Different types of asset classes

Anyone looking to invest money is faced with the question of which asset classes are best suited to them. There is a seemingly endless selection of investment options, many of which people have heard little about or lack the expertise to make the right decision. 

Therefore, you should first ask yourself how much risk you are prepared to take and how long you want to invest your money for.

The answer determines which asset classes are best suited for your personal portfolio. The relationship between risk and return is specific to each asset class and is known as the risk-return profile.

Some asset classes are riskier than others, and some are better suited for long-term wealth accumulation rather than a short-term investment horizon. 

Depending on your personal time horizon and risk appetite, the various asset classes should be weighted within your portfolio. This is known as allocation, and spreading investments across different asset classes is called diversification. 

Good allocation and the associated diversification allow investors to achieve their long-term investment goals while simultaneously reducing risk. 

If you would like to learn more about this topic, take a look at our deep dive into diversification: What is meant by investment diversification? 

To provide a rough overview of the vast selection of investment options, we will explore this topic further. 

The most important and well-known asset classes are stocks, bonds, real estate, cash (and cash equivalents), and alternative asset classes. Alternative asset classes include, for example, commodities, private equity, venture capital, cryptocurrencies, art or luxury goods, loans (as a lender), and infrastructure investments.

Over the coming weeks, we will take a closer look at the individual asset classes and present concrete examples so that you can acquire the knowledge needed to better assess investments and find out which ones suit you best.