Asset Class

Where assets go to school...Also, a group of investable assets that have similar attributes and risk/return profiles.

Peter liked the idea of investing in things that regularly generated cash flows, while Paul preferred the idea of owning something that could appreciate over time and be sold for a profit. Mary was more derivative, and a bigger risk taker, so she opted for investments that only did well if Peter and Paul’s investments fared well.

Given the differences in what they were looking for and their approaches to risk, Peter, Paul, and Mary invested in different asset classes...bonds, stocks and options, respectively. Each of these is considered a different asset class.