What is an asset?

By Jean Folger AAA
A:

An asset is anything of value that can be converted into cash. Assets are owned by individuals, businesses and governments. Examples of assets include:

  • Cash and cash equivalents – certificates of deposit, checking and savings accounts, money market accounts, physical cash, Treasury bills;
  • Real property – land and any structure that is permanently attached to it;
  • Personal property – everything that you own that is not real property such as boats, collectibles, household furnishings, jewelry, vehicles;
  • Investments – annuities, bonds, cash value of life insurance policies, mutual funds, pensions, retirement plans (IRA, 401(k), 403(b), etc.,) stocks and other investments.

Assets are often grouped into two broad categories: liquid assets and illiquid assets. A liquid asset is one that can be converted into cash quickly with little to no effect on the price received. For example, stocks, money market instruments and government bonds are liquid assets. Illiquid assets, on the other hand, are assets that cannot be converted into cash quickly without substantial loss in value. Examples of illiquid assets include houses, antiques and other collectibles.

Your net worth is calculated by subtracting your liabilities from your assets. Essentially, your assets are everything you own, and your liabilities are everything you owe. A positive net worth indicates that your assets are greater than your liabilities; a negative net worth signifies that your liabilities exceed your assets.

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