What are the Main Asset Classes (INVEST LIKE THE RICH!)

focus on buying these five types of assets and you'll become very very rich there are five main asset classes to know about when you get started investing the ultimate goal is to own a little bit of each asset class so you have a really strong diversified portfolio in this video I'll explain each of these five asset classes in detail and I'll also give you some tips on how you can get started investing in them even if you don't have a ton of money to invest right now and before we get started go ahead and hit that subscribe button my channel is all about money and investing for beginners and I know it's gonna help you learn a ton so make sure to hit subscribe and hit the notification bell for new videos every week the first asset class is equity aka stocks or shares when you buy equity you become a co-owner or a shareholder of the issuing company if the company has 10,000 shares outstanding and you own 1000 shares then you own 10% of the company as an equity investor you get returns in two ways when the stock price increases the market value of your equity stake goes up which you can sell at a profit so that's the first way you can make money investing in stocks the second way equity investors make a return is via dividends since you're a part owner of a company you're entitled to a piece of its profits and you generally receive that in the form of dividends dividends are typically paid quarterly and back in the day every shareholder would actually receive their quarterly dividend as a paper check in the mail but nowadays you'll most likely get an electronic deposit in your account that looks something like this there's two ways to buy stocks you can either buy stocks via a fund which are pooled investment vehicles or you can buy individual stocks now if you want to invest in individual stocks you should only pick stocks and invest in companies that you're knowledgeable about and it does take a bit of skill and knowledge to do that so I talk more about how to assess companies and what factors to consider when picking stocks in this video right here and if you also want to learn more about funds then check out this other video right here so if you want to invest in a fund then that's gonna be really convenient for you because funds package a bunch of stocks into a nice diversified portfolio this is the best way to earn the average market return and benefit from the wealth building upward trend of the stock get without having to go down the rabbit hole of analyzing individual companies because let's face it not everyone wants to do that I personally love doing that but it's not for everybody before you can invest in stocks you first need to open a brokerage account a brokerage account is kind of like a bank account but it's a place to hold your investments instead of holding cash so brokerages that you can look into our fidelity Vanguard TD Ameritrade and Robinhood the second asset class is debt or bonds when you buy a bond you become a lender so bonds are very different from stocks because unlike equity investors bondholders don't own anything you're just lending money to the borrower in return for periodic interest payments which are typically semiannual and then at the end of the loan you get the original principal amount back you can invest in either government bonds or corporate bonds government bonds are issued by governments in order to fund infrastructure projects education and pay for all the other things that governments do corporate bonds are issued by firms that need funding for projects and initiatives to grow the company so you can either buy government bonds or corporate funds the number one factor to consider when investing in bonds is creditworthiness as long as the borrower is in good financial shape you're pretty much guaranteed the interest payments and the return of your principal but if the borrower goes bankrupt then you're out of luck Moody's Standard & Poor's and Fitch are agencies that publish blood ratings to show a borrower's creditworthiness so this makes it easy for you to do your due diligence before you invest your money in a bond triple-a bonds are about the safest you can get with basically zero chance of default triple-a companies have a lot of cash flow compared to their debt payments so it's a very low risk of default for you as a lender and the further you go down the ratings table you'll see bonds offering higher interest rates obviously as a lender you want to get as high of an interest rate as possible but the key is to balance that with the risk of not getting your money back when you see a bond offering really high interest that's because the borrower is in shaky financial condition and there's a high chance of you not getting your money back so they have to pay really high interest rates to compensate for this risk for example Argentina's government bond is paying around 12 percent whereas US Treasuries are paying only around 2% and go figure Argentina's defaulted eight times on its debt throughout its history whereas the US has never defaulted so that's kind of how it works you know you get what you pay for and something's too good to be true then it probably is hey and if you're liking this video so far give it a thumbs up to let me know bonds are considered to be safer than stocks because when a borrower goes bankrupt bondholders are usually first in line to get their money back where stockholders are usually the very last to get paid in a default situation so you get a lot less upside with bonds and with stocks but it also comes with less risk if your goal is to grow your money then you'd want to invest most of your money in stocks not in bonds that's why generally for young people for basically people my age around to in 20s and 30s then definitely most of your money should be in stocks you can invest in bonds using the same brokerage account that you use for stocks however the minimum investment is usually $1,000 so unless you have tens of thousands of dollars to invest in bonds it probably makes more sense for you to invest via bond runs which are again pooled investment vehicles just like stock funds except they do bonds and they give you access to a wide range of bonds with no minimum investment some example of bond funds you can look up to jumpstart your research is the fidelity long term Treasury bond index fund or FN bgx and I shares Treasury bond exchange-traded fund or IES the third asset class is cash and cash equivalents so anything that's sitting in your checking or savings account or in your wallet that's cash and cash equivalents also known as the money market are securities that earn a little bit of interest and can easily be converted to cash any form of debt that has a loan term of one year or less is considered a cash equivalent so that's CDs one month's Treasury bills three months Treasury bills six months Treasury bills repurchase agreements and commercial paper have you ever seen those news articl

Related Articles

Back to top button