Real assets include a wide variety of investments that differ in many ways from financial assets (stocks and bonds). Real assets include collectibles, precious metals (especially gold), art, coins, and real estate, among others. The most distinguishing characteristic of real assets is that they can be touched, held, and seen; financial assets, on the other hand, are represented by a piece of paper granting the holder a proportionate interest in an underlying asset, such as a company.

Some real assets are securitized through the creation of a financial asset that represents an interest in the underlying real asset. Real estate investment trusts (REITs) are one example, as are limited partnerships in real estate, oil and gas, and other assets.

Generally, real assets have a low or negative correlation with financial assets, making them excellent portfolio diversifiers. An investment portfolio is not truly diversified if it does not contain some real assets.

Not many investors buy tangibles and collectibles for investment purposes. However, some do buy gold and many do buy real estate for investment purposes. Advisers must be knowledgeable about real estate investments to help new clients who already have real estate investments as well as current clients who now want to buy investment real estate.

Complexity Level: Advanced