Many asset classes have historically been considered traditional and reliable investments with a high probability of return. Assets such as stocks, bonds, real estate, and commodities have traditionally been known to provide a positive return on investment in the long term. These assets have also experienced periods where they have not outperformed other markets or even declined in performance. One needs to consider risk tolerance and financial goals before making any investment decision.

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1. Stocks

Stocks are ownership shares in a corporation. Companies issue stocks to attract money from investors to grow their businesses. By exchanging stock, an investor becomes a part-owner of a firm. Investing in the stock market has many benefits, including potential capital appreciation and dividend payments. The risks associated with trading stocks include company failure and fluctuation in share prices.

2. Bonds

Bonds are debt obligations issued by a corporation or government entity that promise to pay back a fixed interest rate over time. Bonds are backed by the credit of a company or an individual. The risk associated with bonds: If the bond issuer cannot pay off its debt, any bond investor will risk defaulting on their payments.

3. Real Estate

Real estate can include residential properties, commercial properties, and residential land. When an individual purchases a property, they become the legal owner of that property. There are many risks associated with real estate investments, including depreciation and fluctuation in value. The benefit of real estate is the potential for capital appreciation and rental income.

4. Exchange-traded Funds (ETFs)

Exchange-traded funds are a relatively new type of investment. These “products” are shares in a portfolio of stocks or bonds traded electronically on an exchange. The ETFs typically track their underlying assets and provide various combinations of exposure to these investments, such as small-cap value, large-cap value, and dividend income. ETFs may be considered an insurance package for your portfolio as the returns may differ from the returns you would make if you invest directly in the underlying investments.

5. Commodities

Commodities are physical goods such as metals, grains, livestock, and energy products. These are unprocessed goods that can be used to produce an effect. The price of commodities depends entirely on the market’s supply and demand. Other than price, there is also downside risk associated with commodities. Commodities markets are known for having large fluctuations in costs due to uncertainties in supply and demand.

6. Certificates of deposit (CDs)

A certificate of deposit is a short-term investment product. A CD will typically have a fixed interest rate and a specific term. There are various types of CDs, and the interest rate paid on these investments will generally be based on an inflation index as a benchmark. CDs are usually considered safe investments as they are insured by the FDIC, meaning that you are protected from the failure of banks or financial institutions.

7. High-yield Savings Accounts

High-yield savings accounts allow investors to earn an average interest rate of 4% or higher. Term-based high-yield savings accounts allow the investor to choose when their investment matures. The term will typically range from 6 months to 5 years, but the average interest rate is between 4% and 5%. High-yield savings accounts can be used as a temporary money source or used as an investment asset.

8. Dividend Stocks

Dividend stocks are stocks with a relatively high yield. An investor looking to earn income from their investment may pursue dividend stocks. These stocks usually pay a quarterly dividend based on the company’s earnings from the previous quarter. Dividends are generally considered an indicator of health for a company, as the company will pay dividends only when it has cash flow, meaning that these investments provide regular income to an investor.  

With the many asset classes in the financial market, investors need to understand which assets best fit their investment goals. Some asset classes have been proven to be highly volatile and are subject to potential fluctuations in price and performance. By understanding the risk associated with these investments, an investor may gain a more comprehensive and knowledgeable perspective of the market.