Asset Class - Overview and Different Types of Asset Classes
- Stocks or equities – Equities are shares of ownership that are issued by publicly-traded companies and traded on stock exchanges, such as the NYSE or Nasdaq. You can potentially profit from equities either through a rise in the share price or by receiving dividends. The asset class of equities is often subdivided by market capitalization into small cap, mid cap, and large cap stocks.
- Bonds or other fixed income investments – Fixed-income investments are investments in debt securities that pay a fixed rate of return in the form of interest. While not all fixed income investments offer a specific guaranteed return, such investments are generally considered to be less risky than investing in equities or other asset classes.
- Cash or cash equivalents, such as money market funds – The primary advantage of cash or cash equivalent investments is their liquidity. Money held in the form of cash or cash equivalents can be quickly and easily accessed at any time.
- Real estate or other tangible assets (e.g.commodities) – Real estate and other physical assets are considered as an asset class that offers protection against inflation. The tangible nature of such assets also leads to them being considered as more of a “real” asset, as compared to assets that exist only in the form of financial instruments.
- Futures and other financial derivatives – This category includes futures contracts, the forex market, options, and an expanding array of financial derivatives, i.e., financial instruments that are based on, or derived from, an underlying asset. For example, stock options are a derivative of the underlying stocks.
Assets which can readily be converted to cash.
There are various levels of liquidity
- Equities (stocks): owning a piece of a company, Mutual Funds
- Fixed Income (debt): lending money to a company or government for interest (government bonds, other types of bonds, and certificates of deposit, for example)
- Cash and cash equivalents: the money in your savings account, in your pocket, or hidden under your pillow
- Real Estate: owning something physical like property, natural resource commodities and precious metals like gold.
- Commodities: Natural resource commodities and precious metals like gold.
Average annual increase
Source: GarethMorgan.com - No longer available
| ||60's ||70's ||80's ||90's
|Real GDP ||4.4% ||3.3% ||3.1% ||3.1%
|Productivity ||2.9% ||2% ||1.4% ||1.9%
|Employment ||1.9% ||2.4% ||1.7% ||1.3%
|S&P 500% ||6.6% ||-0.5% ||12.9% ||15.9%
|Real Estate ||6.5% ||10.1% ||11.1% ||5.5%
|Inflation ||2.3% ||7.1% ||5.6% ||3%
|Unemployment ||4.5% ||6.2% ||7.3% ||5.8%
Saving and Investing | SEC
Asset Classes Overview | CFI - Corporate Finance Institute