Reviewed by Sep 30, 2020| Updated on
An asset class is a bundle of investments that are subject to the same laws and regulations and have similar characteristics. There are three main asset classes—equities (stocks), fixed income (bonds), and cash equivalent/money market instruments.
Currently, many other categories are included under asset classes, such as commodities, real estate, other financial derivatives, and cryptocurrencies. It includes both tangible and intangible instruments that investors buy and sell for generating income on a short-term or long-term basis.
An asset class can be considered as a grouping of comparable financial securities. IBM, MSFT, and AAPL are an instance of a grouping of stocks.
Asset classes and their categories are often used interchangeably. However, they are not correlated in reality. Each asset class may reflect different risk and return-on-investment characteristics. They also perform differently in any given market environment.