General Asset Classes

Most investments can be classified according to five general asset classes: cash equivalents, debt (bonds), equity (stocks), fixed principal, and tangibles.

Cash equivalents tend to involve the least investment risk (less fluctuation in the value of the investment), however, they tend to grow slowly and may not always keep pace with inflation. These traditional savings vehicles include savings accounts, money market funds, certificates of deposit, and Treasury bills.

Debt investments include government and corporate bonds, and other debt-secured investment.

Equities are comprised of stocks, as well as partnerships and stock mutual funds.

Fixed-principal investments include fixed annuities, trust deeds, and other investments with a stable principal.

Tangibles include real assets such as real estate, gold and other precious metals, and other valuable collectibles.

The return and principal value of stocks, mutual fund shares, and bonds fluctuate with changes in market conditions. Shares, when redeemed, may be worth more or less than their original costs. Investments that seek to achieve higher rates of return generally involve a higher degree of risk of principal.