Real Asset

Loading the player...

What is a '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.

BREAKING DOWN '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. Tangible Asset

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

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

    Any asset that carries a degree of risk. Risk asset generally ...
  4. Fixed Asset

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

    The classification of all assets within a fund or portfolio. ...
  6. Taxable Gain

    A profit on the sale of an asset that is subject to taxation. ...
Related Articles
  1. Markets

    Safety and Income: Real Assets - Gold, Real Estate and Collectibles

    By Brian PerryThe term "real assets" refers to a broad category of investment options that are characterized by the fact that they are tangible (as opposed to stocks, bonds, and CDs which are ...
  2. Personal Finance

    Key Reasons To Invest In Real Estate

    There has been a lot of negativity over the real estate sector since 2008. Here are the reasons why you should be investing in it.
  3. Managing Wealth

    Diversification Beyond Stocks

    If you think holding several stocks means you're diversified, think again - there's much more to be done to reduce portfolio risk.
  4. Retirement

    Retirement Wealth: The Place of Tangible Assets

    When building a retirement portfolio, you need to determine how tangible assets fit with traditional investment products in your wealth-building strategy.
  5. Managing Wealth

    A Career In Real Estate Portfolio Management

    Find out why this job more closely resembles the role of a CEO than an asset manager.
  6. Managing Wealth

    Comparing Tangible and Intangible Assets

    Tangible assets are physical assets such as land, vehicles or equipment.
  7. Personal Finance

    Flipping Houses: Is It Better Than Buy and Hold?

    Real estate investors can flip a property or use it for cash flow. Find out which will work in your neck of the woods.
  8. Personal Finance

    Assessing Bank Assets: Are Your Savings Safe?

    Learn how to determine if your assets are safe or if your bank has spread itself too thin.
  9. Financial Advisor

    Illiquid Real Estate: Correlation Pros and Cons

    Stock and bond markets are moving more closely in tandem with each other. Is illiquid real estate the vaccine for this correlation?
  10. Managing Wealth

    2016's Most Promising Asset Classes

    Find out which asset classes are considered to be the most promising for generating portfolio returns and reducing volatility in 2016.
RELATED FAQS
  1. Are stocks real assets?

    Learn why stocks are classified as financial assets, not real assets. Understand the properties that determine whether an ... Read Answer >>
  2. Why can real estate be a good addition to a traditional stock and bond portfolio?

    Discover why real estate can be a good addition to a traditional stock and bond portfolio. Real estate is affected by economic ... Read Answer >>
  3. What is the difference between tangible and intangible assets?

    Discover the difference between tangible assets and intangible assets and the types of assets that are in each. Additionally, ... Read Answer >>
  4. What are the differences between investing in real estate and stocks?

    Invest in real estate by purchasing physical property or buildings, or invest in stocks by buying a claim to a company and ... Read Answer >>
  5. What is the difference between fixed assets and current assets?

    Learn the differences between fixed assets such as land and current assets such as cash, as well as how these types of assets ... Read Answer >>
  6. How can I make equity investments in real estate?

    Invest in real estate equity through buying and selling real property or through other more liquid investments like real ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center