Various asset classes for wealth creation

Understanding the diverse categories of assets is essential for both constructing and safeguarding wealth.

An asset class refers to a group of financial instruments that share similar characteristics and behave similarly in the market. Let's explore the asset classes and discuss how each class stores wealth or serves as an investment

Equities

Equities, also known as Ordinary shares, represent ownership in a company. When an individual buys shares of a company's stock, they become a partial owner of that company. Equities are traded on stock exchanges, and their prices fluctuate based on factors such as the company's performance, market sentiment, and economic conditions. Investors in equities typically aim for capital appreciation, hoping that the value of their shares will increase over time. Additionally, some companies distribute a portion of their profits to shareholders in the form of dividends, providing investors with income. Equities offer the potential for high returns but also come with higher volatility and risk compared to other asset classes. Equity with stock bonuses and splits pertains to ownership in a company's shares, which could include extra benefits or modifications resulting from bonuses and stock splits.

Fixed Income?

The fixed income category includes government bonds, corporate bonds, and other debt instruments such as certificates of deposit (CDs), municipal bonds, and Treasury securities. These assets are characterized by regular interest payments, known as coupons, and the return of the principal amount at maturity. Government bonds are issued by national governments and are often considered the safest fixed-income investments. In contrast, corporate bonds are issued by corporations and offer higher yields to compensate for higher risk. Municipal bonds are issued by local governments and are typically used to fund public projects. Treasury securities are issued by the government and include Treasury bills, notes, and bonds, each with varying maturities. Fixed-income assets are valued for their stability, income-generating potential, and role in diversifying investment portfolios.?

The periodic interest paid by the bond issuer to the bondholder is commonly referred to as the "coupon." This term originated from the physical coupons attached to bond certificates, which investors would detach and redeem to receive their interest payments. The coupon rate, expressed as a percentage of the bond's face value, determines the amount of interest the bondholder will receive at each payment period.

Mutual Fund

?Mutual funds are collection of amount from multiple investors to invest in various securities such as stocks, bonds, money market instruments, or a combination of these assets. These funds are managed by professional portfolio managers or management teams who make investment decisions based on the fund's objectives and investment strategy outlined in its prospectus. Investors in mutual funds own shares of the fund, which represent their proportionate ownership of the fund's holdings. Mutual funds offer diversification, professional management, and liquidity to investors, making them popular investment vehicles for individuals seeking exposure to a diversified portfolio without directly managing individual securities themselves

Real Estate Investment Trust (REIT)

A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate. Modeled after mutual funds, REITs pool capital investors who earn dividends from real estate investments. Investors do not individually buy, manage, or finance any properties.

ETF

The term stock exchange-traded fund (ETF) refers to a security that tracks a particular set of equities. These ETFs trade on exchanges the same way normal stocks do and track equities just like an index. They can track stocks in a single industry or an entire index of equities. Investors who purchase shares of stock exchange ETF can gain exposure to a basket of equities and limited company-specific risk associated with single stocks, providing them with a cost-effective way to diversify their portfolios.

Commodities and Derivatives

The modern commodities market relies heavily on derivative securities, such as futures and forward contracts. Buyers and sellers can transact with one another easily and in large volumes without needing to exchange the physical commodities themselves. Many buyers and sellers of commodity derivatives do so to speculate on the price movements of the underlying commodities for purposes such as risk hedging and inflation protection.

It's essential to thoroughly research and seek guidance from a qualified financial advisor before making any investment choices.