Page 34 - Banking Finance July 2024

ARTICLE

What is an Asset Class? Each asset class is irreplaceable, and no asset class is a
perfect substitute for another. Moreover, taxation, risk,
Various investment avenues exist to help you invest your
liquidity, tenure, market volatility, and returns vary with each
savings and earn the highest possible returns with the varied
asset class. Common examples of Asset Classes include
potential risk. These are broadly categorized as asset
Stocks, Bonds, Mutual Fund, Real Estate, Commodities, and
classes. Asset classes are a group of securities or financial
Cash.
instruments that exhibit similar characteristics and behave
similarly in the market. For instance, consider all the gadgets
Each asset class has its own unique risk-return profile, which
that you use in your everyday life such as mobile phones,
can help investors diversify their portfolios and manage their
landlines, televisions, radios, cameras, etc. A lot of these
overall investment risk. Investors may choose to invest in
gadgets have similar characteristics. A camera and a mobile
one or several asset classes depending on their investment
phone could be used to click a picture; a laptop, MP3 player,
goals, risk tolerance, and time horizon. Asset allocation, or
or radio could be used to play music. However, they are
the process of dividing a portfolio among different asset
unique in their individual capacities as well and serve
classes, is a critical component of portfolio management and
different purposes. Asset classes operate quite similarly.
can have a significant impact on overall portfolio
performance.
About the author
Common examples of asset class
Sailesh Kumar
Chief Manager (Faculty) investment opportunities
Union Bank of India at Union Learning
Academy, People Excellence, Fixed Deposits
Bengaluru. Recurring Deposits

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