Financial Asset

Some assets are physical items. Your house. A diamond ring. Your collection of Hummel dolls. These are tangible assets...they exist as physical items that can be sold for cash.

Other assets are more theoretical. They include things like stocks and bonds, or the money you have squirreled away in a bank account. These items represent financial assets. Financial assets are assets in the sense that can sell them, but they don't have the same physical reality as more tangible assets.

You can have physical proof of a financial asset (stock certificates or paperwork from the bank), but the real value comes from the contractual obligations. The stock grants you part ownership in a company. A bond entitles you to receive certain interest payments. Those contractual details provide you value.

Meanwhile, that stock certificate is just paper. It only has value because of what the paper represents.

But those Hummels...how can you look at them and miss their inherent physical value?