What is Real Asset?
318 reads · Last updated: December 5, 2024
Real assets are physical assets that have an intrinsic worth due to their substance and properties. Real assets include precious metals, commodities, real estate, land, equipment, and natural resources. They are appropriate for inclusion in most diversified portfolios because of their relatively low correlation with financial assets, such as stocks and bonds.
Definition
Tangible assets refer to physical assets that have intrinsic value due to their substance and properties. These include precious metals, commodities, real estate, land, equipment, and natural resources. They are suitable for inclusion in most diversified investment portfolios due to their relatively low correlation with financial assets like stocks and bonds.
Origin
The concept of tangible assets dates back to early human trade forms, where barter was the primary means of exchange. Over time, the forms and types of tangible assets have evolved, especially after the Industrial Revolution, when equipment and machinery became significant types of tangible assets.
Categories and Features
Tangible assets can be categorized into several types: precious metals like gold and silver, often seen as a store of value; commodities like oil and wheat, commonly used to hedge against inflation; real estate and land, which provide long-term capital appreciation and rental income; and equipment and machinery, which are core assets for business production. Each type of tangible asset has its unique market dynamics and risk characteristics.
Case Studies
A typical case is Warren Buffett's Berkshire Hathaway, which has invested in tangible assets like railroads and energy to secure stable cash flows and long-term growth. Another example is China's Vanke Co., Ltd., which has become one of Asia's largest real estate companies through large-scale real estate development and management.
Common Issues
Investors often face issues such as lower liquidity, market volatility, and storage and maintenance costs when investing in tangible assets. A common misconception is that all tangible assets can hedge against inflation; in reality, different types of tangible assets perform differently under various economic conditions.
