Assets Classes

Write 400–600 words that respond to the following questions with your thoughts, ideas, and comments.

Part 1

In your own words, define the following:

• Common stocks
• Preferred stocks
• Corporate bonds
• Municipal bonds
• American Depositary Receipt (ADR)

Part 2

Discuss the importance of asset allocation in constructing the investment portfolio. Make sure you address the following:

• Describe asset classes, including stocks, bonds, and cash.
• Explain the percentage of asset classes within the portfolio based on purpose and investor demographics.
• Discuss the stock–bond ratio for a conservative, moderate, and aggressive investor.

Answer Preview

Common stocks are securities representing ownership in a corporation whereby the holders has the right of exercising their control through the election of a board of directors and also by participating in voting on the policy of the Corporation (Lustig, Y. 2014). Preferred stock is a form of ownership in a company whose claims on its earning and assets are higher than the…