real asset

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These are assets that actually correspond to physical, tangible goods that are usable or consumable, such as: real estate, precious metals, commodities, land for agriculture, oil, etc. These types of assets have actual value themselves whereas financial assets have value from what they represent.

From a portfolio management stand-point, these assets have a low or even negative correlation with financial assets since they are normally used to complete a portfolio in order to diminish the global or overall risk of the investments in the portfolio.

There are indexes, such as the GSCI (Goldman Sachs commodity Index), that track the movements and evolution of the prices of these assets world-wide and can be subject to negotiations on futures. To put it another way, the distinction between real assets and financial assets comes from the use of real assets.

The real asset market is the one that determines the flows in value of goods and services which make up a countries Gross National Product (GNP = gdp + (income earned abroad – Foreigners’ income earned domestically)) which, in turn, determines real wealth and the demand for financial assets. Other examples of real of tangible assets are machinery, structures (homes) or buildings owned by individuals or businesses or durable consumable goods (cars, furniture, equipment, etc.) because they actively contribute to the owner’s wellbeing and help to obtain income or other benefits. Intangible assets can also sometimes be real assets, as in the case of patents or trademarks.

The value of stocks or bonds which are privately owned cannot be added to the total tangible wealth of an economy in order to calculate individual total wealth since stocks and bonds are actually the rights to a part of the tangible wealth that is the property of someone else. stocks, for example, give the person a share of the rights to a business’ operating facilities, machinery and land that are owned.


The Secret of Real Assets Vs Financial Assets

The Secret of Real Assets Vs Financial Assets