Types of assets you can invest in by role in your portfolio

The first thing you need to understand is that not all investments serve the same purpose.

Some are designed to grow your wealth, others to protect it, and others to generate income for you right now. And you need to know this first classification in order to build a portfolio that fits what you are really looking for.

First, here’s a simple breakdown so you can see everything at a glance; then we’ll go through each one:

1. Growth
• Stocks / Funds
• Crypto
• Startups or companies
2. Stability
• Bonds (fixed income)
• Liquidity
3. Safe haven
• Gold
• Bitcoin
• Real estate
4. Income generation
• Stocks / dividend funds
• Rental real estate

This article is the second in the series where I explain why you need to invest, how and where, so you can learn the essentials even if you are starting from zero:

1. Investing from scratch: where to invest your money.
2. Types of assets you can invest in by role in your portfolio. (This is the one you’re reading).
3. How to buy assets: investment vehicles.
4. Investment platforms: where to buy investment vehicles or assets.
5. Investment risks and protections.
6. My investment system.
7. Wealth: how to grow it, protect it and pass it on.

#1. Growth assets

Here are the assets that, over time, can make your money really grow.

How they work is simple: you buy them expecting them to appreciate over time, far outpacing inflation.

In other words, you expect them to grow by more than 5% per year, because otherwise you would invest your money in another type of asset.

Above all because they are the ones that take on more risk. In return, as I said, they are the ones with greater potential.

Well then, in this group we could mainly consider three assets.

Stocks: investing in the stock market

They represent small parts of companies. When those companies grow, the normal thing is for their shares to be worth more, so your investment in them does too. 

Some stocks pay dividends and others do not (we’ll talk about that later), but the main objective with growth stocks is to achieve an increase in their value.

You can buy stocks individually, or they can be part of a fund; we’ll look at each case later.

Bitcoin and other cryptocurrencies

Investing in cryptocurrencies works in a similar way to stocks, but with more volatility. In other words, there will be many more price swings. 

The good thing is that, the more volatility, the greater the potential gain. But also the greater the risk of falling, especially in the short term.

Within this group you can distinguish several types. The main ones:

• Bitcoin is usually seen as a store of value. In fact, we’ll put it there too.
• Ethereum as technological infrastructure: a very robust distributed database.
• Solana is similar to Ethereum but less mature.
• Stablecoins, such as USDT and USDC which replicate the price of a fiat currency (traditional ones), in this case the dollar, and have their use.
• Finally, we have altcoins as more speculative bets and memecoins as the ultimate expression of risk.

Companies, usually startups

Startups are companies at very early stages, generally technology-oriented. And as such, they can multiply your investment… or disappear. 

The purchase of shares in these companies does not take place on markets such as the S&P 500, the Nasdaq or the IBEX35, but mostly outside traditional markets, through private rounds or specialized platforms.

It is the riskiest way to invest and, unlike the previous ones, it is not suitable for everyone, but it is also the most asymmetric and the one that can give you a 20x return on your investment (multiplying what you put in by twenty).

#2. Assets for stability

Not everything in an investment portfolio has to grow fast. You can also look for pieces that soften the blows when the market falls.

What’s more, depending on your financial situation and other factors such as age, you might prioritize these types of assets over the previous ones, given their lower risk.

When you are young and have little, what you want is growth, but when you are older and have already accumulated quite a bit, you probably prefer not to lose it, even if you earn less.

In these scenarios you have the following assets.

Bonds or fixed income

They are loans you make to governments or companies in exchange for interest payments. This interest is set in advance, without fluctuating over time, hence fixed income.

They do not usually deliver great returns —we are talking about between 2% and 4%, at most— but they bring stability to your wealth and very minimal risk.

Liquidity

It is the money available in an account or in very conservative products.

It fulfills a similar role to bonds: it generates hardly any return, but gives you security and the ability to react.

In this sense, in general, it is better to have your money in a remunerated account than in your usual current account, because you have immediate access to the money and, on top of that, you are earning between 1% and 3%. Just enough to keep inflation at bay.

#3. Safe-haven assets

These are assets that, when everything goes wrong, behave differently, hence their name.

They do not rise as much as growth assets, but they protect part of the value of your wealth in times of crisis.

Investing in gold

Gold is the classic example of a store of value. Think that when you say “life has become more expensive”, you are referring to fiat money. A house today costs roughly the same number of ounces of gold as it did thirty years ago.

