Financial Asset

A financial asset is a liquid asset with value derived from a legal claim to ownership or a contractual right. Financial assets include, among other things, cash, investments in stocks, bonds, mutual funds, and bank deposits. Financial assets do not always have an intrinsic physical value or even a physical form, unlike real estate, commodities, or other tangible physical assets. Instead, the market conditions in which they trade and the level of risk they involve are what determine their worth.

Most assets fall into one of three categories: tangible, financial, or intangible. Real assets are tangible possessions that derive their worth from other things, such as commodities like soybeans, wheat, oil, and iron, precious metals, land, and real estate.

The valuable item that is not physical in nature is known as an intangible asset. They consist of intellectual property, trademarks, and patents.

Between the other two assets are financial assets. With merely the stated value on a piece of paper, like a dollar bill, or a listing on a computer screen, financial assets may appear intangible—non-physical. The ownership of an entity, such as a publicly traded business, or a claim to contractual rights to payments, such as interest income from a bond, is what that paper or listing actually represents.