Savers who deliberately buy tangible assets for investment purposes value their tangible goods as a form of value diversification and as a hedge against economic uncertainty.
Some might believe that tangible assets represent a higher change at high returns than capital assets, such as stocks and bonds. You should consider investing in tangible assets if and when they make sense as part of your overall financial plan.
Tangible assets exist outside of an account balance, financial statement or exchange market. Put another way, tangible assets have a physical form and natural value. It's likely that you have already invested in physical assets in some way– you may have bought a house or car, collected a piece of art, kept a family heirloom, or bought gold or silver jewelry.
Some investment analysts consider current assets, such as short-term securities and cash equivalents in deposit accounts, to be tangible assets.
Diversification Through Tangible Assets
Most investment publications refer to tangibles as "alternative investments." Standard types of tangible investments include real estate, gold bullion, art, antiques and other collectibles.
These asset classes tend to have little positive correlation with the stock and bond markets. Some are even counter-cyclical; an investment in tangible assets could reduce your exposure to overall market risk in a way that most intangible assets cannot.
Protection from Inflation
Advocates of many tangible assets, particularly bullion coins and bars, tout inflation protection. History seems to validate the use of tangible goods as an inflation hedge. In the more than 100 years following the creation of the Federal Reserve, the purchasing power of the dollar declined 95%. The inflation-adjusted value of an ounce of gold increased by more than 2,500% during that same time period.
Any bullion magazine highlights the fact that gold has been valuable for thousands of years and that it has never carried a zero value. This is also technically true. Gold has historically served as a source of jewelry and exchange since at least ancient Egypt and, unlike intangible assets, always carries economic value.
Personal Enjoyment
Many tangible investments can create a psychological benefit. You might buy a collectible or piece of art because you value its display in your home as well as its investment potential. Similarly, your house itself might be a long-term tangible asset, but it serves many important functions for you and your family.
Investment in tangible assets offers the unique dynamic of immediate personal satisfaction, or utility, and the potential for increased future consumption through price appreciation. This is less likely with intangible assets.
FAQs
As per expert real estate investors, adding tangible assets diversify your portfolio and double up the chances of higher returns. Furthermore, tangible investments work effectively as a hedge against inflation.
What are the benefits of tangible assets? ›
Advantages of Tangible Assets
Here are some of the key advantages: Collateral for financing: Tangible assets can be used as collateral for financing, providing a way for businesses to secure loans and other forms of financing based on the value of their physical assets.
What are the advantages of investing in physical assets? ›
Diversification Through Tangible Assets
These asset classes tend to have little positive correlation with the stock and bond markets. Some are even counter-cyclical; an investment in tangible assets could reduce your exposure to overall market risk in a way that most intangible assets cannot.
Is it better to have tangible or intangible assets? ›
Long-term benefits
Oftentimes, intangible assets have more long-term value than tangible assets since companies can continue receiving revenue from intangible assets for decades, while tangible assets lose their value after they're sold.
Why are tangible resources important? ›
The tangible resource is what allows a company to stay in the market and make money. The intangible resource allows a company to obtain knowledge that is not available to other companies and makes it easier to manage the organization.
What tangible assets are worth investing in? ›
6 Tangible Assets to Consider
- Real Estate and Land. Real estate has long been thought of as one of the most lucrative tangible assets available. ...
- Collectables. Among the more popular collections used for investment purposes are art, stamps, and rare coins, to name a few examples. ...
- Precious metals. ...
- Fine wine. ...
- Oil.
Though tangible assets usually have real world value, they are also associated with potentially higher expenses or risks such as storage, insurance, and obsolescence. Examples of tangible assets include land, buildings, machinery, or inventory.
What are the advantages of assets? ›
Assets are important as they can help you to: generate revenue. increase your business' value. facilitate the running of your business.
Why do people invest in physical capital? ›
Machinery, technologies, inventories, and tools are all considered physical capital. Physical capital assets have a large impact on the productivity and output of any business. Producers invest in equipment and other physical assets in order to generate a higher profit.
Are tangible assets good or bad? ›
Tangible assets, such as real estate, commodities, or precious metals, provide diversification beyond traditional financial assets like stocks and bonds. They can help reduce the overall risk and volatility of the portfolio by offering different return drivers.
What are tangible assets? A tangible asset is an asset that has physical substance. Examples include inventory, a building, rolling stock, manufacturing equipment or machinery, and office furniture. There are two types of tangible assets: inventory and fixed assets.
Is money a tangible good? ›
Tangible property includes jewelry, family heirlooms, personal property, and other physical items. Intangible property includes monetary assets in the bank, investment accounts, digital assets, and other items that do not have a physical form.
Why are intangible assets becoming more important? ›
Intangible assets, such as institutional knowledge and intellectual capital, are becoming increasingly important for growth and value creation across various industries. The protection and management of intangible assets goes beyond just the legal protection of IP rights.
Why are intangible assets important? ›
Intangible assets are valuable for any company as these help in differentiating products or services, building customer loyalty, and establishing a competitive advantage in the market.
What is the value of tangible resources? ›
The value of all tangible resources such as raw materials and labour that are used in the production process is called real cost. A fixed cost is that which does not change with a decrease or increase in the amount of services or goods sold or produced.
What are tangible benefits of work? ›
Examples of tangible rewards include:
- Pay raise.
- Cash bonus.
- Gift card (Amazon, local spa, restaurant, etc.)
- Gym membership.
- Free merchandise (apparel, a watch, Apple AirPods, concert tickets, etc.)
- Food basket.
Assets are important as they can help you to:
- generate revenue.
- increase your business' value.
- facilitate the running of your business.
