Does Real Asset is the Best Investment?

Does Real Asset is the Best Investment? | The Covid-19 that hit the world beginning the year 2020 has brought so many changes to the world especially to the economy. But despite the challenges of the COVID-19 pandemic, gross financial assets for households in Asia (excluding Japan) increased 12.7% in 2020, faster than the previous year by 9.8%, according to the Allianz Global Wealth Report 2021.



All asset classes saw double-digit growth rates, with bank deposits growing 12.3% followed by securities (13.9%) and insurance and pensions (11.4%). For Malaysia, the report showed that the growth rate of gross financial assets for households increased by 7.3% to reach 18,240 euros (RM87,776) per capita by the end of this year. It was driven by an increase in securities by 10.6% while life insurance and pension fund assets grew 7.4% and 4.2% respectively.


As a result, it saw the share of life insurance and pension fund assets of the household portfolio increase by almost 40% while deposits and securities were around 30% each. In terms of net financial asset position per capita, Malaysia ranks sixth in Asia behind China and 37th globally. The increase of these financial assets must be because of the high awareness of life-saving during this pandemic.

But between the financial asset and real asset what do you think is the best investment to invest in for long-term security? Hence, did you know about a real asset?

What Is a Real Asset?

According to Investopedia, Real assets are physical assets that have an intrinsic worth due to their substance and properties. Real assets include precious metals, commodities, real estate, land, equipment, and natural resources. They are appropriate for inclusion in most diversified portfolios because of their relatively low correlation with financial assets, such as stocks and bonds.

Between Real Assets and Financial Assets

Thus, there is a difference between real assets and financial assets that can be summarized in these 5 simple notes : 


1. Real assets represent tangible possessions while Financial assets represent intangible possessions.


2. Real assets have lesser liquidity and Financial assets have more liquidity because they can be easily converted to cash.


3. Generally, real assets take more time to dispose of or sell, while Financial assets are easily disposable.


4. Over a period, some of the real assets lose their value and Financial assets will provide continued growth and increased value.


5. Real assets are used to produce products and services to generate revenue, but Financial assets use the income to purchase real assets that offer revenue.


On top of that, the examples of Real assets here is including machinery, and production equipment while Financial assets are more likely stocks and bonds. But anyhow, there are also real assets that many forget their value in the long term such as gold and land or building.

Gold is a real asset

During the pandemic, I as a small income people struggling to live and make assets, thus making money with financial assets could be a high risk especially if you are not experienced with market trends. Therefore, as for me, I choose to invest a small amount of money every month and buy physical gold, about 1 to 2 grams. Investing in Gold is a quick way for you to earn a real asset and the value will increase every year. 

By investing in this small value consistency, it can help you to have bigger assets in the future and for me, Gold is the best because you can pawn it easily when you needed cash in the future. I have a friend who made a house down payment with her gold and it is about 50k of it. And yes, you can earn bigger assets in the future with the small asset you have today. It's so fun, right?


Anyway if you find this article beneficial, do find out how you can make your money work with real assets HERE.

Source: steadyrun, Awani.com