Takeaways
- Assets are resources that provide a future utility or benefit to owners.
- Financial assets include investments like savings, stocks, bonds, and real estate.
- Tangible assets encompass items like cars, homes, furniture, and clothing.
- Increasing your assets boosts your overall net worth and financial security.
- Investors purchase assets because they generate cash flow, act as collateral, or enhance productivity.
What Are Assets?
An asset is a resource that an individual, business, or country owns or controls that is expected to provide future utility or benefit. Investors and asset managers focus on increasing the amount of assets they own to accrue continued economic benefit.
Determining what types of assets provide you the most value based on your financial goals is a critical part of financial planning. The next level of financial management involves ensuring that your assets are protected with insurance products to preserve your net worth.
How Assets Work
There are many different types of assets. When it comes to describing assets, it is similar in some ways to discussing the various types of finance. Some assets are more geared toward personal finance, while others lean more toward corporate or business finance. Here are some major asset categories to consider:
- Financial Assets are a broad group of securities that represent a contractual claim to something of benefit. When discussing financial assets, financial media often refer to financial securities, such as cash, mutual funds, savings accounts, bonds, or other intangible assets. (Read more about How Much Cash Should You Have).
- Intangible Assets represent assets that are not physical, like stocks, annuities, intellectual property, or royalties. (Read more about How to Invest in Stocks).
- Current Assets are generally referred to when discussing a business. They are assets that can be converted to cash within a short period, typically one year or less. (Read more about How to Start Your Own Business).
- Fixed Assets are more illiquid, which means they take longer to convert to cash. Examples include equipment, cars, property, and jewelry. (Read about How to Invest in Real Estate).
Read More: 7 Types of Asset Classes
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Types of Assets
The value of assets can fluctuate based on idiosyncratic, macroeconomic, or segment-specific reasons. Regardless of what assets you own today, here are some types of assets you need to know as you navigate your finances:
- Cash: Most of your money is probably stashed in a checking or savings account with a bank or credit union. Whether you realize it or not, cash is an ultra-liquid asset that lets you purchase other assets quickly. Saving money allows you to amass assets, reduce financial anxiety, and give you financial flexibility. (Read more about our picks for the Best High-Yield Savings Accounts.)
- Stocks: Investing in stocks and equity investments, such as mutual funds, exchange-traded funds, index funds, and target-date funds, allows you to accrue ownership in companies. These securities are readily traded on stock markets and easily converted into cash. (Read about our picks for the Best Online Brokerage Accounts).
- Fixed-Income Securities: This group of assets consists of securities that pay investors interest. They can range from corporate bonds to certificates of deposits. Investors aiming to generate passive income or interest often try to purchase these assets. (Read about our picks for the Best Certificates of Deposit).
- Fixed Assets: By definition, fixed assets are physical assets that are typically illiquid or require a longer period to convert into cash. These assets can be homes, property, cars, furniture, or jewelry. (Read more about How to Invest in Real Estate).
>> Are there other assets? Learn the Best Alternative Investments of 2025
Here’s Why Assets Matter
Purchasing assets allows you to enhance your financial position over time. The more financial assets you can accumulate, the easier it is to achieve financial independence or reach other metrics, like homeownership.
Here is when knowing the value of your assets pays off:
- Understanding Your Net Worth: Net worth is defined as the total value of your assets minus your total liabilities. You can increase your net worth by paying off debt, such as credit cards or personal loans, and investing in assets like stocks and cryptocurrencies. Learn how to calculate your net worth.
- Applying for Credit: When you apply for unsecured loans, creditors will look at a combination of your credit report, credit score, personal income, and other financial metrics like how much cash you have. Applicants with more assets tend to get better lending terms. Read more about how to increase your credit score by 100 points.
- Collateralized Loans: Depending on your credit history, lenders might require you to apply for secured loans. Collateralized loans are backed by assets, which the lender can seize if you fail to make interest or principal payments. One of the most common examples is a mortgage.
- Buying Your First Home: Most homeowners purchase homes with a mortgage. To finance a home purchase, you need assets, such as cash, to cover the down payment. Higher down payments can help you avoid additional housing costs like private mortgage insurance.
- Paying for Insurance: Insurance products can be acutely crucial in protecting the value of your assets. These products provide coverage for you in the event of an unexpected occurrence, such as a fire, flood, or accident. For example, homeowners insurance protects the value of your house, while car insurance protects the value of your vehicle in the event of an accident.
- Retirement: To escape the workforce, you will need a substantial amount of assets when you retire. Your investment portfolio, which usually consists of stocks, bonds, real estate, and other assets, is designed to generate passive income or provide adequate required minimum distributions (RMDs) from retirement plans. Read more about the average 401(k) balance by age.
>> Own digital assets? Read more about How to Buy Bitcoin
Smart Summary
Assets are resources that provide you with an economic benefit. In personal finances, increasing your assets and paying off debt can significantly boost your net worth. Increasing net worth leads to better loan terms, having capital to purchase real estate and begin investing in stocks, and ultimately, to an early retirement. Read more about the different types of asset classes.
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