Running Head: ASSET CLASSES PAPER
Asset Classes Paper
University of Phoenix
Asset Classes Paper
Investment portfolios consist of investment assets and these investment assets are categorized into broader classes known as asset classes (Bodie et al, 2008). Asset classes can be stocks, bonds, real estate, commodities, and money markets (Bodie et al, 2008). Individuals as well as businesses can have investment portfolios. Sometimes investors use different avenues when investing their money, such as mutual funds. Mutual funds involve many investors pooling their money for the purpose of investing it in different asset classes (Investopedia, 2010). There are different organizations that offer mutual funds services. This paper will explain asset classes in one mutual fund organization and asset classes in one organization in the Dow 30.
Vanguard is one of the world’s largest investment management companies, headquartered in Valley Forge, Pennsylvania (Vanguard, 2010). As of December 31, 2009 Vanguard had approximately $1.3 trillion in U.S. mutual funds (Vanguard, 2010). The different asset classes in Vanguard’s mutual funds are money markets, bonds, and stocks (Vanguard, 2010). Money markets are short-term debt securities that are highly marketable and are relatively low risk (Bodie et al, 2008). Stocks are ownership shares in a publicly traded company and are risky because if a company files bankruptcy, the shares become worthless (Bodie et al, 2008). Bonds are long-term debt securities and can be in the form of Treasury bonds, corporate bonds, or municipal bonds and are relatively low risk (Bodie et al, 2008).
Choosing the right asset class in mutual funds for an investor can help them keep their portfolios diverse and offer lower risks during declining economic times. Vanguard conducted research regarding investors and how they chose asset classes during 2009, after the economy started to show some improvement. They...
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