Investments - Asset Classes

We work to earn for a good living. A good living is relative to every individual. Irrespective of that relativity, everyone should subscribe to the thought of making an effort to save a portion, however tiny it may be. There are various ways to save the cash and build a portfolio suitable to the individual in various asset classes. These asset classes could be cash savings in a bank account, mutual funds, pension contributions, liquidity account, immoveable assets, gold, art, etc. Allocating funds to any of these asset classes depends upon the personal circumstances of an individual and should be carefully consulted with someone who has good financial expertise and is aware of the individual's needs. I'm not going to provide the ratios for funds allocation to these various asset classes. I'll be giving some basic tips on considering some of these assets classes.

Liquid Assets:
Those asset classes in which cash is readily available can be termed as liquid assets. These could be liquidity accounts, cash savings accounts or current accounts.
Liquidity Account:
Maintain a bank account which pays some decent interest and allows withdrawal of money, any number of times, without any penalty. This account will provide the liquidity should something go wrong with your regular source of income, that may be your job or business. Depending upon the nature of your job or business or industry, it may be adviseable to have at least 6 months of living expenses in this account. Do not count this money as part of your investment(s). The sole purpose of this account is to provide you the liquidity in an emergency. The monthly living expenses should be comprehensive that should include any regular, weekly, monthly or quarterly outgoing. Examples are rent/mortage, loan repayment, subscription/membership fee, health insurance, vehicle expenses, etc.

Cash Savings Account:
Regularly save cash in a savings account that pays good interest. This should be part of your long-term investments. Interest rates on savings are subjected to change. Weigh the options of parking in a fixed-term savings account and a non-fixed-term savings account. More often than not, the returns on such accounts do not beat the inflation. This is the least risky investment. Having said that, should the bank go bust, only a pre-determined amount would be returned to investor. For example, by current law, banks operating in India covers only the first Rs.200,000 in an account per person per bank.

Semi-liquid Assets:
Those asset classes that are not ready cash but can easily be converted to cash can be termed as semi-liquid assets. These could be bullion, gold/silver/platinum jewellery, shares, etc. As the value of these assets is subject to international market forces, there is an inherent risk to these asset classes.
Bullion:
Silver, Gold, Platinum can be treated as semi-liquid assets as they can be quite easily sold to convert to cash. The value of these vary on a daily basis.

Jewellery:
Jewellery made of precious metals can be easily sold to convert to cash. Again the value of these vary on a daily basis. There is always a chance for loss of value while selling jewellery.

Shares:
Shares can be easily converted to cash in the equity markets as long as the company that issued the shares has not gone bust and is still trading on the stock exchange on which the company shares were bought.

Immoveable Assets:
Real estate, residential/commercial properties form some of the immoveable assets. Over a long period of time frame, say, 10 or 20 years, this asset class could give good returns on the investment. Again the value of these are subject to various local forces.