Asset Class

An asset class is a group of investments that share similar characteristics and behave similarly in the market: stocks, bonds, cash and cash equivalents, real estate, and commodities are the major traditional categories. Assets within a class tend to move together more than assets across classes do.

Asset allocation, the decision of how much to hold in each class, is often described as the single biggest driver of a portfolio's long-run risk and return, ahead of which individual stocks or funds are chosen within each class.