The term “financial asset” is common in the world of accounting and finance. This notion may seem vague to those who know little about the field. I suggest you find out more: what is it about? And what are the different types of financial assets?
A financial asset is an immaterial good, that is to say that one cannot touch, and which has a monetary value. It can be kept temporarily or permanently within the company.
The financial asset offers its owner opportunities for capital gains in the financial market. However, it also exposes it to certain risks in the event of its value depreciating. It can be traded and resold on the market.
In the field of accounting, financial assets retained beyond one financial year are classified as financial fixed assets, thus becoming investments. Otherwise, they are considered as transferable securities.
There are different types of financial assets. Here is a selection of those most frequently encountered.
Shares are financial assets that are part of the equity of those who issue them (public or private companies). These title deeds are equivalent to rights proportional to the share of capital held in the company. Thus, any shareholder or partner owning shares in a company has many rights within it.
The action is a risky financial asset in the short term and particularly profitable in the medium and long term. The income from the share is returned in the form of a dividend, one part of which is returned to the shareholders and the other forms the reserve which will increase the equity of the company.
These are securities that signify a right of claim on the company or institution that issues it. The latter pay pre-established interest and are repayable according to various procedures. There are different types of bonds that can be fixed or variable rates.
UCITS are types of structures that offer the possibility of managing funds collectively. These funds made available are invested in transferable securities. The latter confer on their owners the same rights as shares.
The advantage of UCITS is that you let an organization manage your money. So, instead of investing in one or two companies, you can choose a sector, products or indices. The manager is responsible for optimizing your gains and reducing your losses.
The certificate of deposit or CD is a contract concluded between a bank and an investor stipulating that the latter agrees to deposit a specific sum of money in the bank and receives, in return, a guaranteed interest rate.
Depending on the terms of the agreement between the two parties, the interest rate may be higher. Indeed, if the investor agrees not to touch this money for a specific period, the bank can offer him a higher rate. In the event that he does not respect this commitment, he may lose all his interests and even expose himself to financial penalties.