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Blog | Income Versus Growth

Nathan Lear
Partner/Private Client Adviser
25 Aug 2021

The total return from investing is comprised of two parts, income, and growth. Both play a different, yet arguably equally important role. In this week’s blog let’s explore both concepts within an investment portfolio. 

Growth Investment 

You buy a growth investment with an expectation that it will increase in value over time. Examples of growth investments are company shares or property investments.   

Income Investment 

Income investments generally pay regular interest or dividends. This could include dividends from company shares, rental income from property, or interest from a fixed-term investment such as a bond or term deposit. 

What is the right mix? 

How to decide between growth or income investments? For example, if you are seeking a total return of 10% per annum from your portfolio, does it matter what the breakdown is between income and growth? In short, yes, it does. Here are some things to consider: 

Goals and Objectives 

Ultimately your goals and objectives will drive your portfolio’s mix of income and growth investments.  

An example is a retiree client that may have accumulated sufficient retirement assets over their working life, therefore they may have a higher preference for income and capital stability of their portfolio rather than growth. However, some growth is important to protect their portfolio from the effects of inflation.  

Another example is a younger accumulator that may have the main focus of growing their wealth, therefore they would have a higher allocation to growth investments.  

Risk Appetite 

Attitude to risk can also play a part in your allocation to income and growth investments. A risk-averse investor may have a higher proportion of income investments which are generally lower risk than an investor with a higher tolerance to risk. An investor with a larger appetite for risk may be prepared to accept higher levels of volatility with a higher proportion of growth investments.  


An important consideration when it comes to the return from your investments is tax. For example, those with higher taxable income would pay more tax on their investment income each financial year. Whereas tax on any capital appreciation in the value of your investments would only be paid if an asset was disposed of. Further, the capital gains tax discount can be applied if the asset is held for more than 12 months, providing a 50% discount. 

Therefore, an investor on a higher tax bracket striving to minimise tax may be inclined to invest a higher proportion of their portfolio in growth assets as a way to defer/minimise tax. 

So what is the right mix for you? At Hewison Private Wealth, we build bespoke portfolios, focused on achieving individual goals and objectives. Discover what your bespoke portfolio could look like by securing a 15-minute discovery call with one of our Advisers. To select your preferred day and time for a discovery call, click HERE. 

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.