Investing term

What is Asset class?

A broad category of investment with similar behavior. Stocks, bonds, cash, real estate, commodities.

An asset class is a broad family of investments that share similar behavior and respond to similar forces — stocks, bonds, cash, real estate, and commodities are the main ones. Spreading money across classes that don't all move together is the foundation of diversification, because when one zigs, another often zags.

For example

In a recession, stocks may fall while government bonds rise — holding both asset classes means one half cushions the other.

Asset class is taught hands-on in Stage 2 — Why Investing Matters (And When It Doesn't).

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Related terms

Behavior gapThe difference between a fund's reported return and what its investors actually earned — usually worse.Dollar-cost averagingInvesting a fixed amount on a fixed schedule, regardless of market level.FOMO buyingFear of missing out — piling into something after it has already run, because everyone else seems to be winning.Loss aversionFeeling losses about twice as strongly as equivalent gains — leading you to hold losers far too long.
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