An asset is anything of value that can be changed into cash. Assets are owned by businesses, individuals and governments.
Assets in many cases are grouped into two wide categories: illiquid assets and liquid assets. Illiquid assets are assets that cannot be transformed into cash rapidly without substantial loss in value. Examples of illiquid assets contain antiques, houses and other collectibles.
A liquid asset is one that can be transformed into cash rapidly with little to no impact on the price received. For instance, money market instruments, stocks and government bonds are liquid assets.
Types of Assets
You can find two main types of assets that constitute the
building blocks of an investment: financial assets and growth assets.
Financial assets, such as fixed interest and cash, earn
returns mostly from interest. This means that financial assets generally
provide lower risks because of fixed repayments, however returns are also
probably be lower over the long term.
Growth assets, such as shares
and property, earn income from dividends or rent and increase in value through
capital gains. Capital gain is the rise in asset value, meaning that the
overall value of these investments can actually grow in the long term.