Which asset classes, from what wealth?

Overview

Asset classes differ mainly in four ways: how much their value swings, how quickly you can get your money, whether they pay something out along the way, and how much work they take. The table is a rough classification, not a verdict.

Cash and savings

Current accounts, instant-access and fixed-term savings are the foundation: available any time or on a fixed date, without price swings. In the EU, deposits are protected by law up to €100,000 per person and bank. The price is inflation: if interest is lower, cash loses value in real terms.

Cash is therefore mainly there for the emergency fund, often three to six months of spending, more for the self-employed, and for expenses due in the next few years.

Bonds

With a bond you lend money to a state or company in return for interest. Bonds usually swing less than equities and can stabilise a portfolio. Their risk lies in interest rates themselves: when rates rise, the prices of existing bonds fall, as 2022 showed clearly. With companies, default risk comes on top. For private investors, broad bond ETFs or individual government bonds are the usual routes.

Equities and ETFs

Shares are stakes in companies. Over long periods they have historically delivered the highest returns; in return, drops of 30 to 50 % in individual crises are part of the way. Broadly diversified ETFs spread the risk across hundreds or thousands of companies and cost little; single stocks are more concentrated and take more work.

The entry point is low: savings plans often start at a few euros a month. In Germany, gains and dividends are subject to capital gains tax; for equity ETFs, the partial exemption leaves 30 % of the income tax-free. How to combine a broad core with your own ideas is shown in the guide to the core-satellite strategy.

Property

Property comes in two very different cases. Your own home saves rent and gives security, but brings in no income. A rental flat brings in rent, is usually financed with a loan and therefore works with leverage: changes in value hit the equity invested many times over. For tax, interest, costs and depreciation are deductible.

The price: property is hard to divide and takes months to sell, it concentrates a lot of money in one place, and it takes work. If you shy away from the effort, you can invest through open-ended property funds or listed property companies (REITs), with their own drawbacks: German open-ended funds have a minimum holding period of 24 months and a 12-month notice period for new investors. Whether a rental flat carries itself is shown by the cash flow after debt service.

Pension contracts

Company pensions and German Rürup and Riester contracts are bound wealth: it belongs to you, but you usually cannot access it before retirement, and it is mostly paid out as a pension. In return there is support: tax advantages for Rürup and salary conversion, allowances for Riester, and for salary conversion an employer contribution of 15 % where the employer saves social security contributions. From 2027, the reform of private pensions adds a subsidised pension account (Altersvorsorgedepot).

In net worth, the contract balance counts, kept apart from liquid wealth. More in the FAQ Do pensions count as wealth?

Gold

Gold pays no interest and no dividends; its value depends only on what others pay for it. It is seen as a crisis currency and has moved against equities in some crises, but not in others. In Germany, physical gold and gold securities with a delivery claim are tax-free after one year of holding. Bars and coins come with premiums when buying and costs for safe storage.

Crypto

Cryptocurrencies such as Bitcoin swing extremely; drops of more than 70 % have happened several times. Their value rests on supply, demand and trust in the network. In Germany, gains from private sales are tax-free after one year of holding; within a year an exemption limit of €1,000 a year applies. Your own tasks: safe custody and choosing reputable platforms.

Private markets and collectibles

Private markets are stakes in unlisted companies (private equity), loans to such companies (private debt) or infrastructure. Through funds such as ELTIFs they are now accessible to private investors too. They often tie up money for many years, cost more than ETFs and are rarely valued, which makes them look calmer than they are.

Collectibles such as watches, art or classic cars bring joy and can rise in value. Their value is hard to measure, selling takes time, and insurance and care cost money. For an honest net worth they are valued conservatively.

From what wealth: a common order

There is no fixed rule for which sum makes which asset class “due”. A common order in financial education, however, follows from interest, risk and availability:

1. Expensive debt first. An overdraft or consumer loan usually costs more interest than an investment reliably earns.
2. An emergency fund. Three to six months of spending in savings, so that a broken car does not force a sale of shares.
3. Broad equity ETFs. Possible from the first euro; in this order, the core of long-term wealth building.
4. State and employer support. For example, the employer contribution to a company pension.
5. Property. When equity, income and life plans can carry it: own home, rental property or both. Which assumptions decide is shown in Own home, buy-to-let or ETFs?
6. Additions. Gold, crypto or private markets as small shares once the base is in place.

Typical entry points per asset class:

Seeing the whole

At the start, the question is where to begin. As wealth grows, it shifts: more important than one class’s return becomes its share of the whole. With a rental flat holding €150,000 of equity and a €100,000 portfolio, about 60 % of your wealth is property, in a single city. If you want to stop working soon, you need enough liquid wealth to fund withdrawals, even if a lot sits in property and pensions on paper.

Only a complete calculation shows what your wealth is made of: all asset classes, with their loans. The guide Calculating your net worth goes through it step by step.