The different asset classes are classified into 5 different types which are defined as follows:
what is Equities?
Equities or shares listed in secondary market publicly traded or invested instrument or entities in the exchange i.e., secondary markets.
What are Commodities?
A physical asset or raw material which is usable as a product is defined as a commodity which can be traded bought or sold. The price of the commodity is determined by supply or demand in the consumption of the commodity.
The further classification in commodities into four parts such as:
Agricultural commodities (Soyabean, coffee, Guar Seed etc.,),
Base Metals (Nickel, Zinc, Lead, Aluminum & Copper)
Precious metals (Gold, Silver, Platinum & Diamond)
Energy (crude oil & Natural Gas)
What is a currency?
Currency is a money which is usually accepted as a medium of exchange for goods purchased or services offered in return for trade. Usually currency is denominated in the form of coins or paper notes. Now the latest form of digital currencies are accepted in few countries.
The currency is usually published by the government of the any country and circulated across it in the denomination of coins and paper notes. The value of currency is determined by the health of the economy and thus purchasing power of the respective country.
What are Bonds or Fixed Income instruments?
Bonds or corporate bonds are similar to borrowing or raising funds from a bank where private company or government entities use the mode of instrument to raise funds. As company may issue bonds to finance their operations.
The borrower issues lender a bond by stating that you are providing a loan to a company for a fixed period of time at a face value on the fixed interest. The borrower agrees to refund the money back to the lender, once the bond matures. The borrower agrees pay the predetermined interest bi-annually usually until the bond matures.
Of course there are rating agencies who would give the rating for the bonds after doing a detailed research of the company before they are publicly issued. Based on that ratings investors can decide to invest or not.
A Fixed income as name itself justifies, which provides a return in the form of fixed income fixed in advance as coupon periodically agreed upon and also repays the principal back at the time of maturity. The most common type of fixed income security is bond.
The more details of different types of bonds and fixed income securities and why companies issue bonds instead of borrowing from banks would be discussed in detail in further posts
What is a property or Real Estate asset?
A real estate in simple terms is physical asset land or house or a commercial property which either one uses after purchasing for their personal purpose or rent it for commercial income.
In our next post, let’s discuss on ‘How to benefit from different asse classes.
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