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Financial Assets definition

Often the focus of media outlets because investors hold most of their wealth here instead of in their counterpart called Real Assets.
  1. Define - Define Financial Assets.
  2. Examples - Review characteristics of Financial Assets with examples.
  3. Context - Use it in a sentence.
  4. Quiz - Test your knowledge.
by Paul Alan Davis, CFA, December 31, 2018
Updated: December 31, 2018
Financial Assets are directly tied to Real Assets but many investors forget that, especially in times of euphoria and panic. Keep reading.

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Financial Assets


Financial Assets refer to stocks, bonds, notes, cash, mutual fund shares and pension holdings, among others. They represent an entitlement or partial ownership of an entity and the products, services and income produced by its Real Assets.

Today, Financials Assets are often represented as entries in an accounting system, however, in the past they used to be held in the form of certificates.

Currency is an example of a Financial Asset too. For example, the US Dollar bill says "This note is legal tender for all debts public and private", so it is a note that specifies an entitlement. Unlike Real Assets, Financial Assets do not produce goods or services. They typically have an easily-determined value on a marketplace and can be used to allocate ownership, wealth and to keep score.

Synonym: financial investments

Examples of Financial Assets

Financial Assets are often introduced and discussed in conjunction with Real Assets. The following points illustrate the difference between the two.

  • Real Assets
    • Things that are easy to value that you can see, touch and feel
    • Things that are difficult to value like customer goodwill
    • Used to produce goods, services and ultimately income
    • Long-term in nature
  • Financial Assets
    • Computer entries and certificates
    • Obligations to Real Assets
    • Value is derived from Real Assets
    • Used to keep score and allocate wealth

An Example Using Two Individuals

In the examples below we review a personal balance sheet for two individuals, Ms. Early and Mr. Late. Their stage in life (early and late) and risk tolerance often determines the components, value and weight (allocation) of their personal assets and liabilities.

Personal Balance Sheet Assets
Personal Assets for Two Individuals
  Ms. Early Mr. Late
Item Value % Value %
Real Assets
Art, Furnishings and Clothing 10,000 10% 1,000,000 10%
Car(s) 10,000 10% 100,000 1%
Career 60,000 60% 3,000,000 30%
House 0 0% 1,000,000 10%
Financial Assets
Bank Accounts 10,000 10% 900,000 9%
Mutual Funds 5,000 5% 2,000,000 20%
Stocks 5,000 5% 2,000,000 20%
Total Assets 100,000 100% 10,000,000 100%

Note how Financial Assets tend to be shorter-term and more liquid in nature. Also note how over time the ratio of Real Assets to Financial Assets often changes, as does the liquidity of those assets.

Personal Balance Sheet Liabilities

It is also important to consider the Liability side of the Personal Balance Sheet. Often loans are made towards Real Assets rather than Financial Assets. An example of a liability associated with a Financial Asset is the margin balance on a brokerage account.

Personal Liabilities for Two Individuals
  Ms. Early Mr. Late
Item Value % Value %
Credit Card 10,000 20% 0 0%
Student Loans 40,000 80% 0 0%
Mortgage 0 0% 500,000 100%
Total Liabilities 50,000 100% 500,000 100%

Again, note that liabilities that appear higher in the table represent shorter-term obligations. This is important to consider not only for personal balance sheets but for corporate balance sheets as well.

In a Sentence

Tom:  I still don't understand why my Bitcoin is considered a Financial Asset .
Leo:  Dude, you bought it on leverage, so now it's a financial liability.


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A crude oil ETF has the appeal of a Real Asset but is technically a Financial Asset | True or False?


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