Howdy Wall St. Willy! Some time ago, on TV, I heard about an asset class. But what is an asset class anyway?
An asset class is a group of assets in which you can invest your money. Everything within a specific asset class also shows similar traits.
What do you mean by similar traits? And how does something become part of an asset class?
Everything within an asset class would have similar risks and would provide similar returns.
For e.g., equities usually go with higher risks but also usually provide higher returns, whereas fixed income securities usually have a lower risk and provide lower returns.
Items in the same asset class are also usually subject to the same laws, including tax laws.
Well, can you give me some examples of asset classes?
Some examples of asset classes are Stocks or Equities, Fixed Income or Debt, like bonds, Cash and Cash equivalents like Money Market instruments, Real Estate, Commodities like Gold, Works of Art etc.
Well, what asset class do Certificate of Deposit or CDs belong to?
CDs belong to the asset class of fixed income.
What asset class does crude oil belong to?
Crude oil belongs to the asset class of commodities.
So, why are asset classes even important to me?
Asset classes help with diversification but that’s a topic for another time!
Thank you very much for telling me about asset classes, Wall St. Willy.
You are welcome, Sooper Cooper. Remember, Finance is Your Friend!
Podcast: What are Asset Classes?
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
Everything you need to know about Asset Classes: What is an Asset Class, How does something become a part of an asset class / how is something classified into an asset class, Examples of asset classes, Why are asset classes important for diversification, and more.
Show notes and transcript at: https://easypeasyfinance.com/what-are-asset-classes/
