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Real Asset vs Financial Assets

In: Business and Management

Submitted By dellamerlin
Words 515
Pages 3
:INVESTMENT ALTERNATIVES * Types of assets that investors can invest in; financial assets and real assets * * Financial assets: are claims that organizations sell in order to finance their financial needs. Examples of financial assets are shares, bonds, certificate of deposits, unit trust. * Real assets: consists of tangible assets such as investment in real property, precious metal, gems, antiques, stamps, coins and work of arts.
Real Asset vs Financial Assets Types | REAL ASSETS | FINANCIAL ASSET | Characteristics | Tangible asset/physical capital that generate income | Claims of organization sell in order to finance their financial needs t | Advantages | * It can be used to produce goods and service s * Owning a real tangible asset that has both investment and aesthetic value | * It has an efficient market for trading * High liquidity * Easy to transfer ownership | Disadvantage | * Lack of an efficient and limited market * Hard liquidate * High commission charged | * Must go through broker (middleman) to get access into the market | Example | * Real property ( house, land, machine, gold, antiques) | * Shares, bonds, certificate of deposit ,unit trust, commodity, derivative instruments |

Savings * Form of fixed investment where principal amount and terminal amount is known.

ADVANTAGES | DISADVANTAGES | * Provide security * Earn interest on savings * High liquidity | * Earn low income * Hard to maintain the savings because too easy to withdraw |

Unit Trusts * An investment institutions that was set up to raise funds from small investors who are interested in participating in the security market.

ADVANTAGES | DISADVANTAGES | * Small capital * Less risk * High liquidity * Need not to worry about managing | * Low return * No power on the management * Price

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