An investment portfolio consists of the combined assets value a person or an institution holds for investing purposes. There are three main asset classes an investment portfolio can hold and these include equities, bonds and cash, or cash-like securities.
An investor should hold a variety of asset classes in their investment portfolio, so their returns aren’t volatile and they aren’t overexposed to market swings. For example, equities might provide them with capital appreciation, bonds might provide them with income, and cash-like investments might provide them the opportunity to enter an investment.
Since 2009, two assets classes in particular—stock and bonds—have performed very well. If investors only held these in their investment portfolio, their returns would be substantial. To give some perspective, S&P 500, a well-known stock index, has risen roughly 175% since 2009. Bond prices have increased as well.
Going forward, investors have to be very careful in building their investment portfolios. The Federal Reserve’s monetary policies had a huge hand in the stock market rally and bond prices rising. Now the central bank is moving towards a normal monetary policy. This can impact asset classes across the board.