When it comes to investments, there are traditionally four different classes of assets, which you need to understand before parting with any of your money. Below you will find an explanation of the different classes of assets that is easy to understand and should make it easier for you to get started.
Cash
Cash is the first asset class and is the one that most people are familiar with, although most of us wish we had more. The amount of money that you have available will affect how much you can diversify your investment portfolio in other ways. It is essential that you do not stretch your finances too thin when you are looking to make investments.
Property
Property is the next asset class, and this can include many things such as buildings and land, as well as physical investments that you have, such as gold, silver, and other precious metals. If your investment portfolio does not currently include any precious metals, companies like City Gold Bullion can make the process of investing in bullion a simple one.
Stocks & Shares
The next class of asset is stock and shares, and this is a prevalent investment vehicle for all levels of investors, from significant investors putting in millions of dollars, to small investors investing in dollar stocks and shares. There are many options when it comes to purchasing stocks and shares, but it is something that you should do with the advice of an expert, or at least do extensive research before parting with any money.
Fixed-Interest Securities (Bonds)
A fixed-interest investment is an investment which gives predictable and stable returns. Usually, bonds will last for a specified amount of time, and at the end of this, you will receive a fixed return, plus your investment back. There are many different options available with this type of financial investment so you should seek expert advice or do plenty of research before you make your investment.
The Risk Levels Of Each Investment Class
As with any investment, there are potential risks that come with each class, and knowing these risks can help you to ensure that you choose the right asset class to invest in for your portfolio. Cash is the lowest risk out of all of them, and the biggest worry with cash is inflation, which can devalue your money. The next lowest level of risk is Bonds and Fixed-Interest Securities, as many of these have some guarantees as to the level of return you receive, although it is essential to read the small print before making your investment. The next most risky asset class is property; house prices can fluctuate massively, and commodities such as gold and silver can see their value go both up and down. However, by far the riskiest asset class is stock and shares, and in previous times when we have seen crashes of the stock markets, a lot of people have seen significant losses, including losing everything that they own.
Although some asset classes have less risk than others, you should always ensure that before you make your investment that you seek the advice of an independent financial advisor, and only invest what you can afford to lose.
