what is a real asset 
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 investopedia ellen lindnerunderstanding real assetsassets are categorized as either real financial or intangible all assets can be said to be of economic value to a corporation or an individual if it has a value that can be exchanged for cash the item is considered an asset intangible assets are valuable property that is not physical in nature such assets include patents copyrights brand recognition trademarks and intellectual property for a business perhaps the most important intangible asset is a positive brand identity financial assets are a liquid property that derive value from a contractual right or ownership claim stocks bonds mutual funds bank deposits investment accounts and good old cash are all examples of financial assets they can have a physical form like a dollar bill or a bond certificate or be nonphysical like a money market account or mutual fund in contrast a real asset also known as a non security has a tangible form and its value derives from its physical qualities it can be a natural substance like gold or oil or a man made one like machinery or buildings special considerationsfinancial and real assets are sometimes collectively referred to as tangible assets for tax purposes the internal revenue service irs requires businesses to report intangible assets differently than tangible assets but it groups real and financial assets under the tangible asset umbrella most businesses own a range of assets which typically fall into real financial or intangible categories real assets like financial assets are considered tangible assets for example imagine xyz company owns a fleet of cars a factory and a great deal of equipment these are real assets however the company also owns several trademarks and copyrights which are its intangible assets finally the company owns shares of stock in a sister company and these are its financial assets real assets vs financial assetsalthough they are lumped together as tangible assets real assets are a separate and distinct asset class from financial assets unlike real assets which have intrinsic value financial assets derive their value from a contractual claim on an underlying asset that may be real or intangible for example commodities and property are real assets but commodity futures exchange traded funds etfs and real estate investment trusts reits constitute financial assets whose value depends on the underlying real assets it is in those types of assets that overlap and confusion over asset categorization can occur etfs for example can invest in companies that are involved in the use sale or mining of real assets or more directly linked etfs can aim to track the price movement of a specific real asset or basket of real assets physically backed etfs include some of the most popular etfs in the world based on volumes such as state street s spdr gold shares gld and ishares silver trust slv both invest in precious metals and seek to mirror the performance of those metal technically speaking though these etfs are financial assets while the actual gold or silver bullion they own is the real asset advantages and disadvantages of real assetsreal assets tend to be more stable than financial assets inflation shifts in currency values and other macroeconomic factors affect real assets less than financial assets real assets are particularly well suited investments during inflationary times because of their tendency to outperform financial assets during such periods in a 2017 report asset management firm brookfield cited a global value of real asset equities totaling 5 6 trillion of this total 57 consisted of natural resources 23 was real estate and 20 was in infrastructure in the firm s 2017 report on real assets as a diversification mechanism brookfield noted that long lived real assets tend to increase in value as replacement costs and operational efficiency rise over time further the found that cash flow from real assets like real estate energy servicing and infrastructure projects can provide predictable and steady income streams for investors real assets however have lower liquidity than financial assets as they take longer to sell and have higher transaction fees in general also real assets have higher carrying and storage costs than financial assets for example physical gold bullion often has to be stored in third party facilities which charge monthly rental fees and insurance portfolio diversificationinflation hedgeincome streamilliquiditystorage fees transport costs