What is an asset class?
An asset class is a category of financial instrument - these can be physical assets or financial assets. The instruments are grouped into asset classes based on whether they show similar characteristics, behave in the same way on the market, or are governed by the same laws and regulations.
To prevent the risk associated with focusing on one section of the market, many strategies recommend spreading trades out across a mix of assets. This is referred to as diversification (or diversifying). There is no guarantee that diversifying a portfolio will yield returns, but it may help reduce risk - if one asset class experiences a positive swing, it could outweigh the downward movement of another.