A category of investments sharing similar characteristics and risk profiles.
An asset class is a category of investments with similar characteristics, legal structures, and behavior. Major asset classes include: stocks (equity ownership), bonds (debt securities), real estate, commodities (oil, gold, agricultural products), and cash. Each asset class has different risk/return profiles; stocks are riskier but offer higher long-term returns; bonds are stable but lower-returning. Asset classes often move differently (low correlation), making diversification across classes effective for risk reduction. Different asset classes suit different investors: young investors typically favor stocks; retirees favor bonds and income-generating assets.