Classifications of Assets and Markets

Assets

Securities: includes both debt and equity securities. Securities may be further classified as public or private securities, depending on if they are traded on a public exchange.

Currencies: monies issued by national monetary authorities.

Contracts: agreements to trade other assets in the future.

Commodities: precious metals, energy products, industrial metals, and agricultural products.

Real Assets: all tangible properties, such as real estate, airplanes, airports, machinery, timberland, and pipelines.

Markets

Futures Markets/Forward Markets/Options Markets: traded contracts require delivery at some date in the future. Contracts in the options markets are only delivered if the option is exercised.

Spot Markets: traded contracts require immediate delivery.

Primary Market: funds flow from the purchaser to the issuer.

Secondary Market: funds flow between traders.

Money Markets: trades debt instruments maturing in one year or less.

Capital Markets: trades instruments maturing in over one year, such as bonds and equities. Corporations usually finance their operations through the capital markets.

Traditional Investment Markets: transactions involve only direct or indirect investments in publicly traded debts and equities.

Alternative Investment Markets: includes private markets investments, which are more difficult to trade and value. In order to compensate for the limited liquidity, investors in these markets expect to earn a greater risk-adjusted return than they would in traditional investments.

Question

A direct investment in an industrial warehouse is an example of a:

A. Contract

B. Security

C. Real asset

Solution

The correct answer is C.

Since the investment is in a tangible property (real estate), it would be considered a real asset.

Reading 36 LOS 36b:

Describe classifications of assets and markets

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