Mostly assets are classified based on 3 broad categories:
The “traditional” asset classes are stocks, bonds, and cash:
- Stocks: value, dividend, growth, or sector-specific (or a “blend” of any two or more of the preceding); large-cap versus mid-cap, small-cap or micro-cap; domestic, foreign (developed), emerging or frontier markets
- Bonds (fixed income securities more generally): investment-grade or junk (high-yield); government or corporate; short-term, intermediate, long-term; domestic, foreign, emerging markets
- Cash and cash equivalents (e.g., deposit account, money market fund)
|Convertibility||Depending on their extent of convertibility, they are further divided into fixed assets or current assets.|
|Physical existence||Comprise assets that are both tangible and intangible.|
|Purpose||Depending on their purpose of use, they are categorised as operating and non-operating assets.|
The following offers a fair idea about the different types of assets in general:
Current assets or short-term assets
These types of assets can be readily converted into cash or its equivalent resources typically within a year and are known as liquid assets. For example, cash equivalents, stock, marketable securities and short-term deposits are some of the most common current assets.
Fixed assets or long-term assets
Also known as hard assets and fixed assets, these resources are not easy to convert into cash or its equivalent kind. Generally, land, machinery, equipment, building, patents, trademarks, etc. are considered as fixed assets.
Similarly, assets with a physical existence are categorised as tangible assets. Resources like stock, land, building, office supplies, equipment, machinery and marketable securities, among others are functioning examples of tangible assets.
On the contrary, assets which do not possess a physical existence come under the category of intangible assets. The best examples of such assets would be market goodwill, corporate intellectual property, patents, copyrights, permits, trade secrets, brand, etc.
Assets like cash, building, machinery, equipment, copyright, goodwill, stock, etc. are termed as operating assets. Typically, such assets are used to generate revenue and to maintain daily operation.
Though these assets are not used for performing daily operations, they tend to help generate significant revenue. Some of the best examples of non-operating assets are short-term investments, vacant land, income generated through fixed deposits, etc.
Other alternative assets that may be considered include:
- Commodities: precious metals, nonferrous metals, agriculture, energy, others.
- Commercial or residential real estate (also REITs)
- Collectibles such as art, coins, or stamps
- Insurance products (annuity, life settlements, catastrophe bonds, personal life insurance products, etc.)
- Derivatives such as options, collateralized debt, and futures
- Foreign currency
- Venture capital
- Private equity
- Distressed securities
- Hedge funds