Investment portfolio uncovered: Types of assets

Julie Brownlee, Fsp Invest, 13 Feb. 2014

Tags: investment portfolio, investment, portfolio, assets, types of assets, asset types, investors, investing, cash, bonds, shares, listed property, property, common asset types

Investing all comes down to assets. Which assets are you going to keep your money in? There are many different types of assets. And each asset class carries a different amount of risk. When you invest, by spreading your cash amongst different assets you can offset your overall risk. Let’s take a look at the most common types of assets that make up an investment portfolio…

Different asset classes have different risks associated with them, Gareth Stokes in Fear, Greed and the Stock Market explains…

Let’s start with the least risky class and work our way up to the most risky asset, shares…

Cash: Virtually risk-free

Investors see cash as a risk-free. But for that lack of risk comes the rather dismal return in the form of interest paid. Most people hold cash for quick access in the event of an emergency.

You might opt to keep your cash in a savings account. You can get a higher rate of interest if you put the money in a notice or call deposit account. But you will have to pay a penalty if you withdraw it early.

Bonds: Solid and low risk

If you want to invest in bonds, the easiest option is Retail Savings Bonds. You can read more about them here.

With a minimum investment of R1,000, they are very accessible to most investors. You will receive interest payments twice a year.

Listed property: Safe as houses

Even though you might own your own house, you shouldn’t view it as part of your investment portfolio. But property is an important asset to invest in. It’s another way of adding income to your portfolio with relatively small downside risk.

So you should consider keeping some of your investment funds in listed property stocks.

Shares: Diversify in equities

Equities (or shares) usually make up the largest portion in your investment portfolio.

Looking at the stock market broadly, there are small-cap, medium-cap and large-cap shares. These vary in risk. Generally, small-caps (like penny shares) carry more risk than large-caps (big blue chips like Sasol).

And remember, most long-term retirement tools are heavily invested in the stock market. This could be a retirement annuity, unit trusts, or a company pension plan. So chances are you already have solid exposure to the stock market.

So there you have it, the most common types of assets that make up an investment portfolio.

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