5 Asset Classes Which Can Transform your life

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Let’s Know 5 Asset Classes which can transform your life.

5 types of asset class


When we want to start investing in any asset class there is first question comes in our mind where to invest first.

So ‘where to invest’ always confuse us because we used to never know what is ultimate goal of that investing. So our financial goal decides where to go.

So let’s understand with simple example. If want to go somewhere with help of Google Map, then until we fill destine location in that it does not show the direction.

Once we put our destine location in that it starts to show where we are heading. In same way before investing we must understand what the ultimate financial goal is. This goal may be short term, medium term, or long term.

Likewise in real world if we want to go one place to another place keeping in mind final destination point we used to some vehicle to reach there.

It may be motorcycle, car, bus, train, airplane, etc. In same way there are five major financial investment vehicles or asset class broadly which again have sub-investment vehicles.

So here I am using financial investment vehicle term instead asset class to make it easily understandable.

So before stepping in investing world we must have knowledge of all these financial investment vehicles and their pros & cons.

Because each financial investment vehicle has it’s own importance. We can’t say that this investment vehicle is good & that is bad as their importance based on the short, medium, & long term goal. On the basis of those goals, the financial investment vehicle chosen.

So let’s first understand the meaning of financial investment vehicle’. The ‘financial’ means a study related to the management of money & other assets.

The ‘Investment means investing money with the expectation of profit.

The ‘vehicle’ means a conveyance that takes something from one place to another place.

So financial investment vehicles mean such conveyances of money that convert money into higher ‘future value’ from its ‘present value’ within a time frame. Before going further let’s understand these scenarios with a simple example.

if we have to travel to reach a destination ‘within time frame’ let’s assume 30 km away from our starting point, then what types of suggestions come in our mind before stepping out.

It might be safety, comfortability, risk, cost, suitability, etc point of view. On considering all these factors, what type of options comes in our mind?

The answer of this question could be Motorcycle, Bus, Car, Train, etc.

If we use a motorcycle then it may be cost-effective but not good safety point of view, if we use a train, it may be good safety, cost-effective point of view but may not suitability point of view. So it’s hit & trial method to use a suitable vehicle based on location & it varies from person to person.

Now if we have to travel to reach its destination ‘within time frame’ let’s assume this time 300 km then what could different conveyance options be available considering safety, comfortability, risk, cost, suitability factors?

The answer to this question could be Bus, Car, Train. This time we didn’t consider the motorcycle due to comfort, safety factor (exceptions always there)

Now again we repeat the same process but this time the distance to travel is 3000 km ‘within time frame’.

Now what could travel vehicles be available again considering safety, comfortability, risk, cost-effectiveness, suitability factors?

So this time answer could be Train or Aeroplan. This time we didn’t consider the Bus, Car, Motor Cycle because they are not as valid options as compared to trains or airplanes. 

So all traveling vehicles have their uniqueness based on their usage e.g. to travel 30 km, airplanes can’t be used & in the same way for traveling 3000 km, the motorcycle can’t be used for covering distance ‘within time frame’.

So from the above example, we can understand that two factors are playing a role to choose our traveling vehicle to reach on our destination within a specified time.

The first one is ‘Distance to Cover’ & the second one is ‘Reach on Time’. So the type of vehicle selected based on when we are confident that we can cover that much distance within a time deadline.

If we can finalize the traveling vehicle based on the distance to travel & time availability, then in the same way we should choose different financial investment vehicles based on the requirement of future’s liabilities & when these liabilities are approaching.

That’s why the selection of investment vehicles so important.

Generally, common man uses same investment vehicle for a goal just one year away & the same vehicle for the goal which ten years away & it’s one of the basic reason a common man not able to reach their goal & to fulfill that goal’s requirement, takes debt & hence trapped in a debt cycle which again impacts other future goals.

So there are five types of financial investment vehicles or asset class broadly through which we can invest our money considering safety, comfortability, risk, costing, suitability factors.

These five financial investment vehicles or asset class are 

1. Cash

2. Fixed Income

3. Commodity

4. Real Estate

5. Equity

These all five financial investment vehicles again have sub-investment vehicles which we will discuss now


To fulfill day to day needs cash is required. It may be in your wallet or your bank account.

