Have you ever stopped to think that each asset class plays a better role in an investment portfolio? To make a simple analogy, an asset is like a tool and so is it essential to know how to use this tool in the best way possible.
A well diversified investment portfolio should have at least three types of assets. Income generation, growth and financial reserve.
There is no very clear rule that exactly separates each type of asset according to its best use, but with a little observation you will notice that each asset class plays a better role.
Financial reserve assets
Reserve assets are generally those linked to fixed income. They have high liquidity, but generally will have little income, especially going forward with the current policy of reducing interest rates.
Do not stop them much longer than necessary for emergencies or whatever is being “stored” for a specific short term purpose.
Growth assets are those that have higher volatility in the short term, but in the long term will provide further growth of their equity. Good company stocks or even good ETFs are good asset growth assets.
Anyone who has time to reach the desired goals should not care much about the negative swings of these assets in the short term.
These swings are great opportunities to buy good assets (as long as you’ve done a good analysis and make sure it’s really a good asset) for little money.
Income Generating Assets
Income-generating assets are those that provide the investor with periodic income. Real estate leased to third parties or, more intelligently, real estate funds are excellent income generators.
Shares of good dividend-paying companies also fit this profile. These assets are variable income assets and are therefore also subject to fluctuation.
However, more important than the value of shares or shares of these assets is the income they provide, because this income is the main objective of this type of investment.
Asset Types, Goals, and Deadlines
These are simple concepts, but many people put them aside and do not note these details when investing.
It is common to find people who are raising money for a short term goal and for lack of information and knowledge put that money into equity assets and therefore risk being in a period of negative swing in the moment they need the money. money
Or people who are investing for retirement in the long run and put all their money into fixed income assets and thus lose the earning potential that a stock investment or ETFs could generate over a longer period of time.
Diversify your assets into these three classes. Have an emergency reserve, have assets that are more likely to provide equity growth, and have assets that are good income earners.
According to your strategy, objectives and observing the “true vocation” of each asset class, it is easy to balance your portfolio to better achieve the desired results.