ASSET CLASS INVESTING

 

The key to good investing is having some balance in your portfolio. Asset class investing helps you do this. Each group of investments within a specific asset class share a similar risk and return profile.

 

The four major asset classes are: 

• Cash and cash equivalents
• Fixed income investments
• Equity investments
• Tangibles

Let’s break these down.

• Cash and cash equivalents are cash or highly liquid investments that can be turned into cash immediately, such as savings accounts, some certificates of deposit, short-term Treasury bills, short-term bonds and money market accounts.
• Fixed Income Investments are debt instruments with a fixed payment schedule. They are loans or debt, such as government bonds, municipal bonds, corporate bonds, high-yield bonds and foreign bonds.
• With Equity Investments you have ownership interest in an asset like a company. You are a part owner via the shares you hold. There are many categories of equity investments including U.S. Large Capitalization stocks (one billion or more in market capitalization), U.S. Medium Capitalization stocks (500 million to 1 billion in market capitalization), and Small Cap stocks (under 500 million in market capitalization). There are also Micro Caps with various definitions but generally between 50 to 200 or 300 million in market capitalization. (Market cap is determined by number of shares outstanding multiplied by current share price, not sales.) 
• Tangibles include real estate, precious metals and other commodities and collectibles – coins, stamps, antiques, decoys, to name a few.

Here’s a quick and easy asset class investment lesson: Balance is the key. Combine different asset classes within the same investment portfolio. Although it can’t assure a profit, you can manage the overall risk and price volatility in the portfolio. The objective is smoothing out the portfolio. If you are entirely invested in one asset class and it goes up, great; however, when it goes down, and I am not aware of any asset class that has not gone through a down period, you could lose a lot.

Tune into Bob Hardcastle’s “Money Talk” radio program every Sunday from 8 a.m. to 10 a.m. on KFNS 590 AM “The Fan”. You can also visit Bob’s website at www.moneytalk.org or contact his office, Delta Investment Services, Inc., at (636) 532-0484 or 1-800-969-6878.   Bob Hardcastle, President and CEO of Delta Investment Services, Inc., 16100 Chesterfield Parkway West, Suite 150, Chesterfield, MO 63017   Securities and advisory services offered through VSR Financial Services, Inc., Member FINRA/SIPC, a Registered Investment Adviser. Delta Investments Services is not an affiliate of VSR.