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John Burnside

Asset Class Definitions

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An asset class is a group of similar investments. The investments that make up an asset class are grouped together based on size, financial structure, financial markets where they are traded, and rules and regulations.

 

The three main asset classes used for financial markets investing include:

  • Stocks (Equities)
  • Bonds (Fixed Income)
  • Cash (Cash Equivalents)

 

There are hundreds of sub asset classes that investors use to build investment portfolios.  Keep in mind, there is rarely an agreed upon definition for a sub asset class.

 

Some of the more popular ones include:

 

Equity (Stocks)

  • Large Caps: Companies with market caps that are $10 billion or above.
  • Mid Caps: Companies with market caps that are between $2 billion and $10 billion.
  • Small Caps: Companies with market caps that are less than $2 billion.
  • Micro Caps: Companies with market caps that are between $50 million and $2 billion.
  • Foreign Developed:  Companies that are headquartered outside of the United States.  Developed-market countries are widely industrialized, have established economies, and enjoy a stable and robust infrastructure.
  • Emerging Markets:  Companies that reside in countries that are not well developed.

 

Fixed Income (Bonds)

  • Short Term: Bonds that mature in 1 to 3 years
  • Intermediate Term: Bonds that mature in 2 to 10 years.
  • Long Term: Bonds that mature in 10 to 30 years

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