As we discussed in the last series, Assets can be classified in various ways based on the perspective – Business or Personal Finance and Investment.
In this article, we want to consider these various classes…
Quoting directly from simplicable.com,
Assets are divided into various categories for the purposes of accounting, taxation and to measure the value or financial health of an entity.
The following are a few major types of assets.
1. Tangible Assets
Tangible assets are any assets that have a physical presence. Examples include cash, stocks, bonds, property, buildings, equipment, inventory, precious metals and art.
2. Intangible Assets
Intangible Assets are assets that have no physical presence. Examples include patents, copyrights, goodwill and trademarks. It is usually difficult to determine the value of intangible assets.
3. Financial Asset
A financial asset is an asset that has a value that’s based on a contract. Examples include cash, stocks, bonds and derivatives.
4. Fixed Assets
Fixed assets are long-lived assets that cannot be easily converted into cash. Examples include property, buildings, equipment and furniture.
5. Current Assets
Current assets include cash and assets that are expected to be converted into cash, consumed or expended in thenext year or current operating period.
However, from the personal finance and investment perspective, there are four classes of assets that you need to have available to build an investment portfolio.
a.) Stocks or equities
b.) Fixed Income or bonds
c.) Money market or cash equivalents
d.) Real estate or other tangible assets
When investing, it is usually advised that your portfolio contains at least 3 or more of the asset classes so as to be better prepared to take advantage of all the swings the market can throw at you.
Though some financial professionals disagree on the actual number of asset classes (some say three and others say five), your Investment is considered balanced if your portfolio includes investments spread across these classes.
That’s how far we’re going to go with ASSETS.
Next, we’re going to learn about LIABILITIES and how they impact on your Finances.
Got any questions or comments?