The three major asset classes of capital accumulation are stocks, bonds (including cash) and real estate.
Understanding Risk
The kinds of risk unique to each asset class. Financial or business risk involves the issuer’s need to spark sales and can be hurt by broad economics, soaring costs, decreased demand and increased competition. Market risk is a danger, when an asset becomes unwanted. Interest rate risk involves the current rates available at the time of reinvestment of proceeds.
Return Types
Your asset value needs to be exposed to some level of risk in order to grow. Another factor is the need to cash out. Income levels needs to be match your need. Purchasing power needs to be addressed during rising inflation. Tax concerns of the return needs to be looked at.
Objectives Meet Your Needs
SCM advises you learn more about your goals and the process. Then, your holdings should be checked and asset targets is set. The asset classes are stocks, fixed income, cash and real estate. At SCM, guidelines are expressed and adhered to when making decisions.
Stocks
Common stocks have consistently provided after-tax returns well above the rate of inflation and should represent a substantial portion of the portfolio. The major forms include common stocks, preferred stocks, stock exchange-traded funds (ETFs), stock mutual funds, options, and commodity futures. SCM uses primarily common stocks and ETFs.
Fixed Income
Fixed income assets provide a stated rate of return on money lent to an issuer. They provide greater income protection than stocks but can be just as risky in changing interest rate cycles. Types of fixed income assets include muni bonds, corporate bonds US government securities, US savings bonds, mortgage-backed securities and short-term securities such as CD’s, money market funds and commercial paper.
Real Estate
Real Estate has also provided excellent, long-term returns well in excess of inflation and should play an important role in capital accumulation. Methods of ownership include direct ownership, limited partnerships, real estate investment trusts (REITs) and real estate mutual funds. SCM recommends categories of real estate investments which fit a your need. Finally, the specific investments are checked and the real estate watched.
