Asset Classes Flashcards
6 cards from real IMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Asset Classes flashcards as text
What is 'private equity' as an asset class?
Answer: Investment in companies that are not listed on public stock exchanges, typically seeking capital growth
Private equity involves investing in companies not listed on public stock exchanges. It includes venture capital (early-stage), growth equity, and buyouts (mature companies). Returns come from capital appreciation over a medium to long-term horizon.
What is 'infrastructure' as an alternative asset class?
Answer: Long-term investments in physical assets such as roads, bridges, airports, and utilities
Infrastructure as an asset class involves investing in physical systems and facilities such as transport networks, utilities, energy, and social infrastructure. It typically offers stable, long-term, inflation-linked returns and low correlation with equities.
What is a 'commodity' in investment terms?
Answer: A raw material or primary agricultural product that can be bought and sold, such as gold, oil, or wheat
Commodities are standardised physical goods (hard commodities like metals and energy; soft commodities like agricultural products) that are traded on exchanges. Investors access them through futures contracts, ETFs, or shares in commodity producers.
What is the key risk associated with investing in property as an asset class?
Answer: Illiquidity — property is slow and expensive to buy and sell
Property is an illiquid asset class — transactions are slow, costly (stamp duty, legal fees, agent fees), and cannot be partially sold. This makes it difficult to quickly exit a position or rebalance a portfolio compared to listed securities.
What is an ETF (Exchange-Traded Fund)?
Answer: A fund that trades on a stock exchange, typically tracking an index, combining features of both funds and shares
An ETF is a fund listed and traded on a stock exchange throughout the trading day, unlike traditional open-ended funds priced once daily. Most ETFs passively track an index (equities, bonds, commodities), offering low cost and intraday liquidity.
What is 'short selling' and what is its maximum theoretical loss?
Answer: Borrowing and selling securities you do not own, hoping to buy them back cheaper; maximum loss is theoretically unlimited
Short selling involves borrowing securities and selling them, aiming to buy them back at a lower price and profit from the difference. If the price rises instead, the short seller must buy at a higher price. Since prices can rise indefinitely, maximum loss is theoretically unlimited.