Some assets are physical items. Your house. A diamond ring. Your collection of Hummel dolls. These are tangible assets...they exist as physical items that can be sold for cash.
Other assets are more theoretical. They include things like stocks and bonds, or the money you have squirreled away in a bank account. These items represent financial assets. Financial assets are assets in the sense that can sell them, but they don't have the same physical reality as more tangible assets.
You can have physical proof of a financial asset (stock certificates or paperwork from the bank), but the real value comes from the contractual obligations. The stock grants you part ownership in a company. A bond entitles you to receive certain interest payments. Those contractual details provide you value.
Meanwhile, that stock certificate is just paper. It only has value because of what the paper represents.
But those Hummels...how can you look at them and miss their inherent physical value?
Related or Semi-related Video
Finance: What is a Hard Asset?12 Views
Finance allah shmoop What is Ah hard asset Yeah It
takes a lot of hard work to get an asset
like that Okay So hard asset is just one that
you can bang on touch Engage with cell Alright examples
Oil it's Hard asset gold Hard of vintage nineteen Fifty
seven Ferrari with beige leather interior hard four thousand head
of longhorn cattle in texas A commercial building in the
best part of town All of these arm or less
commodities Hard assets Well okay Okay The categories Rare cars
art coins stamps stuff like that that's where they fit
So what do you care if something is ah hard
asset or a soft one Well most or all hard
assets are commodities and they generally do very well in
periods of very high inflation when you know stocks were
getting crushed And yeah the feds raising rates appoint a
quarter now forever Well equities and bonds will get crushed
Commodities well generally keep up with the spike in prices
causing the fed raised rates in the first place So
they're a good hedge for most investment portfolios And not
all of them are great forever like check out riel
Inflation adjusted oil prices the last few decades you had
not a good run Most not all do well though
an oil will likely have its day in the sun
again At some point you lan When in doubt remember
what kim kardashian and warren buffett said A good asset
is hard to find and a hard asset is good
to find But we won't tell you who said which
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