Chapter 8

Asset Classes

A concise guide to asset classes

‘Know what you own, and know why you own it.’

Peter Lynch

The objective of this and the next two chapters is to cover the characteristics of different assets. When investing, you mix and match investments. Constructing an investment portfolio with relatively predictable behaviour requires an understanding of its building blocks.

Investing mainly involves buying securities. Securities are financial instruments representing ownership rights in publicly traded companies (stocks), creditor relationships with governments, corporations and other borrowing institutions (bonds), or rights to ownership as represented by derivatives (options). Securities are interchangeable, negotiable and tradable. ...

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