ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Evaluation Of Asset Classes

Updated on August 7, 2014
Source

Portfolio management is composed of using various capital market instruments and asset classes. Asset classes are categorized in to three main types, money market securities, debt securities, and equities. Each asset class will give an investor different amounts of risk and returns. The portfolio manager’s job is to find the right mix of asset classes for the economic conditions and purpose of the portfolio.

MONEY MARKET SECURITIES

The money market securities are short-term instruments that provide a fixed-rate return and liquidity because of their short time until maturity. The time to maturity of these instruments is under 1 year. This asset class has the least amount of risk because of the short time horizon of the investment. Here are some examples of the more popular money market securities.

· Certificates of Deposit (CD’s)

· Treasury Bills

· Bankers Acceptance

· Commercial Paper

DEBT SECURITIES

The debt securities are long-term investments that provide a fixed return but include more risk than market securities because of the time horizon of the investment. The time to maturity of these instruments is over 1 year. This asset class does not provide an investor with liquidity and the expected return should be higher than the money market securities because of the increase in risk. Here are some examples of the more popular debt securities.

· Corporate Bonds

· Commercial Paper

· Mortgage-Back Bonds

· US Treasury Bonds

EQUITIES

The final asset class is the equities class that provides the investor with the greatest amount of risk and return. These securities are liquid because of their tradability in the secondary markets. Equities will provide a return to investors through capital market gains and dividend payments. Here are some examples of equity securities.

· Common Stock

· Preferred Stock

· Mutual Funds

Conclusion

Asset classes provide investors and managers options of allocating funds to create value through various conditions. Portfolio’s with a large percentage of market securities provides the managers and investors with liquidity for future investments, a fix rate of return, and the lowest level of risk from any of the asset classes. A portfolio with a high percentage of bonds will provide managers and investors with a fix rate of return, low risk but decreases the liquidity of the portfolio to invest in opportunities. Portfolio with large percentages of equities will provide the managers and investors with the highest potential returns, most risk, and liquidity to transfer funds to other opportunities. A portfolio strategy should match the investment’s purpose, and asset classes should be used to increase or decrease risk and return potential for each economic condition that influences the portfolio’s value.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)