Asset Class
What stocks, bonds, cash and real estate are as categories, how each one earns you money, and why they rise and fall at different times.
Key idea
An asset class is a group of investments that work the same way. A stock makes you an owner, a bond a lender, cash a depositor and real estate a landlord. Because they earn money differently, they rise and fall at different times, which is what makes mixing them useful.
What it is
An asset class is a group of investments that work the same way. The four main ones are stocks (also called shares), bonds, cash and real estate. A stock makes you a part-owner, a bond a lender, cash a depositor, and real estate a landlord or a homeowner. Because each earns money differently, they behave differently, and how you mix them is your asset allocation.
Four asset classes side by side
Here's how they compare:
Stocks
- What you own
- A small share of a company
- How you earn
- Price gains and dividends
- How much it swings
- The most: Swiss shares' worst year was −34.0% (2008)
- Turning it into cash
- Sold on any trading day, with the money two trading days later (until October 2027)
Bonds
- What you own
- A loan to a government or a company
- How you earn
- Interest, and the loan paid back at the end
- How much it swings
- Less: Swiss franc bonds' worst year was −12.1% (2022)
- Turning it into cash
- Can be sold before the end, at the market price
Cash
- What you own
- Money in a bank account
- How you earn
- Interest
- How much it swings
- Its balance rarely falls in francs, but it loses buying power when prices rise faster than the interest rate
- Turning it into cash
- Usually within days; many banks limit withdrawals from savings accounts
Real estate
- What you own
- A building, or a share of one through a fund
- How you earn
- Rent, and changes in its price
- How much it swings
- Slowly, but prices can fall for years
- Turning it into cash
- Takes time to sell, with costs and a tax on the gain
Stocks can grow the most and fall the furthest: Swiss shares lost 34.0% in 2008, their worst year since 1900. They can be sold on any trading day, with the money two trading days later (until October 2027; then one). Bonds pay interest and swing less: their worst year was 2022, at −12.1%. Cash rarely falls in francs, and real estate moves slowly but can fall for years. The figures for shares and bonds come from Pictet's study of Swiss returns since 1900.
Why they move differently
Different classes react to different news. In 2008, Swiss shares fell 34.0% while Swiss franc bonds gained 4.5%, as worried investors moved into bonds they saw as safe. Holding classes that don't fall together is what diversification is about. It isn't guaranteed, though: in 2022, when interest rates jumped, both fell, shares by 16.5% and bonds by 12.1%. In the 126 years since 1900, both fell in the same year only 8 times.
A fund is not an asset class
An ETF or an index fund is a container, not an asset class. What matters is what it holds: a stock fund behaves like stocks and a bond fund like bonds. A real-estate fund holds property, though if it's listed, its price also moves on the stock exchange.
The honest caveat
Property can fall for years too. And it can look calmer than it is, because its price indices rest on a few estimates a year, while share prices change all day. Asking prices for Swiss single-family houses were 23.1% lower in 1999 than in 1989, and only passed that level again in 2010. Prices actually paid for houses barely moved in francs, but once inflation is taken into account, every index was lower in 1999 than in 1989, by 14.5% to 38.9%. The figures are price indices from Wüest Partner, IAZI and Fahrländer Partner, published by the Swiss National Bank, and the Federal Statistical Office's consumer price index.
Swiss note
Most households in Switzerland rent: in 2024, 35.7% of homes were lived in by their owners, according to the Federal Statistical Office. So many hold real estate only indirectly, through their pension fund or a real-estate fund. If you want your money back from a Swiss real-estate fund itself, it normally pays out only at the end of its financial year, after 12 months' notice. Most such funds are listed on the exchange, though, so their units can usually be sold to another investor on any trading day. Selling property yourself is subject to a tax on the gain, levied by the canton or, in some cantons, the commune. The tax on the part you reinvest is put off if you put the proceeds into a new home in Switzerland within a reasonable time. That applies if the property was your permanent home, with no part rented out, and you live in the new one the same way. Check your fund's factsheet to see which asset classes it holds.
Key takeaways
- —A stock makes you a part-owner, a bond a lender, cash a depositor and real estate a landlord or homeowner.
- —Swiss shares' worst year since 1900 was −34.0% (2008), Swiss franc bonds' −12.1% (2022).
- —Shares and bonds fell in the same year only 8 times in the 126 years since 1900, most recently in 2022.
- —A fund is a container, not an asset class: what counts is what it holds.
Related concepts
Stock
Own a slice of a company and share in the profits it pays out.
Bond
Lend money, collect interest, get your principal back.
Asset Allocation
Stocks, bonds and cash: the split that decides your ride.
Diversification
Spread your money so that no single failure can sink you.
Risk and Return
More risk buys the chance of a higher return, not the promise.