Lesson 2: Asset Types and Asset Allocation


Listed below are a few types of investing vehicles.

· Stocks

· Bonds

· Mutual Funds

· Passive index mutual funds and ETFs

· Active management

· ETFs

· Real estate and alternative investing

It is important to know that is not one size fits all. Different strategies work for different investors and different situations.

An investor might employ more than one strategy, or choose a variety of investment vehicles depending upon their goals.

We will discuss this later as we go on in this course.

A Reminder:

To be successful at investing, you must have a plan and a strategy.

S: You Current Financial Situation
G: Goals
A: Age
R: Risk Temperament

Just like going on trip in your car, it is important that investors have a plan and a destination in mind before investing their money. Your goals—whether planning for retirement or buying a home—dictate your time horizon, which dictates your tolerance for risk. Additionally, you want to make sure that you diversify your investments so that some do well when the rest of your portfolio might not.

This approach allows you as an investor to construct a portfolio that is in line with their risk tolerance and that balances potential return with some downside risk protection.