Capital Flows Between Asset Classes

What this unit covers

Understand that money rotates between shares, bonds, commodities and cash as conditions change: one pool of capital moving to wherever it is currently rewarded.

By the end you will be able to

• Explain that equities, bonds, commodities and cash form one connected pool of capital.
• Describe how capital moves toward whichever asset class is currently rewarded, and shifts as conditions change.
• Recognize that a falling price is a real loss, even when it coincides with capital moving elsewhere.

How it starts: Falling Fund, Rising Gold

1. You open your investment app one evening to check your savings.
2. Your equity fund has fallen 8,000 rupees this month, and it stings.
3. The same screen shows gold and bonds rising, so what happened to your money?

Words you will meet

Asset class

A broad group of investments, such as equities, bonds, commodities or cash.

Equities

Shares of ownership in companies, bought and sold on a stock exchange.

Bonds

Loans investors make to a government or company that pay back with interest.

Commodities

Physical goods such as gold, oil or metals that are traded as investments.

In this module: Cross-Asset Thinking

1. Capital Flows Between Asset Classes (this unit)
2. Risk-On vs Risk-Off Markets
3. Correlations Across Markets
4. Building a Multi-Asset Perspective