What are financial assets?

Find out about the characteristics, classification and description of what are known as financial assets
Financial assets are securities or accounting entries that give the purchaser the right to receive future income from the vendor. They can be issued by economic entities (e.g., companies, autonomous communities, governments, etc.) and do not usually have a physical value as is the case with real assets (e.g., houses or cars). Also, unlike real assets, financial assets do not increase the overall wealth of a country and are not included in GDP. However, they do encourage movement in real economic resources, which contributes to economic growth. The parties who purchase financial assets generate returns on the money invested, while for the vendors, the sale is a source of financing. In summary, financial assets are the rights the purchaser acquires to the vendor's real assets and the cash these assets generate.
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Main characteristics of financial assets

There are three main characteristics that best describe financial assets.

  • Liquidity. The ability to convert the asset at issue into money without incurring losses. Money is the most liquid asset, followed by different types of deposits and products such as bonds, public funds and obligations.
  • Risk. This is determined by both the guarantees offered by the vendor and their solvency. The more likely the vendor is to honor their commitment, the lower the return on assets.
  • Returns. The purchaser obtains interest as consideration for accepting the risk associated with transferring their money. The more interest there is, the greater the return on assets.

Classification of financial assets

The main financial asset classification distinguishes between fixed income and equity financial assets.

  • Fixed income. Fixed income assets are those issued by public administrations and companies. Assets issued by public administrations are considered lower risk as they have strong financial backing from the entities that issue them. These entities commit to return the invested capital after a previously established period and for a specific return. Examples of these types of assets are treasury bills and corporate promissory notes.
  • Equity. There is no guarantee with these assets of any returns or that the invested capital will be recovered. The investment may even be forfeited. Returns depend on different factors such as the income statement of the entity that sold the asset, or the financial situation of the market where said entity operates. Stock is the main example of these types of assets.

Depending on the maturity date

Current financial assets differ from non-current financial assets due to their date of maturity.

  • Monetary assets and current assets. These assets mature within a short period of time (generally less than one year) and usually generate low returns.
  • Non-current and medium-term assets. These assets mature after twelve months and have higher risk ratios as values may fluctuate due to the extended term.
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BBVA offers better asset diversification

When investing, it is a good idea to diversify your investment using different financial assets. BBVA investment funds are a good option, as they adapt to every investor profile with solutions that invest in different types of assets. We focus on solutions that seek to find a balance for your investment by including assets of different risk levels and returns and by incorporating different proportions of assets depending on the risk profiles of different types of investors or their requirements and objectives.

* As with any other investment product, investing in funds involves a certain level of risk. All funds involve a level of risk (depending on their specific characteristics and the assets invested in), which means that losses may be incurred on the capital invested. You can check the specific risks of each fund in the brochure at bbva.es

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