Asset Classes

The phrase ‘Asset classes’ normally refers to the four main types of investment categories – cash, bonds, commercial property and equities. Each of the asset classes have their own strengths and qualities as well as their own and risks and rewards. They tend to move independently of each other. Therefore, when choosing an investment strategy that is right for your own needs and risk profile, it is important to consider diversification across the primary asset classes, to spread risks whilst giving you the potential to make profit.

The key to investing is to diversify – in simple terms, don’t put all your eggs in one basket, not even cash.

• Cash - for example, money deposited in a bank or building society account. It earns money through interest, which is generally set at a guaranteed rate. Treasury bills, certificates of deposit (CDs) and other short-term securities are called cash or cash equivalents.
• Bonds - Bonds represent money loaned to the issuer (governments, municipalities, and other entities). They earn money from the interest paid on that loan. Bonds are also called fixed-income investments.
• Equities – Stocks, also known as equities, are shares of ownership in a company. Shares earn or lose money based on the increasing or decreasing share value, which is affected by issues such as company performance, market conditions and wider economic factors.
• Commercial Property – Commercial property (such as retail, industrial and office space) has become more popular in recent years. Similar to bonds, it can provide an income through rental. This income is more secure than residential property as it tends to be on longer leases to financially stronger tenants. It can also provide capital growth and rising income through rental increases.

These asset classes form the basis of most mainstream investments, such as Unit Trusts and ISAs. Simply pop in and see a Legal & General Financial Adviser in a Bradford & Bingley branch. They can help you look at an investment plan that matches your own personal attitude towards risk and long term financial goals.