When choosing the best investment assets, it helps to take investment objectives into account. A long-term time horizon will generally lead to a different composition of the investment portfolio than a short-term strategy. General goals and risk tolerance are also factors that influence the most suitable assets to consider. Investing in a variety of investment assets, including stocks, bonds, and commodities, is a diversification strategy often adopted by many professional investors. The best selections and the number of assets to buy also vary depending on economic and market conditions.
Stocks are investment assets that introduce some volatility into a portfolio. This means that investments can, with or without notice, show price fluctuations that go to even the most sophisticated investors. It is possible that any interpretation, rightly or wrongly, of the investment or economic news could influence investor demand for equities. Next, stocks may be the best investment asset if you can handle volatility, but you’re also looking for returns that might support a long-term goal, like retirement.
Bonds belong to the category of investment assets and represent another type of investment asset. These financial securities often bring stability and income to an investment portfolio. Government bonds in particular expose only small doses of risk to investors, due to the infallible risk of a federal agency. If you want to introduce a conservative investment, such as bonds, for your exposure, you should also assess your expectations. Traditional bonds don’t carry many risks, but the yields offered are also modest.
High-yield bonds carry more risk than traditional fixed-investment assets. These high-yield investments are the best choice if you want to inherit your exposure to financial securities with a higher probability of default. The nature of high-yield bonds indicates that the rating assigned to these debt securities is less than favorable given the confidence that investors may have in the repayment of their loans. The yields on these bonds are potentially attractive for the amount of risk involved.
If you are looking for even greater diversification from an investment portfolio, you may want to consider commodities. These securities, which include contracts for metals and agricultural commodities, tend to trade in a way that is not correlated with stocks and bonds. This means that the factors that influence trading in the equity and bond markets are different from those that determine the trading of commodities.