Asset Classes

An asset class is a group of securities that have similar financial characteristics. The primary asset classes are:

  • Equities
  • Fixed income
  • Money market 
  • Guaranteed
  • Real estate

Most financial experts agree that some of the effective investment strategies involve diversifying investments across broad asset classes like stocks and bonds rather than focusing on specific securities that may or may not turn out to be "winners."

Asset Allocation

The goal of asset allocation is to try and create the most efficient mix of investments or asset classes that have the potential to appreciate while meeting your tolerance for risk (market volatility), your goals and investment objectives, and your preferences for certain types of investments within asset classes. Use our Asset Allocation Calculator to help you determine your risk tolerance level.

Since investments within asset classes tend to perform differently under similar market conditions, diversification across asset classes may help reduce volatility. If you include several asset classes in your long-term portfolio, the upward movement of one asset class may help offset the downward movement of another as economic and market conditions change over time. But keep in mind that there are inherent risks associated with investing in securities, and diversification does not prevent against loss.

It's also important to frequently evaluate your portfolio to find out whether your allocation strategy is still appropriate for you.  

When reviewing your portfolio, make sure it fits your complete investment time horizon — the number of years you have to invest before needing to use the money and how many years you'll need that money to last.

TIAA-CREF offers the following five asset classes. (Employer-sponsored retirement plan rules outline which investment choices are available to you within each asset class.)


Equities, or stocks, represent shares of ownership in publicly held companies, and they've historically outperformed all other kinds of investments. They've also tended to be the most volatile in the short term. There are inherent risks associated with investing in equities. Your returns and the principal value of your investment will fluctuate so that your accumulation units, when redeemed, may be worth more or less than their original cost. It is important to keep in mind that past performance is no guarantee of future returns.

Fixed Income

Bond investments generally pay a set rate of interest over a given period, then return the investor's principal. Before maturity, the value of fixed-income investments can fluctuate in response to current interest and inflation rates.

Money Market

This asset class includes relatively safe, liquid short-term investments such as securities issued or guaranteed by the federal government, certificates of deposit, banker's acceptances, euros and commercial paper. An investment in the CREF Money Market Account or the Money Market Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. It is possible to lose money in these investments.


Guaranteed assets, backed by the claims-paying ability of the issuing insurer, preserve your principal and provide at least a specified minimum return. 

Real Estate

Investing in accounts that own real estate directly can be particularly useful in building retirement assets. First, real estate returns sometimes run counter to both stocks and bonds and can therefore help diversify your portfolio. Second, property values and rental income have traditionally tended to parallel inflation, so real estate holdings can help protect your future purchasing power.

And since values tend to rise and fall more slowly than stock and bond prices, real estate can help reduce your portfolio's volatility.  However, it is important to keep in mind that the real estate sector is subject to various risks, including fluctuation in underlying property values, expenses and income, and potential environmental liabilities.


TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.

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