The classes are:
- Stocks or equities
- Fixed Income or bonds
- Money market or cash equivalents
- Real estate or other tangible assets
You might notice that all stocks are lumped together, when individual stocks (or mutual funds for that matter) can be quite different. For example, a small-cap stock is not going to act the same way as General Electric.
However, stocks are grouped together because they will, as a group, react more alike than any of the other three classes. The same thing is true for the other three classes.
The purpose of having all four asset classes represented in your portfolio is to take advantage of the different strengths of each class.
The whole theory of asset allocation is based on diversifying your portfolio by asset class. Read an introduction to asset allocation for more information.
Many people use Real Estate Investment Trusts and other more liquid investments to satisfy the real estate leg of the asset class tool Read an article on REITs.