Financial assets are liquid assets prized through their represented contractual claims. Bank deposits, stocks, bonds, loans and the likes are financial asset examples.
Physical assets such as land, equipment, gold and commodities are different from these because financial assets have no tangible elements.
Financial assets, in simpler terms, are legal claims to future cash. These assets are usually expected to be converted to cash at a defined time of maturity. Counterparties such as banks which came to an agreement with a holder will then pay the future cash.
A FINANCIAL ASSET POSSESSES THE FOLLOWING CHARACTERISTICS:
- It can be owned
- It has monetary value
- Its monetary value is derived from a contractual claim
Benefits of Owning Financial Assets
- Low Maintenance
Since they have no physical aspect, financial assets obviously do not need space for storage and regular maintenance and insurance efforts. They can usually be checked through institutional statements, automated machines and even online.
- Easier to Spend
Majority of the market at present accepts liquid assets in financial transactions such as making large investments. Physical assets need ample time to be converted to monetary form.
- Lower Loss Risk
Financial assets carry a lower risk of loss compared to physical assets since they can be quickly sold at a full value. When market forecasts become unstable or financial crises take place, liquid assets can immediately be sold with minimal or no loss at all. These bring less
- Better Trade Opportunities
Daily financial exchanges are constantly taking place. Financial assets have the fastest and most convenient ways to trade with a great deal of opportunities and platforms. You don’t have to look for a buyer and pitch your asset with the chance to get rejected.
- Stronger Financial Profile
Owning financial assets adds up to your chances to avail other liquid asset offers such as loans and mortgages. Some institutions actually require liquid assets and savings accounts for mortgages.
Types of Financial Assets
- Stocks
These are assets within companies and corporations have no ownership time limit. Investors purchasing stocks from companies became shareholders, sharing even the businesses’ profits and losses. Stocks can be owned as desired but can also be sold to other investors.
- Certificate of Deposit
This certificate of deposit (CD) lets an investor deposit money to a bank for a set time frame, with a certain monthly interest rate.
- Bonds