Major Asset Classes Explained
4 Min Read | Last updated: May 20, 2026
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Understanding asset classes can help you diversify and balance your portfolio. Learn about key investment categories and strategies.
At-A-Glance
- Asset classes are groups of investments that share similar characteristics.
- Three main asset classes are equities (stocks), fixed-income investments (bonds), and cash (and equivalents).
- Balanced investment portfolios typically contain investments from multiple asset classes.
Creating a balanced investment portfolio requires knowledge of how investments work. A good understanding of asset classes is an important part of creating a balanced portfolio and determining which assets to invest in.
In this article, we’ll take a look at different major asset classes. We’ll also talk about risk and how it factors into your investment and financial planning strategies.
What Is an Asset Class?
An asset class is a grouping of investment vehicles that share similar characteristics. Three main asset classes are equities (stocks), fixed-income investments (bonds), and cash (and equivalents).1 Financial advisors help clients to diversify their portfolios by investing in assets from different asset classes.2
Types of Asset Classes
The list of asset classes and sub-classes has grown with the launching of new financial products. Historically, there have been three main asset classes: stocks, bonds, and cash (and equivalents).1 Today, many investment professionals include more investments in the asset class mix.
They are listed below, along with their relevant sub-classes that are commonly used in portfolio construction:
- Cash and Cash Equivalents: Savings, treasury bills, and money market accounts are examples of cash and cash equivalents. The common denominator for each of these is their liquidity. They can provide cash any time you need it.3
- Fixed Income Securities: These are a preferred investment for risk-averse individuals or companies. Bonds are a fixed-income security. They provide a steady fixed income, typically without the risk associated with equities.4
- Stocks and Equities: Stocks, also known as equities, are shares of publicly traded companies that are traded on stock exchanges such as the NYSE (New York Stock Exchange).5,6
- Alternative Investments:This asset class has expanded. Alternatives include the following sub-asset classes:7
- Real Estate
- Cryptocurrency
- Hedge Funds
- Private Equity Funds
- REITs
Some of these are high-risk, complex investments. It’s advisable to speak with a professional financial advisor if you’re considering any alternative investment.7
Diversification Strategies
There are several schools of thought on how to diversify your portfolio. Modern portfolio theory (MPT), developed in 1952, is one popular passive investing strategy that is still in use today. MPT is a method for selecting potential investments in order to maximize their returns within a given level of risk.8 Although post-modern portfolio theory (PMPT) is an attempt to improve MPT by minimizing downside risk.9
No matter which theory you subscribe to, there are some universal tips for investors who are looking to diversify their portfolios.10
- Don’t put all of your money into one stock or sector.
- Consider adding index funds or funds.
- Continually add to your investments.11
- Know when to exit.
It’s important to make investment decisions based on your risk tolerance.11
Frequently Asked Questions
The three main asset classes are equities, fixed income, and cash equivalents.1 However, there are additional investments that may also be considered asset classes today.
An alternative investment is any investment that doesn’t fit into the other main asset classes. Examples include cryptocurrency, hedge funds, private equity funds, and REITs.7
The Takeaway
Different investments can be broken up into asset classes. Asset classes can also be used to help diversify an investment portfolio. Understanding how asset classes work is an important part of making informed investment decisions.
1,2 “What Is an Investment Advisor?,” Experian
3 “What are cash equivalents, and should you be using them?,” Yahoo Finance
4 “Bonds,” Financial Industry Regulatory Authority
5 “Stocks - FAQs,” U.S. Securities and Exchange Commission
6 “What Is the Stock Market and How Does It Work?,” Experian
7 “What Are Alternative Investments?,” Experian
8 “Is it Time for Individual Investors to Look Beyond the Traditional 60/40 Portfolio?,” Financial Planning Association
9 “Investment Concepts | Business and Management | Research Starters,” EBSCO
10 “Active vs. Passive Investing,” Financial Industry Regulatory Authority
11 “What’s a Good Investment Strategy for 2026?,” Experian
Kevin D. Flynn is a financial services provider, business coach, and financial writer. He lives in Leominster, Massachusetts, with his wife Evelyn, two cats, and ten wonderful grandchildren.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
Related Articles
Saving vs Investing – What’s the Difference?
Saving and investing are two different ways to achieve financial goals. Understanding the differences can help you choose the best approach for you.
What Is Personal Finance?
Personal finance refers to managing money in a way that works for you, while at the same time planning for your future goals. Learn more about how it works.
What Is a Health Savings Account?
Learn how Health Savings Accounts (HSAs) work, including tax advantages, eligibility requirements, and how they can help with medical and long-term savings.
The material made available for you on this website, Credit Intel, is for informational purposes only and intended for U.S. residents and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.
