Asset classes and Investing

Table of Contents

References
What Is an Asset?
Assets allocation
Asset classes
Asset class and Investing Strategy
Asset class types
Investing
Investing advice from legends
Trading
Financial Advisors
TODO
Tags

References

https://www.investopedia.com/terms/a/assetclasses.asp

What Is an Asset?

An asset is a resource with economic value that an individual, a company, or a country owns or controls with the expectation that it will provide a future benefit.

https://www.investopedia.com/terms/a/asset.asp

Assets allocation

Assets allocation is the way that asset classes are divided up in an investment portfolio. Depending on an individual investor’s time horizon and tolerance for risk, he or she will allocate the money in the portfolio in different proportions among stocks, bonds and cash.

Asset classes

Asset classes are the three major groupings under which financial assets fall: stocks, bonds and cash. Stocks are ownership shares in a company. Bonds are loans to a company or a government entity. Cash is not just currency, but also checking and savings accounts held in banks and money market funds.

An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. In other words, grouping of comparable financial securities.
Thus, asset classes are made up of instruments that often behave similarly to one another in the marketplace.
There is usually very little correlation and sometimes a negative correlation among different asset classes.
Financial advisors view investment vehicles as asset-class categories that are used for diversification purposes. They focus on asset class as a way to help investors diversify their portfolios.
Each asset class is expected to reflect different risk and return investment characteristics and perform differently in any given market environment. Investors interested in maximizing return often do so by reducing portfolio risk through asset class diversification.

Asset class and Investing Strategy

Investors looking for alpha employ investment strategies focused on achieving alpha returns. Investment strategies can be tied to growth, value, income, or a variety of other factors that help to identify and categorize investment options according to a specific set of criteria.

Some analysts link criteria to performance and/or valuation metrics such as earnings-per-share (EPS) growth or the price-to-earnings (P/E) ratio. Other analysts are less concerned with performance and more concerned with the asset type or class.

https://www.investopedia.com/terms/a/alpha.asp Earnings Per Share: https://www.investopedia.com/terms/e/eps.asp Price-to-Earnings Ratio: https://www.investopedia.com/terms/p/price-earningsratio.asp

Asset class types

Examples of common asset classes include
1. Liquid assets
2. alternate assets
  1. The real estate market
  2. valuable inventory, such as artwork, stamps, and other tradable collectibles
  3. hedge funds, venture capital, crowdsourcing
  4. futures, other financial derivatives (futures trading: https://www.investopedia.com/terms/f/futures.asp, Derivatives: https://www.investopedia.com/terms/d/derivative.asp)
  5. currencies, Digital Currencies

The stock market has proven to produce the highest returns over extended periods of time. Since the late 1920s, the compound annual growth rate (CAGR) for the S&P 500 is about 6.6%, assuming that all dividends were reinvested and adjusted for inflation.

In other words, $100 invested in the S&P 500 on Jan. 1, 1928, would have been worth about $46,833 (in 1928 dollars) by Dec. 31, 2023, without adjusting for inflation. The total would have grown to $836,206 in 2023 dollars. By comparison, the same $100 invested in five-year Treasuries would have been worth only about $7,278 in today’s dollars.

https://www.investopedia.com/terms/c/cagr.asp