Diversified portfolio strategy that uses certain factors that attempt to outperform a conventional market-cap strategy Key features: Helps insulate against the ups and downs of the stock market. Expects to provide more return from income, rather than capital appreciation Limits exposure to stock market volatility Built by Get even more control with a Flexible Portfolio.
Jump to navigation Jump to search An asset class is a group of instruments which have similar financial characteristics and behave similarly in the marketplace.
We can often break these instruments into those having to do with real assets and those having to do with financial assets. Often, assets within the same asset class are subject to the same laws and regulations; however, this is not always true.
For instance, futures on an asset are often considered part of the same asset class as the underlying instrument but are subject to different regulations than the underlying instrument.
Many investment funds are composed Asset classes the two main asset classes which are securities: However, some also hold cash Asset classes foreign currencies.
Funds may also hold money market instruments and they may even refer to these as cash equivalents ; however, that ignores the possibility of default. Money market instruments, being short-term fixed income investments, should therefore be grouped with fixed income.
In addition to stocks and bonds, we can add cashforeign currenciesreal estateinfrastructure and commodities  to the list of commonly held asset classes.
In general, an asset class is expected to exhibit different risk and return investment characteristics, and to perform differently in certain market environments. Asset classes and asset class categories are often mixed together. In other words, describing large-cap stocks or short-term bonds asset classes is incorrect.
These investment vehicles are asset class categories, and are used for diversification purposes. Helps protect future purchasing power as property values and rental income run parallel to inflation Values tend to rise and fall more slowly than stock and bond prices.
It is important to keep in mind that the real estate sector is subject to various risks, including fluctuation in underlying property values, expenses and income, and potential environmental liabilities. Helps protect future purchasing power as values have fixed utility and thus run parallel to inflation Values tend to exhibit low correlations with stock and bond prices.
Price dynamics are also unique: Most financial experts[ who? However, there is no guarantee that diversification will protect against a loss of income.
The goal of asset allocation is to create a balanced mix of assets that have the potential to improve returns, while meeting your: Tolerance for risk market volatility Goals and investment objectives Preferences for certain types of investments within asset classes Being diversified across asset classes may help reduce volatility.
If you include several asset classes in your long-term portfolio, the upswing of one asset class may help offset the downward movement of another as conditions change.The 3 Best Asset Classes To Brace Your Portfolio For The Next Financial Crisis.
July 20, Historical Asset Class Returns The following tables demonstrate the challenges investors face when attempting to predict the next top-performing asset class. The default asset classes are Hardware, Software License, and Consumable.
These general classes can be used to manage a variety of assets. If the general classes are not appropriate for a specific group of assets, consider creating a new asset class. The risk/return coordinates of the other asset classes are also provided.
The location of the maroon dot is arguably one of the ideal combinations of risk and return. The pros and cons of the main asset classes neatly arrayed for your investing convenience. Financial professionals generally agree that there are four broad classes of assets, although many claims there are only three and some feel there are as many as five.
Regardless of the number, if your portfolio includes investments spread across these classes, it's considered balanced. Balance is good.