Asset Classes
Asset classes are categories of financial instruments that share similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. Understanding different asset classes is fundamental to building a diversified investment portfolio.
The main asset classes include stocks (equities), bonds (fixed income), real estate, commodities, and cryptocurrencies. Each asset class has its own risk-return profile, liquidity characteristics, and role in a portfolio. By diversifying across multiple asset classes, investors can potentially reduce risk while maintaining growth opportunities.
Bonds
Bonds are debt securities where investors lend money to issuers in exchange for periodic interest payments and return of principal at maturity.
Commodities
Commodities are basic goods and raw materials that are interchangeable with other goods of the same type, including energy, metals, and agricultural products.
Cryptocurrency
Cryptocurrency is a digital currency that uses cryptography to secure and verify transactions and control the creation of new units.
Real Estate
Real estate is physical property consisting of land and buildings, serving as both a tangible asset class for investment and a basic human need.
Stocks
Stocks represent ownership shares in a company, giving shareholders claim to corporate assets and earnings through equity participation.