone.
While investing seems complicated, it does not have to be. And with lots of options out there, knowing where to start can be a challenge.
That’s where the “Third, a Third, a Third Rule” rule comes in - a straightforward way to balance risk & reward, growth, and liquidity.
In this guide, you’ll learn what the basic types of investments are out there, and how to pick the right options for your financial objectives.
Let’s dive in and make investing easier!
“A balanced investment portfolio is your best defence against the unknown. Start simple, invest smart.”
What is the “Third, a Third, a Third” Investment Rule?
The "third, a third, a third" rule is a simple asset allocation strategy that divides your investment portfolio into three equal parts, each serving a distinct purpose.
The goal is to balance risk, growth, and liquidity by spreading investments across different asset classes.
Here’s how it works:
1. One-Third in Cash and Cash Equivalents
- Things like savings accounts, bank deposits, Treasury bills, and money market funds
- Gives you quick access to cash for emergencies
- Helps you sleep easier during market ups and downs
- Can cushion the blow if interest rates are rising
2. One-Third in Marketable Securities
- Includes shares (stocks), bonds, ETFs, and mutual funds
- Greater growth potential, but more ups and downs
- Easy to buy, sell, and liquid
3. One-Third in Non-Traditional or Alternative Assets
- Think real estate, commodities (like gold), and private businesses
- Less liquid (you can’t sell as quickly), but offers protection if listed markets wobble
- Can help you grow your wealth over the long term and can incorporate leverage
Why use this rule?
Because it’s simple, flexible, and helps you manage risk without needing a deep knowledge of finance.
The importance of diversification when investing
Major Types of Investments: Growth vs. Defensive Assets
Let’s keep it easy:
Growth Assets
- Fluctuate more, but can give higher long-term rewards
- Examples: Shares, property, equity funds
- Suited if you’re after growth and have time on your side
Defensive Assets
- More stable, less likely to jump around in value
- Examples: Cash, fixed interest, government bonds
- Give you peace of mind, especially if you’re saving for shorter-term goals
Pro tip:
“Mixing growth and defensive assets means you can tailor your investments to your timeframe, objectives and risk tolerance. It allows you ride out the storms and celebrate the sunny days.”
Ask a Financial Adviser about your investment options
Your Investment Options
Here’s what you can add to your portfolio:
1. Cash & Cash Equivalents
- Perfect for emergencies or upcoming expenses
- Easy to liquidate, low risk, low return
2. Bonds & Fixed Interest
- Lend money to governments or companies, get regular interest income
- Higer interest than cash, and less risky than shares
3. Shares (Equities)
- Own a slice of a company and its future profit growth
- Greater risk, but the potential for higher rewards
4. Property
- Own real estate or property funds
- Can bring steady income and long-term growth, but less flexible
- Can incorporate leverage if appropriate
5. Managed Funds & ETFs
- Let experts invest for you
- Built-in diversification
6. Superannuation (Retirement Accounts)
7. Investment Bonds
- Great for tax planning and estate management
8. Alternative Investments
- Gold, silver, crypto, or private investments
- Higher risk, can spice up your portfolio but use with caution
How to Choose What’s Right for You
Choosing investments depends on you:
- Know your risk tolerance—how much are you comfortable losing if things go south?
- Set your financial goals and know your timeframe. What are you investing for: a house deposit, retirement, or a holiday?
- Diversify. Don’t bet everything on one horse.
- Review and rebalance your investments every year.
- Get advice. A registered financial planner can guide you and help you sleep better at night.
If you'd like to start planning your future and investing your funds in a way that aligns with your tolerance to risk and goals, book a meeting with a Financial Adviser.
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The information provided is factual only and does not constitute financial advice. If you need to speak with a Financial Adviser before making a decision, you can contact us via the button above.