Asset class is a sort of investment, which includes
bonds, stocks, real estate, or
cash. Asset class can alternatively be defined as the collection of securities demonstrating similar behaviors based on same policies and regulations. The three primary asset classes are
bonds (or fixed income),
equities(or stocks) and
cash equivalents(or money market instruments). Some other asset class includes natural resources, foreign currency, stocks, treasured metals, luxury items, automobiles etc.
Asset class behavior
Each asset class exhibits different return and risks and behaves accordingly in the market environment.
Class of Asset
Assets can be categorized as
long term assets, current assets, prepaid and
deferred assets, intangible assets, if we look from the accounting view point. Current assets are actually the cash and items which can easily be converted into cash; long term assets are real estate, plant, equipment etc; prepaid and deferred assets are rent, insurance, interest etc; and the intangible assets are those assets which cannot be touched, like trademarks, copyrights, goodwill etc.
Need of asset class
Asset classes are normally mixed up to effectively and proportionately allocate the assets.
Some unusual behavior of asset class
One of the unusual characteristics of asset class is their tendency to perform in different manner under similar market conditions and that is why investors should keep some points into their mind, which are the built-in risks of the securities and it is very difficult to rule out those chances of losses.
Some of the primary asset class
Equities: These are basically the stocks demonstrating the shares of ownership. These equities have the tendency to be volatile in the short term and constitute some risks. That is why principal value of the investment and returns may sometime sway in and no such guarantee of return in future.
Fixed income: These are basically the bond investments, which provide rate of interest over a specific period of time.
Money market: This asset class can be defined as the short-term investments, which are safe and are guaranteed by the CD (Certificate of deposit), federal government etc. There is a possibility to lose money if investors opt for this money market.