Before entering a new investment, we need to be able to answer the question “What is it?” How does the investment generate a return and what is the risk in terms potential losses during a market downturn. What has to happen for the investment to generate a profit? A successful investment portfolio will have multiple return drivers. That means there will be a variety of asset categories whose returns will differ from one another as the factors that determine their long-term returns will differ.
Below are video and audio profiles of common asset classes that can be used in building your investment portfolio.
What Should You Do Next?
Now that you understand the characteristics of various asset classes, we need a methodology for how to combine those assets into a portfolio. That process is called asset allocation.