Asset class is a broad grouping of assets that have similar characteristics, such as bonds, shares, real estate, and commodities.
Two broad categories of asset classes: traditional and alternative investments. Equity and debt securities are examples of conventional asset investments. Meanwhile, commodities, real estate, and private equity are examples of alternative investments.
To meet financial goals, investors will diversify their portfolios into various asset classes. They consider the risk and return characteristics of each asset to optimize returns while minimizing risk.