Asset Class
What is it? Typically refers to securities that have similar features. For example, stocks and bonds are the two main classes. They may be subdivided into other classes like mortgages, common stock, and preferred stock. Typical asset classes are cash (money market), domestic bonds, international stocks, large cap stocks, and small cap stocks. Asset classes are used in the process of asset allocation to control the risk and return characteristics of a portfolio. The predictions for asset class performance are based on historical performance characteristics, which include the expected future return, the expected future volatility (risk) of the return, and how the returns of assets classes perform relative to each other.In the long run, with a diversified portfolio, over 90 percent of your returns as an investor are determined by the class of assets you decide to hold. The remaining percentage of your return depends on which specific stock, bond or mutual fund you buy and when you buy it.Added By: Makayla
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