Cash, Fixed Income and Equities are the 3 main asset classes. However, when it comes to asset class categories there are many more. For example if we start with Fixed Income we could break this down further to Foreign Fixed Income and Domestic Fixed Income. Further still, Domestic Fixed Income could be broken down to Domestic Government Fixed Income and Domestic Corporate Fixed Income. Domestic Government Fixed Income could also be further broken down to Federal, Provincial and Municipal categories which could then be further broken down to Short, Medium and Long Term, etc.
As you can imagine, it would be possible to perform this exercise on all three of the asset classes, and you could easily end up with 100 different asset class categories – clearly overkill. Broad asset classes are expected to behave differently in different market conditions (that’s why they play such a ubiquitous part of portfolio construction), but as you go down the asset class category chain, you will may find that the behaviours become more closely aligned. In other words, you will get to a point where you are just pulling hairs.