How finance folk use it
Investment products that are similar in a certain way are grouped together in what is called an asset class.
There are 3 main asset classes: equities (stocks), fixed income (bonds), and cash equivalent or money market instruments.
Is it good or bad?
Assets are said to belong to the same class when they behave the same way and are governed by similar regulations.
This allows you to understand how they work and how you should manage them, as well as making it easier for you to see how they could fit in your investment strategy.
What it means for you
Knowing the asset classes you have in your portfolio, whether through individual investments or funds, is the first step towards effective diversification.
Since assets in the same class are likely to be affected by the same things, making sure that you don’t have too much money invested in just one class will help you manage your risk and have a better investing journey.
