By Kevin Judge | June 11, 2018
TYPES OF INVESTMENT ASSETS: There are hundreds of types of investments and thousands of choices, but only two categories to choose from.
- DEBT: These are investments where you are owed interest and your money back.
- EQUITY: These are investments where you own something and hope for one or both of two things: earn income (dividends) from it and/or have its value rise (appreciation).
ASSET CLASSES: The two types are also divided among a variety of more specific “Asset Classes” and those are divided even further based on the details and objective of the investment.To reduce risk, it is advised to spread your investments across several different classes because it is very rare that all classes have bear markets (decline) at the same time.
NOTE: This did happen in the 2008 Financial Crisis. All asset classes except Cash declined significantly, however if you went all to cash you missed an awesome recovery in all asset classes.
| Class | Type | Categories: Investors and funds will group asset classes based on risk objectives and investment strategies |
| Stock | Equity | Growth Stocks, Income Stocks, Emerging Markets (Foreign), Specific markets (Europe, Asia, Africa), Specific Industries (Oil, High Tech, Pharmaceuticals, |
| Long Term Bonds | Debt | US Government, Municipal Bonds (Tax Free) Corporate, Junk Bonds (High Risk/return) Sovereign Debt (Foreign Debt)
I would add annuities to this group, issued by insurance companies |
| Short Term Bonds/CDs | Debt | Same as long term, but I would add bank Certificates of Deposit |
| Real Estate | Equity | Commercial, Residential |
| Cash Equivalent | Equity | Savings Accounts, Money Market Funds. |