People build their careers for decades and save money in the pursuit of a smooth retirement or to meet certain financial goals. You could store money in the bank and let it accumulate over time, but you can get higher returns by putting your money in various investments.
Many consumers know that investing is a common path to long-term wealth. You put your money to work for you, and the power of compounding takes its course. However, it can be hard to keep track of all of the investment opportunities out there. While many investors know about stocks and real estate, other investments such as gold, crops, art and wine (yes, wine investing is a thing) can make the options seem complicated.
Luckily, investors use asset classes to group the various types of investments. Key asset classes include equities, fixed income, real estate, commodities, cash and alternative assets. Knowing how asset classes work can help you construct a portfolio that aligns with your financial objectives.
How Do Asset Classes Work?
Asset classes help consumers group different types of investments based on their similarities. For instance, investments in fixed income generate consistent cash flow for a set period of time. Many fixed-income assets have low risk, and some of them have virtually no risk, such as certificates of deposit and U.S. Treasury bills.
