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What are Investment Assets?

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  • Written By: Geri Terzo
  • Edited By: A. Joseph
  • Last Modified Date: 08 September 2016
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Investment assets in the financial markets are securities designed to generate profits. They are grouped in categories known as asset classes, and might be divided into stocks, bonds, commodities and currencies. Each asset class tends to react differently to a similar piece of economic news, and therefore by combining multiple investment assets in one portfolio, a combination of investments held, an investor is mitigating risk exposure. In addition to being grouped by broad financial components, investment assets can be categorized based on detailed characteristics, including equities that trade in a similar industry such as energy.

There are various types of investment asset categories, but all are used to enhance an investment portfolio. Stocks that trade in the financial markets fall under the equities group, while bonds are categorized as fixed-income investments. Real estate is a type of hard asset because it is a tangible item, although some properties trade as a value in an index known as a Real Estate Investment Trust in the stock market. Commodities represent an umbrella asset class under which various investment assets trade, including oil, gas and agricultural products.

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By combining asset classes that are uncorrelated to one another in a portfolio, an investor is diversifying his exposure to the markets. Uncorrelated assets do not tend to trade in sync with one another. For example, if equities decline sharply, commodities will not necessarily follow suit, which might be able to prevent the portfolio from steeper losses. Different asset classes tend to react differently to the same piece of news or economic development, and by diversifying across multiple asset classes, an investor is mitigating risk.

In addition to real estate, hard assets might include other tangible products. This can include a manufacturing company's inventory and machines or an energy company's oil and gas reserves. These investments are listed on a company's balance sheet, which makes it possible to compare a company's investment assets to its liabilities.

Distressed assets represent another form of investment assets. These investments are created by a number of scenarios. They can be formed by land from a foreclosure on a private residence, inventory from failed companies or even stocks and bonds that were issued by a company that has been forced into bankruptcy protection. Since the holder or seller of distressed assets is often in a dire financial situation, the assets typically can be purchased by the investor at a bargain price.

During an economic downturn, distressed assets are more prevalent because companies are more likely to come into financial hardship. These opportunities might be difficult for an individual investor to identify and are risky because there is no guarantee that the asset values will rebound. Investors might want to turn to a professional, such as a mutual fund manager, who specializes in adding distressed assets in a portfolio for diversification.

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icecream17
Post 4

Cupcake15-Investing in bonds is a great way to obtain income while maintaining a low level of risk.

Municipal bonds that invest in government obligations are the safest. These bonds offer a yield from 2% to 6%. The higher the yield in a bond, the riskier the investment is.

The great thing about municipal bonds is that they offer tax free income twice a year. If for example, you have $500,000 to invest in municipal bonds that offer a yield of 5% will offer you two payments of $12,500 a year of a total of $25,000 of tax free income.

Municipal bonds because of the level of complexity should be purchased with a broker that specializes in municipal bonds. Cantor Fitzgerald offers brokerage services and is considered experts in the bond market. These are great investments for people in high income brackets.

cupcake15
Post 3

Sneakers41- I did not know that. A list of mutual funds could be found on Morningstar. Morningstar offers its famous star rating for thousands of mutual funds.

It gives you information regarding the expense ratio of the fund, along with the manager of the fund and the overall age of the fund.

It also offers a category box that tells you if the fund in a large cap growth, or large cap value for example. Large cap value means that the fund invests in larger capitalized companies that are currently undervalued and have potential for growth in the future.

This box allows you to diversify your holdings to cover most of the market. In addition, you can

also obtain the latest news on the fund as well as determine the risk level of the fund.

A beta is used to determine the level of risk for a fund. A fund with a beta rating higher than 1.0 indicates a more aggressive fund with higher volatility.

A beta rating lower than 1.0 indicates lower risk and typically mutual bond funds fall into this category.

They also offer the current mutual fund prices along with the investment performance of the last year, the last five years and the last ten years the fund has been traded..

sneakers41
Post 2

Mutsy- The thing to remember when investing in gold is that the capital gains taxes are significantly higher.

For example if you were to sell a mutual fund to take advantage of the monetary gains then you will be charged a capital gains tax of 15% of the proceeds.

However, if you do the same thing with an exchange traded fund invested in gold or even a mutual fund invested in gold, then you will be charged with a capital gains tax of 28%. The capital gains tax is 15% for most investments; however gold has different tax implications.

mutsy
Post 1

Investment products are usually referred to as securities like commodity mutual funds for example that invests in gold.

Gold investments are really popular right now because people are uneasy about the economy in the United States. The investing in gold helps preserve capital against future inflation and the devaluation of the U.S. dollar.

The speculative nature of these investments tends to raise the price to unexpected highs. Gold prices have been rising by 15% for the last seven years. The safest way to invest in gold is to look at exchange traded funds that actually invest in gold.

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