Income-oriented asset

Some assets are bought so they pay something back on a schedule. Interest every quarter. Rent every month. A regular, countable amount, whether or not the asset's own price ever changes.

That is an income-oriented asset. The workbook's own example among financial assets is a bank deposit — its interest arrives on schedule, and the investor is not primarily counting on the deposit itself becoming worth more.

A growth-oriented asset is the opposite — held mainly for the rise in its own value, with little or no regular payout along the way.

Financial assets represent a claim on the benefits the asset provides. A bank deposit paying, say, 7% p.a., benefits the holder through periodic interest plus the return of principal, a structure built entirely around income rather than appreciation. This is what makes it the workbook's income-oriented example, standing opposite equity investments, its growth-oriented one.

Some assets do not fall neatly into either bucket — listed securities, the workbook notes, can combine both income, through dividends, and growth, through price appreciation, in a single holding, rather than sitting purely in one camp.

An investor puts Rs 10,00,000 into a bank fixed deposit paying 7% p.a. That deposit pays roughly Rs 70,000 a year in interest, on a fixed schedule, regardless of what happens elsewhere in the market — a pure income-oriented asset.

The same investor also holds Rs 10,00,000 of a listed company's shares that pay a modest annual dividend but are held mainly in the hope the share price itself rises. The shares sit closer to growth-oriented, even though the small dividend gives them a mild income component too, illustrating the workbook's point that many financial assets are really a combination of the two, not purely one or the other.

Chapter 1 (Introduction to Personal Financial Planning), section 1.4 (Assets), names bank deposits as its income-oriented example among financial assets, immediately alongside the growth-oriented equity example. Expect a question classifying a listed asset as income-oriented, growth-oriented, or a combination of both.

• Income-oriented does not mean risk-free — a deposit still carries the issuer's credit risk, even though its return comes as a scheduled payout rather than price movement.
• Listed securities can combine both income and growth in the workbook's own framework — do not force every asset into a single category.
• Do not confuse an income-oriented asset with an income-expense statement — the two share a word but describe entirely different things.