Financial assets and their categories

Defining assets, their categories and more.

10:23 04 January 2014

What are assets? Assets are items of economic value that are owned by individuals and corporations that can be converted to liquid cash. The world of finance cannot exist without them. Getting a clear picture of why they are around is essential if we are going to maximise their use

Categories of assets

Assets can be categorised into four types

• Assets that yield consistent direct income - The items that fall into this category include stocks and shares which yield dividends, a buy-to-let house that gives income and intellectual property that has some royalties that come from licensing.

 

• Assets that create an enabling environment for you to earn money - Items that fall in this category are laptops used by web developers, factory machinery and other tools that are used to produce something. Your academic qualification also can qualify as an asset as it provides you with an opportunity to earn money.

 

• Assets that have the potential to appreciate in value - Art, antiques, diamonds, precious metals and property have the potential to appreciate in value thus enabling you partake in profits.

 

• Assets that might depreciate in value - While there are some things that appreciate in value; there are those that decrease in value. Items that fall in this category often include cars and electrical. Cars decrease in value as soon as you drive out of the dealership, while electrical items quickly compete with new models in the market.

There are some assets that skirt along more than one category. For instance, if you have a rental house, it can give you profits but if no people are living there it is just a structure that might increase or decrease in value as time goes on.