Real Asset

AAA

DEFINITION of 'Real Asset'

Physical or tangible assets that have value, due to their substance and properties. Real assets include precious metals, commodities, real estate, agricultural land and oil. They are appropriate for inclusion in most diversified portfolios - with their proportion dependent on the investor's risk tolerance and preferences - because of their relatively low correlation with financial assets, such as stocks and bonds. They are particularly well-suited for inflationary times, because of their tendency to outperform financial assets during such periods.

INVESTOPEDIA EXPLAINS 'Real Asset'

Real assets are a separate and distinct asset class from financial assets, whose value is derived from a contractual claim on an underlying asset, which may be real or intangible. For example, commodities and property are real assets, but commodity futures and ETFs, as well as real estate investment trusts, constitute financial assets whose value depends on the underlying real assets.

Higher carrying and storage costs, increased transaction fees and lower liquidity, are some common drawbacks of real assets in relation to financial assets.

RELATED TERMS
  1. Real Estate

    Land plus anything on it, including buildings and natural resources.
  2. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses ...
  3. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  4. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  5. Financial Asset

    An asset that derives value because of a contractual claim. Stocks, ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Forex Education

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  2. Fundamental Analysis

    Spotting Profitability With ROCE

    This straightforward ratio measures whether a company is efficient, money-making or neither.
  3. Personal Finance

    Can You Count On Goodwill?

    Carefully examine goodwill and its sources before considering the value of your investment.
  4. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  5. Investing

    Is the Best Plan for Pot Investing 'Wait-and-see?'

    Legalized marijuana is an emerging industry and those interested in investing in it should proceed with caution.
  6. Investing Basics

    Are You Investing With A Purpose?

    We all appreciate having a wide variety of investing choices, but a random collection of investments does not make an investing plan.
  7. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  8. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  9. Bonds & Fixed Income

    Figuring Out How To Cover Your Liability Bases

    Whenever we talk about the asset-liability approach to portfolio management (ALM), the concepts of immunization and cash flow matching come into play.
  10. Taxes

    Getting U.S. Tax Deductions On Foreign Real Estate

    If your home or second home is not in the United States, you can still get U.S. tax deductions. How many and what kind depends on whether you also rent it.

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center