Forex trading involves risk. Losses can exceed deposits

Asset classes definition

Forex trading involves risk. Losses can exceed deposits

The various types of financial instruments are called asset classes, and they come under four broad categories. Asset classes are defined by the similar characteristics of the instruments within them, such as behavior on the market, laws and regulations.

Types of asset class

The traditional four types of asset class are:

  • Equities (or stocks): the equities that make up the ownership of public companies.
  • Fixed income: investments that pay interest over time, then return the original sum paid.
  • Money market: cash and its equivalents, very liquid but without much room for growth. Currencies are included in this class.
  • Alternative investments: some very popular markets are classed as alternative investments.

To prevent the risk associated with investing in one section of the market, many investment strategies recommend spreading trades out across many or all of the above asset classes. This is referred to as diversification (or diversifying).

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