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August 17, 2021
An asset class is a grouping of investments that share similar characteristics and are subject to the same laws and regulations. Traditionally, the 4 major asset classes are equities (stock), fixed income (bonds), cash or cash equivalents, and alternative assets, such as real estate. It is commonly recommended to diversify one’s investment portfolio with different asset classes as a means to reduce risk and maximize returns, the reason being that, usually, there’s very little correlation, and in some cases a negative correlation, between different asset classes.