In other words, in reality, it can be seen as “life has become more expensive” or as “the value of money (fiat) has fallen”. And gold helps fight this reality.

It can be bought:

• In physical format: jewellery or bars, with custody risk.
• In directly linked financial products, such as ETFs.
• In financial products with indirect exposure, since you can be exposed to its price through shares of companies in the sector, such as mining companies.

Investing in Bitcoin

I am not saying crypto, I am saying Bitcoin.

Because not all DeFi tokens (decentralized finance), far from it, can be considered a store of value.

Bitcoin seems to be, which is why they call it digital gold. And although it is relatively recent, it is increasingly starting to be seen as an alternative safe-haven asset. 

Depending on how you look at it, you can consider it both in the growth part —Bitcoin is probably the asset that has appreciated the most over the last ten years— and here, in the store-of-value category.

Because, beyond its growth, the power to self-custody it without anyone knowing, or take it to another country without a problem, gives it potential far above the others.

Real estate investment

Depending on the objective, this asset can be in this group or in the next one.

Within real estate we have two main forms:

• Direct the one you buy in your own name and the most common one:
• Apartment
• Commercial premises
• Garage
• Storage room
• Indirect, consisting of slightly more complex financial products:
• REITs / SOCIMIs
• Real estate ETFs

You can understand real estate investment as a safe haven because the most common thing is that, unless you bought right at the bubble period (between 2006 and 2008) the asset you buy will appreciate, at least, in line with inflation. And far above it in certain places such as the Balearic Islands or the Costa del Sol.

You buy an apartment and, theoretically, your wealth does not lose value over time.

Because, in addition, the primary residence has certain tax advantages, especially when calculating wealth, since in many cases it is partially exempt from Wealth Tax.

However, in addition to this haven and price exposure, you can also get a return from it.

#4. Income-generating assets

Here the objective is not so much for the asset to rise, but for it to generate recurring income for you.

What are these assets?

Rental real estate

Well, we continue with real estate, because when you invest directly, buying an apartment, premises, garage or storage room and rent it out, you are generating monthly income, in addition to the aforementioned exposure to price.

Probably because of this double aspect of haven plus income generation, property has been the main — and almost the only — investment vehicle in Spain.

But there are others.

Dividend stocks

I mentioned earlier that stocks may or may not pay dividends. These are nothing more than the distribution of company profits to its partners.

When you hold shares directly, if the company pays dividends, you receive them in your account and they are taxed at that time. In other words, they are always distribution-based and generate a tax impact.

However, when you invest through funds or ETFs, things change. There are products called “accumulating” that automatically reinvest those dividends within the fund itself, without you receiving the money.

This has a clear advantage: you do not pay taxes until you sell the investment. Meanwhile, the profits are reinvested and generate a greater compounding effect.

That is why, in these cases, even if the asset itself (stocks) can generate dividends, the treatment you receive depends on the vehicle you use to invest.

Conclusions

Not all assets fulfill the same role within a portfolio, and understanding this is the first step toward investing sensibly.

There are assets oriented toward growth, others toward stability, others toward protection, and others toward income generation. The common mistake is mixing objectives without a clear structure.

The assets of growth are the ones that really allow wealth to increase in the long term, but they involve greater volatility and risk.

Compared with them, the assets of stability and liquidity reduce the impact of downturns, although at the cost of lower returns.

Safe-haven assets play a key role in adverse scenarios, as they help preserve value when the rest of the market suffers.

For their part, income-generating assets provide recurring cash flow, which can be especially useful in more advanced stages or when you are looking to supplement income.

Choosing between one and another depends largely on your stage of life and your risk tolerance, although the key is not choosing a single type of asset, but combining them coherently.

A portfolio does not always have to maximize returns at every moment; it has to adapt to different scenarios and keep a balance between growth, protection and income over time. It depends on your goals.

Next steps

If you want to move a little further, I invite you to continue with the next article in the series:

1. Investing from scratch: where to invest your money.
2. Types of assets you can invest in by role in your portfolio. (This is the one you’re reading).
3. How to buy assets: investment vehicles.
4. Investment platforms: where to buy investment vehicles or assets.
5. Investment risks and protections.
6. My investment system.
7. Wealth: how to grow it, protect it and pass it on.