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Most people already own stocks and bonds but there are eight other common asset classes. Stocks, bonds, commodities, currencies, private equity, venture capital, real estate, statistical arbitrage, cash, and even collectibles like art can be traded and invested in.
The first asset class is cash. Cash is the safe haven when we can’t find any other good trading opportunities. For instance if stocks look like junk and bonds are no good you will likely have some money in cash as you wait for a good opportunity. So while its really a currency we look at cash as a separate asset class.
Equities are the next asset class on the list. We include domestic, foreign, and even emerging market stocks in the same broad asset class category. Equities represent ownership in a company.
Fixed income, also known as bonds represent loans to a government or business. When you loan money you receive interest in exchange. Anyways most global macro traders trade US government, foreign government, corporate, and even low grade corporate bonds. They have different drivers so they provide more trading opportunities.
Next on the list are commodities. Commodities include precious metals, base metals, energy complex, agricultural goods, and livestock. Basically global macro trades lumber, oil, gold, etc if the risk to reward is in place.
Finally we get to currencies. This is actually the largest asset class out there and gives some of the best trading opportunities. If you have an opinion on any country you can buy or short the currency and try and make money.
So what of the other assets classes? Well they tend to be less liquid so you need a lot of money to trade them well. For instance you can make a lot with real estate but you need to have a long time horizon. Same goes for art, venture capital, and private equity. You can trade this stuff but it takes a different time frame then most investors are used to.
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