Asset classes

There are four main asset classes:

• Shares – a stake in a company.
• Bonds – a loan to a company or the government.
• Property – a physical building, whether commercial or residential.
• Cash deposits – mainly savings in bank or building-society accounts.

Derivatives

There are also other types of asset called derivatives, which you are unlikely to invest in directly, but which may be included in the assets of a pooled investment.

A derivative is typically a right or an obligation to buy or sell another type of asset – such as a share or a bond – at a specific price to someone else at a specific date and time in the future. The specific price may turn out to be higher or lower than the market price at that date. The most common types of derivatives are futures and options.