How Do I Choose the Best Investment Assets?

In choosing the best investment assets, it is useful to consider the goals for investing. A long-term time horizon will typically lead to a different investment portfolio composition than a short-term strategy. The overall goals and tolerance for risk are similarly factors that influence the most appropriate assets to consider. Investing in various investment assets, including stocks, bonds, and commodities, is a strategy of diversification that is often adopted by many professional investors. The best selections and the amount of assets to buy will vary based on economic and market conditions too.

Stocks are investment assets that introduce some volatility to a portfolio. This means that, with or without warning, investments could display price swings that are jarring to even the most sophisticated of investors. It's possible for the slightest interpretation, rightly or wrongly, of investment or economic news can influence investor demand for stocks. Subsequently, stocks may be the best investment assets if you can handle the volatility but are also seeking returns that could sustain a long-term goal, such as retirement.

Bonds fall under the fixed income category of investment and represent another type of investment assets. These financial securities often introduce some stability and income to an investment portfolio. Government bonds especially expose investors to only small doses of risk because of the unlikelihood of a federal agency to default. If you are looking to introduce a conservative investment, such as bonds, to your exposure, you should also gauge your expectations. Traditional bonds do not include a lot of risk, but the returns offered are similarly modest.

High-yield bonds carry more risk in comparison with more traditional, fixed-income investments. These high-yielding investments are the best selection if you are willing to inherit exposure to financial securities that have a greater chance of defaulting. The nature of high-yield bonds indicates that there is a rating assigned to these debt securities that is less than favorable tied to the confidence investors can have that loans will be repaid. Returns on these bonds are potentially attractive relative to the amount of risk involved.

If you are seeking even greater diversification to an investment portfolio, you may consider commodities. These securities, which include contracts for metals and agricultural products, tend to trade in a manner that is not correlated to stocks and bonds. This means that the factors that influence trading in the stock and bond markets are different than what drives trading in commodities.