Asset Classes Flashcards
Asset Class
A group of comparable financial securities that have similar characteristics and are subject to the same laws and regulations.
Cash, bonds, and stocks are the most common types that OneAmerica deals with.
Cash and Cash Equivalents
These are investments that are very liquid and can be easily converted to cash, such as money market funds, certificates of deposit, and treasury bills. They typically offer low returns but also low risk.
Stable Value Fund
A portfolio of bonds that are insured to protect the investor against a decline in yield or a loss of capital. The owner will continue to receive the agreed-upon interest payments regardless of the state of the economy.
This is a low-risk investment.
Bond Funds
Pooled investments that invest primarily in bonds (government, municipal, corporate, or convertible) and other debt instruments, such as mortgage-backed securities (MBS).
Equity Funds
Funds that primarily invest in stocks.
Stocks can provide returns on investment if the company pays a dividend, or if a stock owner can sell the shares for more than the purchase price.
Target Date Funds
A fund that is designed for maximum value at a targeted date.
As you move towards the targeted date, the fund gradually reduces risk by changing the investments in the fund.
Alternative Asset Class
These are investments that do not fall into the conventional categories, such as cryptocurrencies, derivatives, hedge funds, and private equity.
They can offer high returns and low correlation with other asset classes, but they also involve high fees, complexity, and lack of transparency.
Commodities
These are investments that involve raw materials, such as metals, energy, and agricultural products.
They can offer diversification and hedge against inflation, but they also face supply and demand fluctuations, storage issues, and regulatory risks.
Fixed Income
Bonds are essentially loans. These investments that pay a fixed rate of interest, such as bonds, notes, and mortgages.
They generally offer higher returns than cash equivalents, but also higher risk, depending on the credit quality and duration of the issuer.
Cash or Cash Equivalents
These are investments that are very liquid and can be easily converted to cash, such as money market funds, certificates of deposit, and treasury bills.
They typically offer low returns but also low risk.
Consists of Fixed Interest Account and Stable Value type fixed interest rate investments.
Foreign Stock Fund
Foreign stock funds are investment vehicles that hold a collection of stocks from non-U.S. countries. They can be mutual funds, closed-end funds, or exchange-traded funds.
To invest in an international stock fund, you need to consider your risk tolerance, time horizon, and investment goals.
Investing in an international stock fund can help you diversify your portfolio and access a wider range of opportunities, but these investments can be volatile and involve currency fluctuations, political instability, tax implications, and higher fees.
Mutual Funds
Pooled money from many different investors that is placed in securities such as stocks, bonds, and other short-term debts.
Mutual Fund Dividends
Mutual funds that invest in stocks may pay dividends.
If you invest in these funds, you can reinvest the dividends into more shares, or you can use the money as an income stream.
Large Cap Stocks
Invests in companies with a market capitalization value of more than $10 billion, so larger, less volatile stock.
Mid Cap Stocks
Invests in companies with a market capitalization - or market value - between $2 and $10 billion.
Small Cap Stocks
Invests in stock from a public company whose total market value, or market capitalization, is about $250 million to $2 billion.
Foreign Stocks
Invests in companies outside of the investor’s country of residence. Investing in international funds comes with the risk of currency volatility.
Managed Asset Allocation
Diversified grouping of investments consisting of stocks, bonds, and cash which provide investors with an optimal level of return and risk.
Primary examples are Target-Date Funds.
High Yield Bonds: Consist of lower quality/riskier bond issuances. In other words, they are issued by smaller or lesser established companies or organizations and pay a slightly higher rate of return over time.
Intermediate Bonds
Intermediate Bonds consist of primarily fixed income bond issues of government, corporate, and secured debt. They are less volatile than high yield bonds, but with a slightly lower rate of return over time.
