Asset Class

Asset class refers to a group of securities that are same in characteristics. The major asset classes are self-evident enough and only an academic needs further explanation.

The major asset classes are equities, fixed-income, cash equivalents,  real estate and commodities(such as gold). Some believe that diversification among different asset classes offers protection in down markets and enhance overall returns. However, gurus in one asset class tend to do well in that asset class. As Buffett would say, everyone has his or her circle of competence. The question is not how big the circle is, but staying within the circle.

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