Real Asset Prepared by : Akram Hamdy El komey Supervision : Dr Emad AbuShaaban
Investments in Real Assets * Definition * Advantages and Disadvantages of Real Assets * Inflation Difference between stocks and bonds? * conclusion*
What are Real Assets? * A real asset is a tangible asset like gold, oil, and real estate. * It has intrinsic value due to its utility. * Its value is derived by virtue of what it represents.
* An inflation hedge * Hedge against unknowns, fears * Effective vehicle for diversification * Improves portfolio risk-return alternatives * Low correlation with monetary assets Real Assets - Advantages
* Lack of large, liquid, efficient markets * Larger commissions & spreads compared to securities * No current income except from real estate * Storage and insurance costs * Unit costs may be high Real Assets - Disadvantages
Hedge against inflation. Inflation is the increase in the amount of currency required to purchase goods and services. Commodities can help protect investment portfolios against inflation because they represent the value of goods and services, not the value of currency.
Horror of investors: The high inflation rate is scary for investors because inflation means a lack in money value associated with that investment, as well as the lack of royalties they wait her value from their investments. The alternatives for many investors, when selects the one it links assets liquid, If a man invest his money in bonds give him a profit of $ 7 per year, and inflation is 4 it means that its profit had fallen, and 3 only.
Measuring inflation Inflation is measured in two ways : First, calculate the rate of general price, account is taken of the prices of various goods including food, clothing, fuel and equipment such as computer, as well as a range of services such as laundry or cost. Calculates the value of buying these goods each month, displayed and sold to the public, the value of procurement for the different periods which usually months or a chapter (three months) knows how much inflation and the amount of change in the total price and not in just one commodity. If there is displacement of the price increase by half a per cent, this means that there is an inflation by this amount.
The second way to measure inflation: a measure of the source, a sampling of goods prices and pricing of the product, any amount that is determined by the product price for his goods, and the overall price trend line could see prices going up or down.
Treatment of inflation States of the free economy and the strong to pursue price indicators for inflation and its creator, hence the treatment begins. Take the capitalist countries the interest rate to curb inflation, dealing with interest rate increases or decreases to address inflation, when there are signs of inflation began to appear, the Central Bank increase interest rates, and the reason is the desire to withdraw money from the market and to the process of providing or investing, when high interest rates, the temptation in investment will rise to the benefit to the investor.
Bonds Defined Bonds Defined Bonds are, at their basis, loans given to either a government or to a corporation.
Stocks Stocks are one of the only financial assets that do not have an agreed upon ending date. Investing in stock means the investor has part ownership of a company and shares in the company’s profits and losses. He or she can keep the stock for any length of time or decide to sell it to another investor.
conclusion * The real wealth of the society which determines the size of production capacity where many factors, such as infrastructure, buildings and industrial machinery production capacity, It is possible, subject to the production of real production assets, those assets are land, buildings, machinery and know-how and technology used in the production process. * Specifies the distribution of income and assets in the economy, the financial assets are divided into fixed interest assets such as bonds, stocks, derivatives such as futures and contracts for the right to choose.
Thank you to all the students of good listening