A group of securities that exhibit similar financial characteristics and behave the same in the marketplace is known as an asset class. Some examples of major asset classes include equit🏅ies, bonds, money markets, and real estate.

Equities offer an ownership stake in a business. The familiar term for equities is stocks. 澳洲幸运5开奖号码历史查询:Fixed-income securities, known as bonds, pay a fixed return at regular intervals over a period of time, after which the investor's principal is returned. 澳洲幸运5开奖号码历史查询:Money market investments, which include government securities and certificates ♒of deposit (CDs), pay a fixed interest rate and can be liquidated easily. Lastly, there is real estate. Assets classified as real estate include a person's residence, rental or investment properties, as well as ☂commercial real estate holdings.

Why Equities Are the Riskiest Asset Class

Equities are generally considered the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the successes and 💯failures ofꦦ private businesses in a fiercely competitive marketplace.

澳🐎洲幸运5开奖号码历史查询:Equity investing involves buying stock in a private company or group of companies. Doing so extends an ownership share in those companies to the investor. When the company increases in value, stockholders' investments in the company increase in value as well. However, when the company loses value, so do the portfolios of investors heavily invested in the company. Other than 澳洲幸运5开奖号码历史查询:dividends – fixed regular cash payments enjoyed by stockholders – equities offer no guaranteed payments or rates of return. An investor can gain 100 percent or more on an equity investment in a year, but they can also lose their entire principal. It is entirely dependent on the perform⭕ance of the company.

People investing in equities must weigh the risk against the potential return. In finance, risk and return correlate positively. The more money an investor can make on a particular investment, the more that same investor stands to lose from it as well. Equities offer the potential to make a lot of money, as investors aren't shackled to a fixed 澳洲幸运5开奖号码历史查询:rate of return, such as six percent or 10 percent.

An investor who purchases Company XYZ shares at $100 and sells them a year later for $150 makes a 50 percent return. Just as investors aren't limited by a fixed return, they aren't protected by it, either. If Company XYZ shares drop to $50 each, the investor loses half of his or her money.

How Real Estate Is Also Quite Risky

After equities, 澳洲幸运5开奖号码历史查询:real estate subjects its investors to the most risk. The meltdown of 2008 demonstrated that real estate does not always appreciate in value. Real est𒐪ate comes with additional risks not present in other asset classes. Environmental risks and maintenance costs must b▨e weighed against potential profits when investing in real estate.

Real estate, long considered safer than equities, showed its ugly side in the late 2000s, when property values in many U.S. region. Like equities, real estate provides no guarantees. Moreover, investors must consider additional costs endemic to real estate, including maintenance costs, fees and 澳洲幸运5开奖号码历史查询:property taxes. The roof cannot leak on stock or boꦰnd investments, but it can leak on an investment condo in Florida.

The Bottom Line

Equities and real estate generally subject investors to more risks than do bonds and money markets. They also provide the chance for better returns, requiring investors to perform a 澳洲幸运5开奖号码历史查询:cost-benefit analysis to determine where their money is best held.