Introduction to Investments

Real Assets Vs Financial Assets Prof S G Badrinath

Real versus Financial Assets

 Real assets are tangible assets which are used to create value

 Examples: Land, buildings, equipments, human capital, art, antiques etc

 Their value fluctuates depending on demand and supply – Value increases if growing population
increases the demand for the scarce resources

 Financial assets are legal claims on future financial benefits created by underlying real assets

 Examples: Shares, Bonds, Derivatives etc

 A share in a stock derives its value from its claim on the uncertain financial benefits created by some
real asset

 Bond certificates are a piece of paper which are used by Government/corporates to raise money and
they assure the holder of periodic payment / discount at the time of issue or both
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