Question

Give a real life example of how you have personally used financial and real assets. What is the difference between the two.

Answer 1

I have personally used financial assets to make quick gains in times of a booming economy.During that period, I invested heavily into the stock market to attain huge gains. I used Real assets such as property to earn rental income as also receive appreciation on the same.

Financial assets are assets which can be quickly converted into cash. They represent claims against real assets and are highly liquid. They show continued growth and generate income to buy real assets.

Real assets are value generating property such as real estate and machinery. They are tangible objects which are less liquid. They show slow growth and are used to produce goods and services to generate revenue.