fbpx

What are physical assets?

Physical assets are those which we can touch, feel and see. Real estate, commodities and gold are examples of physical assets.

What are financial assets?

Financial assets are intangible assets such as bank deposits, bonds, stocks, mutual funds etc. They have no physical presence except for the existence of a document that represents the ownership interest held in these assets.

Advantages of financial assets over physical assets

1) Liquidity-When it comes to withdrawing money from the investment, financial assets score over physical assets. Financial assets can be easily converted into cash in a short span of time. Fixed deposits can be liquidated, mutual funds can be redeemed easily and money gets credited into bank account in 1-3 working days.

On the other hand, selling real estate is not easy as it may take months and years to find the right buyer. Gold can be easily liquidated but it is ingrained in human behaviour that selling gold is a sign of financial distress. It is generally observed that people tend to cling to gold and do not sell it until it is the last resort.

2) Transparency-Financial assets are more transparent in terms of their valuation and charges involved. Their current value can be checked and tracked on the daily basis.

In the case of real estate, it is difficult to know the correct value of the property. Similar houses in the same area fetch different prices. Also, only after the deal has finally happened between the buyer and the seller, one can know the actual value of an asset.

Even in case of gold, whether it is in form of jewellery or coins and bars, the actual value is known only once it is sold. Specially in case of jewellery, the purchase price and the selling price can be significantly different due to deduction of making charges and materials used other than pure gold.

3) Divisibility -One of the many advantages of financial assets is their flexibility to be liquidated fully or partially, as per the requirement of an investor.

Physical asset like real estate cannot be sold in parts. Also, real estate usually involve large amount and has to be sold in whole, no matter how small the requirement of an investor is.

4) Taxation – Prior knowledge of the exact value of a financial asset makes it is easy to evaluate the taxation involved in the transaction, before actually completing the transaction.

Also Read: What is the role of mutual fund investors?

Which is best: Financial Assets or Physical Assets?

60,723,169 views
What is Lorem Ipsum? Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry’s standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged. It was popularised in the 1960s with the release of Letraset sheets containing Lorem Ipsum passages, and more recently with desktop publishing software like Aldus PageMaker including versions of Lorem Ipsum.

Why do we use it? It is a long-established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem Ipsum will uncover many websites still in their infancy. Various versions have evolved over the years, sometimes by accident, sometimes on purpose (injected humour and the like).

Where does it come from? Contrary to popular belief, Lorem Ipsum is not simply random text. It has roots in a piece of classical Latin literature from 45 BC, making it over 2000 years old. Richard McClintock, a Latin professor at Hampden-Sydney College in Virginia, looked up one of the more obscure Latin words, consectetur, from a Lorem Ipsum passage, and going through the cites of the word in classical literature, discovered the undoubtable source. Lorem Ipsum comes from sections 1.10.32 and 1.10.33 of “de Finibus Bonorum et Malorum” (The Extremes of Good and Evil) by Cicero, written in 45 BC. This book is a treatise on the theory of ethics, very popular during the Renaissance. The first line of Lorem Ipsum, “Lorem ipsum dolor sit amet..”, comes from a line in section 1.10.32.

The standard chunk of Lorem Ipsum used since the 1500s is reproduced below for those interested. Sections 1.10.32 and 1.10.33 from “de Finibus Bonorum et Malorum” by Cicero are also reproduced in their exact original form, accompanied by English versions from the 1914 translation by H. Rackham.

1 thought on “Which is best: Financial Assets or Physical Assets?”

  1. Pingback: Benefits of Investing in Minor’s name - Primewealth

Comments are closed.

No posts found!