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What Is an Investment Class and Where Do Alternatives and Private Credit Fit In?

An investment asset class is a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.

When you invest in anything, you’re investing in an asset. Assets are anything with value that can, at one point, be converted into cash. Stocks, bonds, and the investments on Percent are all assets.

Each asset belongs to an investment asset class. This article provides a brief overview of equities, fixed income, cash (and cash equivalents), and alternative investments.

Public Equities

Public equities are stocks that are traded on public exchanges. This asset class is typically highly liquid, meaning it can be easily converted to cash. Penny stocks, international stocks, ETFs, and some other publicly traded investment vehicles also fall under this asset class. When you invest in equities, you may receive dividends while you hold the investment but realize returns (+/-) when you sell the asset.

Fixed Income

This asset class usually refers to public bond investments. These investments are generally also liquid, and have a set rate of interest. When you buy a bond or a fixed income security, you are lending your money (investing in) a company, government or agency for a certain period of time. Investors provide the principal up front and then receive interest payments until the security matures. At maturity, investors are repaid the principal (although principal can also be returned during the life of the note, which can also be referred to as amortization payments). In the case of fixed income notes, the principal does not increase in value over time the way a stock would, so fixed-income securities generally provide more predictable income than equities (given the contractual payment schedules for interest and principal repayment).

Cash and Cash Equivalents

This broad asset class includes: actual cash; high interest savings accounts; guaranteed investment certificates; holding foreign currencies (often used in the foreign exchange market); federal and provincial treasury bills; and money markets funds. Returns on this asset class tend to be minimal. Cash is the most liquid asset as it can easily convert into any other asset class listed in this article.

Alternative Investments

Alternative investments got their name by not fitting neatly into one of the three categories described above. This umbrella term includes assets such as private equity, private credit, real estate, venture capital, cryptocurrencies, and collectables such as art, fine wine, vintage cars, etc. These assets are an alternative to traditional investing and straight-up cash, allowing investors to invest in things that might not always be correlated with equities or fixed income markets.

Generally, each investment asset class is expected to reflect different risk and return investment characteristics and perform differently in any given market environment. Historically, there is usually little correlation between different asset classes – meaning that when one asset class is performing poorly, another may experience strong returns – although there is sometimes a negative correlation (where two asset classes are aligned in their performance).

Given the particular risk/reward characteristics of different investment asset classes, most financial advisors recommend that investors create a diversified portfolio of assets to reduce portfolio risk and maximize potential for returns.

What Types of Investments Does Percent Offer?

Percent specializes in private credit investments, which are an alternative investment. Our marketplace provides retail accredited and institutional investors with opportunities across three main sub-asset classes: asset-based securities, corporate loans, and limited partner investing.

In the last few years, we have seen stock and bond market performance become increasingly correlated, causing investors to search for more diversified investments. Alternative investments are often broached as an option, since they offer the potential for enhanced return and are generally less correlated to traditional assets. Within alternatives, private credit assets – like those offered on Percent – offer higher yields that exceed treasury benchmark rates, recurring income distributions, and shorter-dated investment timeframes.

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