There are three main asset classes – equities (stocks), cash equivalent/money market instruments, fixed income (bonds), real estate, futures, and other financial derivatives.
To make it easier to understand and identify, assets are grouped based on having similar financial structure and they are typically traded under the same markets.
- Equities or also known as equities – are shares of ownership issued and sold by publicly-traded companies like $AMD, $TSLA, and $AAPL. You can trade them through stock exchanges (NYSE or NASDAQ) or brokers like eToro. You can profit either through an increase in share price or by receiving dividends.
- Cash or Cash equivalents, money market funds – are investment securities that are designed for short-term, have high liquidity and credit quality. They are certificates of deposits, bankers’ acceptances, treasury bills, corporate commercial paper, and other money market instruments.
- Bonds or fixed-income investments – are investments in debt securities that pay in the form of interest.
- Futures and other financial derivatives – these are forex market, futures contracts, options, and many more.
- Real estate – are an asset that offers protection against inflation.