{"id":22810,"date":"2018-05-01T00:00:00","date_gmt":"2018-04-30T18:30:00","guid":{"rendered":"https:\/\/www.moneyworks4me.com\/investmentshastra\/what-are-different-asset-classes\/"},"modified":"2018-05-01T00:00:00","modified_gmt":"2018-04-30T18:30:00","slug":"what-are-different-asset-classes","status":"publish","type":"post","link":"https:\/\/www.moneyworks4me.com\/investmentshastra\/what-are-different-asset-classes\/","title":{"rendered":"What are Different Asset Classes?"},"content":{"rendered":"

An Asset class is like a basket of investment opportunities having similar nature like how it works, risk-return, liquidity etc. Each Asset class is likely to exhibit different risk and return relationship. Popular Assets classes are typically divided into two types Growth & Security.<\/strong>\u00a0Growth best achieved through Equity\u2014higher returns, higher risk;\u00a0Security through Debt\u2014more secure, lower returns.<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n
Asset class<\/strong><\/td>\nDirect Stocks<\/strong><\/td>\nMutual Funds<\/strong><\/td>\nIndex Funds<\/strong><\/td>\nLiquid Funds<\/strong><\/td>\nLong-term Debt<\/strong><\/td>\n<\/tr>\n
Category<\/strong><\/td>\nEquity<\/td>\nEquity<\/td>\nEquity<\/td>\nDebt<\/td>\nDebt<\/td>\n<\/tr>\n
What?<\/strong><\/td>\nStocks\/Shares ownership in a company<\/td>\nA portfolio of stocks\u00a0(Some\u00a0 have debt instrument too)<\/i><\/td>\nA portfolio of stocks that is based on \u00a0a particular index\u00a0(e.g. Nifty 50)<\/i><\/td>\nVery low-risk fixed-income assets that invests in very short-term debts and Govt. securities<\/td>\nLong term debt, Govt. securities that give better than FD- returns<\/td>\n<\/tr>\n
When to invest?<\/strong><\/td>\nWhen fundamentally sound stocks are available at a discount from its fair value<\/td>\nWhen available with a good Potential Upside i.e. future returns<\/td>\nWhen there\u2019s no better opportunity in Direct Stocks & Mutual Funds<\/td>\nWhen market gets expensive<\/td>\nAlways a fixed portion to be invested<\/td>\n<\/tr>\n
Why?<\/strong><\/td>\nTo earn high returns on a long term basis. No cost investment\u00a0 in Stocks\u00a0(except the Demat brokerage)<\/i><\/td>\nTo complement Direct stock investment.\u00a0 Different investment styles work under different market conditions<\/td>\nLow cost diversification.\u00a0 More predictable returns. Easy-exit when a better opportunity in equity is available<\/td>\nTo temporarily park funds and earn close to after tax FD-returns.When the markets move lower, then use it to buy more equity<\/td>\nTo provide for Security need<\/td>\n<\/tr>\n
Limitations?<\/strong><\/td>\nShort-term drawdown at stock-level<\/td>\nHigh cost, Risks that a Fund Manager takes, Not as easy to exit as stocks<\/td>\nNo customisation, Not many options available in India<\/td>\nLow returns<\/td>\nLow returns<\/td>\n<\/tr>\n
Volatility<\/strong><\/td>\nVery High<\/td>\nHigh<\/td>\nMedium to High<\/td>\nLow<\/td>\nLow<\/td>\n<\/tr>\n
Invested for?<\/strong><\/td>\nLong-term<\/td>\nMedium to Long-term<\/td>\nMedium to Long-term<\/td>\nShort-term<\/td>\nLong-term<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

Apart from the above mentioned, there are a few more Asset classed like Cash, Commodities and Real estate.\u00a0<\/p>\n

You need to\u00a0look at your <\/strong><\/a>Investable Surplus<\/a> as one portfolio, and allocate it to <\/strong>different Asset classes<\/a> based on your needs and your <\/strong><\/a>Risk Profile<\/a>.<\/strong>\u00a0<\/p>\n

Note on Fixed Deposits:<\/strong>\u00a0Return quoted for FDs is pre-tax return. If it\u2019s 7-8%, then after tax return may be in the range of 5-6%. It may not be adequate to beat inflation! Read this story from\u00a0<\/i>Mint newspaper<\/i><\/a>.<\/p>\n

\u00a0Read the next article to know:<\/strong>\u00a0\u2018<\/strong><\/span><\/a>Why do\u00a0you need to do Asset Allocation?<\/strong><\/span><\/a>\u2019<\/strong><\/span><\/p>\n

\u00a0If you liked what you read and would like to put it in to practice Register at MoneyWorks4me.com<\/a>. You will get amazing FREE features that will enable you to invest in Stocks and Mutual Funds the right way.<\/p>\n","protected":false},"excerpt":{"rendered":"

What are Different Asset Classes?<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_is2025_no_summary":false,"footnotes":""},"categories":[1147,1144],"tags":[],"class_list":["post-22810","post","type-post","status-publish","format-standard","hentry","category-portfolio-management","category-sensible-investing"],"_links":{"self":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/22810","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/comments?post=22810"}],"version-history":[{"count":2,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/22810\/revisions"}],"predecessor-version":[{"id":23219,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/posts\/22810\/revisions\/23219"}],"wp:attachment":[{"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/media?parent=22810"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/categories?post=22810"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.moneyworks4me.com\/investmentshastra\/wp-json\/wp\/v2\/tags?post=22810"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}