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    Financial Investment vs Real Investment 

    • 5 min read
    • Last Modified Date: February 6, 2024
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    • As investors, we’re all human beings first, with different personalities, varying personality traits, and different attitudes towards investing. What one investor feels is a low risk, high reward bet might be completely untenable for another.
    • And as investors, we often find ourselves on the crossroads of the two most important types of investing: Financial investment, and real investment. 
    • Both these paths provide different asset classes, a number of unique characteristics, and they come with their own risks and rewards. Your aim as an investor should be to carefully consider all the options on the table before opting for the strategy which aligns seamlessly with your investment goals and financial values. 

    Financial Assets vs Real Assets: Understanding the Basics

    Before getting confused with the intricacies, let’s look at the specifics of each investment method: financial assets and real assets.

    Financial Assets Explained

    • Financial assets encompass various financial instruments that you must have come across on your journey a number of times. These instruments include: stocks, bonds, cash equivalents, and ownership claims to underlying assets. 
    • On the flipside to that coin, real assets are those which include tangible properties. These can be real estate, whether residential or commercial real estate,  commodities, or natural resources. 
    • Well then, a question on your mind must be, from where do financial investments derive their value if there’s no tangible property involved?
    • Financial investments epitomise the traditional realm of investments. These investments attain value (or get devalued) based on their underlying financial instruments. For example, stocks reflect the performance of companies and board confidence, bonds reflect government projects, other entities, and so on. 

    Diving Into Financial Investments 

    • Liquidity and flexibility are inherent in financial investments: they equip investors to swiftly buy or sell assets in response to market dynamics. Take stocks, for example; these offer ownership opportunities within publicly traded companies – a gateway that allows investors not only capital appreciation but also participation in the company’s success via dividends.
    • In the realm of bonds, investors actively lend money to governments or corporations; they do so in exchange for two crucial elements: periodic interest payments and – at maturity – the return of principal amount. Mutual funds represent a popular choice for diversification; these entities pool funds from numerous investors to construct diversified portfolios consisting not only stocks but also bonds and other assets.

    Are Financial Investments the Right Choice for You? 

    • Those investors looking for quick returns, seeking active involvement in the stock market and doing research on burgeoning companies are perfect for financial investments. You must also possess an appetite for dealing with economic volatility and market fluctuations.
    • At the end of the day, individuals who have the right financial mindset, are willing to do their research and build a diversified portfolio, can easily capitalize on the potential of various financial instruments. 

    Real Investments: Invest in Tangible Assets 

    • Real investments are characterised by tangible assets. These assets include real estate, precious metals, industrial properties, physical commodities that facilitate the movement of goods and services, and so on. 
    • Investing in real assets grants ownerships the benefit of owning actual tangible properties, and diversifying their portfolios beyond the virtual confines of financial markets. 
    • Real investments, specifically in real estate, impart a feeling of stability and tangibility. Residential or commercial properties possess inherent value; they can produce income through rental returns or over time via appreciation. Furthermore, precious metals such as gold and silver provide concrete protection against inflation and economic ambiguities.
    • Various forms can be taken by real estate investments, ranging from the direct ownership of properties to indirect investments via real estate investment trusts (REITs). Through pooling funds and investing in income-generating real estate assets, REITs offer investors a more accessible entry point into the market for property.
    • Fractional ownership in commercial real estate is also a sound real investment. Investors can pool funds and get shared ownership of commercial real estate assets, in turn sharing the rental yields and income generated from the commercial properties. 

    The Ideal Real Investor

    Real investments and investing in real assets appeals to those for whom financial stability and long term growth is a priority. By investing in commercial real estate assets, you can hold money in tangible assets and build wealth through rental yields, capital appreciation, and ownership of property. 

    Key Points of Difference Between Financial Investments & Real Investments 

    CriteriaFinancial InvestmentsReal Investments
    Risk and Return DynamicsTend to exhibit higher volatility, with potential for substantial returns or losses.Generally considered more stable, providing a hedge against market volatility.
    LiquidityHigh liquidity, allowing quick buying and selling in the financial markets.Lower liquidity, with real estate transactions often taking more time.
    Income GenerationIncome generated through dividends, interest, or capital gains.Rental income from properties or potential profits from property appreciation.
    Intrinsic ValueValue derived from the performance of underlying financial instruments.Inherent value in physical assets, often tied to location and demand.

    Assetmonk: Alternative Investments in Real Assets

    Assetmonk, specializing in fractional ownership of high end commercial real estate, stands out as a unique player in the realty alternative investment space. Providing a web based dynamic alternative investment platform; it equips investors with power to possess ownership stakes of high-value commercial properties: this unlocks opportunities for them within real estate investments that have significantly reduced entry barriers.

    Commercial Real Estate Investments with Assetmonk

    Through Assetmonk’s innovative approach to fractional ownership, investors gain access to premium real estate assets without bearing the weighty upfront costs. The minimum entry ticket to invest in our fractional ownership models is Rs 25 lakh. This model enables portfolio diversification with commercial properties. 

    Thus, not only do investors reap benefits from rental income with high projected Internal Rates of Return (IRR), but they also potentially appreciate their investments.

    Assetmonk, by marrying the stability of conventional real estate investments with modern financial investments, constructs an innovative bridge between traditional property investment and contemporary wealth management strategies. In doing so; it presents investors a unique avenue for growth by putting them in pole position for reaping off of their financial investments.  

    Read More

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    SEBI Approves Framework for Fractional Ownership Assets

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