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How to Decide Which Asset Class is Best for You

An asset class is a broad group of securities or investments with similar financial characteristics.

In unpredictable times as today, one of the most important decisions you’ll ever make is choosing which asset class to invest in for you to earn reasonable returns. When it comes to this, you’ll consider a few things – what you need the investment to do and the amount of risk you are willing to take. 

There are three main asset classes on Rise, built to help you create a healthy investment portfolio. 

Fixed Income Asset Class

This asset class is offered in form of Eurobonds and best if what you want is stability for your money. Eurobonds investment are set for a specific period with guaranteed returns. However, the risk is lower than stocks and because of that, returns are also lower than other asset classes. If you’re a risk-averse investor, someone who doesn’t like taking too much risk and pleased with modest earnings on your investments, then Eurobonds is your best investment bet. It helps you make better financial decisions and plan strategies to achieve your investment goals.  

Summary: If you are looking for stable, regular and guaranteed returns and not having to worry about market downturns, begin your dollar investment in fixed income now.  

Real Estate Asset Class

This is simply investing to buy, rent or sell a property. The risk here is higher than with bonds as it’s not always certain what amount we can sell a property for in the future, and in rare situations like the ongoing pandemic rental income could be impacted. Because of this, real estate has higher returns than fixed income but much lower long term returns than stocks because property prices are more stable but also don’t compound as rapidly or appreciate as quickly as stock. Investing in real estate on Rise gives you the opportunity of returns through fixed income and capital appreciation. 

The money you invest is considered as fixed income and when we buy or rent properties and sell them when market value increases, you earn significant returns on your investment.

Summary: If you care about a good balance of returns and stability and are willing to invest over a longer period, then invest in US real estate. 

Stocks Asset Class

This represents a piece of ownership in a business. Stocks is a risky asset class because you are basically betting on a company’s equity increasing in value. However, the value of a company’s equity on the stock market fluctuates wildly from day to day though for good companies it tends to grow in the long run. For a company’s stock to perform, the company has to produce an awesome product, do better than its competitors and the economy has to be doing well to ensure there is a demand for the product. If this happens, more money for you! 

Investing in stocks can be considered highly risky compared to real estate and fixed income. It’s possible to double you money in one year and it’s also possible to see the value of your investments drop within the same period, especially during an economic downturn such as what we are facing today. 

When this happens, don’t sell. Hold on to your investments because there’s always a possibility for prices to move up and exceed your purchase price. Remember that the market is cyclical, so it’s important to not jump the gun and sell off your assets because of a market crisis. 

Summary: If you believe in owning great businesses and more importantly, making money on an appreciating stock market, then invest in global stocks. In addition, it gives you a sense of ownership into popular companies and brands that other asset classes can’t match.

There you have it, folks! All three asset classes are on Rise and there is something for everyone. Whether you are completely risk-averse or comfortable with risk, there’s an asset class with your name on it. 

Pro tip: No asset class is entirely free from risk and holding a combination of Eurobonds, stocks and real estate investments can help you reduce the overall risk. That way, regardless of what each asset class is doing individually you always know that in the long run, your assets will continue to Rise. 

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2 Comments

  • by Abiola Aderemi
    Posted June 10, 2020 4:27 pm 0Likes

    Great article.

    From the Pro tip, how can one best combine the asset classes to de-risk investments to a comfortable extent?

    • by Ego
      Posted June 14, 2020 1:37 pm 0Likes

      Diversification is always the way to go. The three asset classes on Rise, allow you to invest in them at the same time and spread your funds appropriately.

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