<P> Many investment funds are composed of the two main asset classes which are securities: equities (stocks) and fixed - income (bonds). However, some also hold cash and foreign currencies . Funds may also hold money market instruments and they may even refer to these as cash equivalents; however, that ignores the possibility of default . Money market instruments, being short - term fixed income investments, should therefore be grouped with fixed income . </P> <P> In addition to stocks and bonds, we can add cash, foreign currencies, real estate, infrastructure and commodities to the list of commonly held asset classes . In general, an asset class is expected to exhibit different risk and return investment characteristics, and to perform differently in certain market environments . </P> <P> Asset classes and asset class categories are often mixed together . In other words, describing large - cap stocks or short - term bonds asset classes is incorrect . These investment vehicles are asset class categories, and are used for diversification purposes . </P> <P> Stocks - Also called equities </P>

What are the characteristics that define an asset class