If it’s in your wallet then it earning no interest & if it is available in a bank account then it may earning interest 3-5% in the Indian context.

Its ok to have capital in cash form for the short term but it’s not good for the long term else ‘inflation’ will start reducing the ‘time value of money’ of your cash.

Fixed Income:

it’s the big subject which I’ll cover separately but here is limited to their names e.g. FDs (Fixed Deposits), RDs (Recurring Deposits), Bonds, NSC (National Saving Certificate), PPF (Public Provident Fund), SCSS(Senior Citizen Saving Scheme), Debt Mutual Funds, TDs (Time Deposits), Treasury Bills, CDs (Certificate of Deposits), CPs (Commercial Papers), RBI Bonds.

These all investment vehicles suitable from the ‘safety of capital’ point of view but their returns are limited.

These sub-investment vehicles can be used for ‘capital preservation’ purposes because these have a huge safety factor of capital. So if someone has a low-risk appetite then these options can be considered


This investment vehicle covers mainly

      3.1 Metals (Gold, Silver, Platinum, Copper, etc), 

               3.2 Energy (Crude Oil, Natural gas, Gasoline, etc), 

               3.3 Agriculture (Rice, Wheat, Corn, etc)

               3.4 Livestock & Meat (Cattle, Egg, Mutton, etc) 

Here we just take the example of gold as many of us very familiar with it & consider much precious metal from the common man’s point of view.

The gold has its ‘intrinsic value’ that’s why it remains a favorable investment vehicle in every era.

In today’s world, one can purchase this metal in physical as well as financial form.

If it purchased in the form of a coin or ornament then its called physical form & if it purchased in the form of an SGB (Sovereign Gold Bond) scheme, Gold ETF, Gold Funds then its called financial form.

The financial form of this investment vehicle is better than the physical form for long term investment from a safety, comfortability point of view.

This investment vehicle was given good returns over time & a good investing option in the time of market crisis & hedging the portfolio. 

Real Estate:

This investment vehicle is good for steady income & long term financial security.

But it has low liquidity & high transaction cost. So it’s not a cup of tea for everybody.

But still through REIT (Real Estate Investment Trust) funds, a retail investor can invest in this investment vehicle to diversify their portfolio.


This investment vehicle highly used for wealth creation because it gives higher returns & liquidity as compared to other investment vehicles for the long term.

To invest in equity can be done through two modes first is ‘Direct Mode’ & the second one is ‘Indirect Mode’.

When someone purchases a share of a company directly from the capital market then its called ‘Direct Mode’ while if it invests through Mutual Funds, its called the ‘Indirect Mode’.

Each mode has its pros & cons. So if someone new to the capital market then should come through ‘Indirect Mode’ i.e. Mutual Funds mode.

To invest in this investment vehicle always remember that “Return of Investment” is more important than “Return on Investment”.

Till now we discussed every five types of financial investment vehicles & their importance.

Now we have to decide where should we go first.

So let’s understand this with a simple example. For good health, our food also should be healthy. A food plate can be said healthy if contains a balanced proportion of each ingredient like vegetables, whole grains, healthy proteins, fruits, etc.

Now I can’t say that I like vegetables only so I’ll eat only vegetables or will say I like whole grains, that’s why I will eat only whole grains. It’s the same true for other ingredients also.

In same manner, I can’t say I like fixed-income investment vehicle or asset class, so I’ll invest only in that or I like Equity market so invest only in that.

It should be a balanced mixture of all investment vehicles or asset class by keeping in mind the final financial goal.

So for short term goal, Fixed Income investment vehicle or asset class are good & for long term goal, Equity investment vehicle is better.

For medium-term goals, we may make a mixture of both. Any financial goal less than 3 years called the short term goal, a goal between 3-7 years called medium-term, & any goal beyond 7 years called long term goal. So you should learn the asset allocation.


To learn investing skills is the long process that can be learned through continual exposure  to all these financial investment vehicles or asset class.

We should focus on the principles of investing because on the landscape of investing many things would change but principles will remain same. 

6 thoughts on “5 Asset Classes Which Can Transform your life”

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