What is an asset?
An asset is anything that you own that you expect to make or save you money in the future.
For investing purposes, financial assets are divided into four main asset classes: equities or stocks, fixed income or bonds, cash, and property. Your collection of assets is your portfolio.
Where have you heard about assets?
Assets get talked about a lot when companies reveal their financial results – especially if they have been buying or selling a lot of assets.
You may also have heard of the controversial practice of asset stripping, where a company in difficulty gets taken over and its key assets are sold off for short-term gain, often at the risk of the company’s long-term future.
What you need to know about assets...
To make sure you don’t end up with too many eggs in one basket, investors are often advised to have a good spread of asset classes in their portfolio to diversify risk.
Company assets are detailed on a balance sheet and can include intangible assets such as trademarks and goodwill.
Assets can also be classified according to how easily they can be converted into cash. So liquid assets are things that can easily be cashed out – for example a savings account. Illiquid assets, on the other hand, are usually harder or slower to sell– for example property.
Alternative assets can include fine wines, stamps, antiques and collectibles.