BacktestFolio · Glossary
Asset Class
In plain language
Equities and bonds are two different asset classes: the former offer growth but with high volatility; the latter offer stability with lower returns. Diversifying across asset classes reduces risk because they often react differently to the same macroeconomic events.
Technical definition
Category of financial instruments sharing similar economic characteristics, market behaviour and risk/return profile. The main classes are: Equities, Bonds, Real Estate, Commodities, and Cash/Money Market.