Assets definition

What is an asset?

An asset is an economic resource which can be owned or controlled to return a profit, or a future benefit. In financial trading, the term asset relates to what is being exchanged on markets, such as stocks, bonds, currencies or commodities.

Examples of assets

An asset can be tangible or intangible because it is defined by the ability to own it and convert it into a monetary value. Broadly, assets can be defined in two ways depending on whether they are in connection with a financial instrument or a company.

Underlying assets

Traditionally, assets were the subject of investments, bought outright in the hope they would increase in value. With the rise of online trading, assets have also become used to define the price of derivative products, and as such the profit or loss from a derivative trade such as a CFD trade. Underlying assets can include shares, indices, commodities, currencies, bonds, options or ETPs.

When you trade using a derivative product, you do not take ownership of the asset. Instead, you speculate on the price movement of the underlying asset, which is often known as the market. If you correctly predict that the underlying asset will increase in value, the trade will result in profit. If you predict that it will increase in value and its value subsequently drops, the trade will result in a loss.

Company assets

A company’s assets are the resources it owns that add to its value or are expected to generate value in the future. They are the opposite of liabilities, which are the parts of a company that detract or are expected to detract from its value.

A company’s value is taken from the balance sheet, which reports how well a company is managing its assets – this includes current assets, such as cash and inventory goods, as well as fixed assets that will last more than a year, such as buildings and equipment.