Financial Asset Management

Are you interested in learning about financial asset management? If you’re an investor thinking to invest over $5 million in liquid assets, then familiarizing yourself with the different types of financial asset management is a great starting point to your journey in investing. Understanding how financial asset management works and its impact on your investment portfolio can hold critical implications for your success. You can learn more about this by requesting a copy of our book, 7 Secrets to High-Net-Worth Investment Management, Estate, Tax, and Financial Planning.

STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION

 

7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning

 

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

Pillar Wealth Management is a team of fiduciary advisors offering more than 60 years of combined experience. We can help you figure out how financial asset management works and how you can use it to grow your wealth. We offer wealth management services to high-net-worth clients with $5 million to $500 million in financial assets. Click here for a consultation, absolutely FREE of cost!

In this blog, we will discuss what are the three types of financial assets and what are some examples of financial assets? We will also go over other important questions like is a house a financial asset? And do you need a financial advisor for managing your financial assets? Let’s begin.

What Are Financial Assets?

A financial asset is defined as a liquid asset. Its value is derived from an ownership claim or contractual right. To elaborate, there are basically 3 kinds of assets in general. These are:

• Real assets

• Financial assets

• Intangible assets

Real assets refer to physical assets such as a house, precious metals, land, building, and commodities. These assets have an intrinsic value drawn from substance or properties. Intangible assets are contracts, trademarks, copyrights, patents, and other forms of intellectual property.

A financial asset, as we mentioned, is a liquid asset. These assets do not really have any intrinsic physical worth. They usually don’t have a physical form, either. Instead, their value is derived from other facts such as:

• The supply and demand of the asset in the marketplace

• The degree of risk associated with them

• The expected rate of return on the asset

For instance, a highly valued financial asset would have a high demand in the marketplace. This would drive up its price and impact its intrinsic value. The opposite can also happen.

If you want to learn which other factors influence the value and performance of financial assets, talk to a wealth manager in our team!

Given that a house is classified as a real asset, this should also answer your question is a house a financial asset?

Financial asset management

What are the 3 types of Financial Assets?

Now that you understand what financial assets are let’s take a look at another important question – what are the three types of financial assets?

1. Equities

When we discuss equities, we are referring to the stocks or shares in a company. When you buy these stocks, you are essentially buying equities that represent your ownership in the company. Your shareholder’s equity here represents how much money the company would return to you if it liquidated all assets and paid all debts after liquidating those assets.

Buying equities thus makes you a partial owner of the company’s shares. Investors can earn money by investing in equities by:

• Earning dividend income – this is a portion of the company’s profits paid out to its shareholders periodically (usually at the end of the year).

• Capital appreciation – this refers to selling your shares to another bidder after their price has increased and earning a profit on your original investment amount.

Equities are volatile in nature and don’t normally have a fixed rate of return. There usually isn’t a guarantee that you will earn money through these financial assets. However, depending on your financial advisor and the type of shares you buy, you can still reduce this risk considerably to earn a high return.

To learn more, go through our guide and discover how you can improve your portfolio performance.

1. Bonds

 Bonds are another major type of financial asset. They represent a loan that you make to the government or a corporate entity. The money is then used for building infrastructure, financing general operations, and other projects.

The issuer (the government or the corporate entity) makes periodic interest payments to the investor. These are usually made quarterly, semi-annually, annually, and so on. All bonds also have a maturity date that can vary between 3 or 4 months and go up to 30 years or more. Once the bond matures, the issuer will return the principal amount (the face value of the bond) to the investor. Therefore, when you invest in this financial asset, you can earn money via the interest payments issued and the principal amount returned to you.

Bonds are highly secure, low-risk investments. Government bonds, in particular, have a very low default rate. Corporate bonds are slightly more risky in comparison. If the company that issues these bonds goes bankrupt, it will no longer make interest payments to investors. It may also fail to return the principal amount of the bond. To account for this risk, corporate bonds typically have a higher rate of return than government bonds.

2. Cash and Cash Equivalents

The final category among the 3 most common types of financial assets is cash and cash equivalents. Cash and cash equivalents refer to the total cash present in your investment portfolio. Cash equivalents are the investment securities in your portfolio that are highly liquid. They also possess high credit quality. These financial assets have a low-risk and low-return profile.

What Is Financial Asset Management?

Financial asset management refers to managing an investor’s financial assets on their behalf. It is an ongoing process that can be broken into 2 parts.

1. Appreciating the value of the investor’s assets over the investment period

2. Mitigating and controlling the risk associated with these assets

A financial asset manager is primarily responsible for making important decisions that determine which financial assets they should buy, which they should avoid, and which they should sell to increase the value of a client’s investment portfolio.

To learn more about how this works, we recommend ordering a free hardcover copy of Pillar Wealth Management’s book,  The Art of Protecting Ultra-High-Net-Worth Portfolios and Estates – Strategies for Families, Worth $25 million to $500 million.

What Are Some Examples of Financial Assets?

We have already discussed the 3 main types of financial assets. However, these can be further broken down into other examples. Knowing what are some examples of financial assets can better prepare you for a meeting with your prospective financial advisor.

Examples of Equities/Stocks

There are several types of stocks that investors can consider. These are:

1. Blue-chip Stocks

Blue-chip stocks belong to established companies having a history of profitability over the last 10 years or so. They also make regular dividend payouts to their stockholders. These stocks are a lot less volatile. They belong to companies capable of sustaining operations during periods of recession. Investors can buy and hold these stocks and earn income in the form of dividends.

2. Penny Stocks

Penny stocks belong to small public companies. They usually trade for less than $5 per share. These stocks are highly volatile, and their price can easily increase and decrease in response to economic conditions. Investors can earn high returns by trading these stocks when their price appreciates. However, they also run the risk of facing significant losses if the price drops.

To learn more about investing in equities, please request a copy of our book, 7 Secrets to High-Net-Worth Investment Management, Estate, Tax, and Financial Planning.  

Examples of Bonds

1. Treasury Bonds

Treasury bonds are government debt securities. The US federal government issues these securities. They have a maturity period that’s usually longer than 20 years. These bonds earn interest on a periodic basis until they mature. They have a fixed interest rate, and interest payments are made semi-annually.

2. Municipal Bonds

Municipal bonds are debt-based securities issued by a county, municipality, or state for financing capital expenditures. They can be used to construct highways, build schools, and improve the quality of life for residents.

These bonds are highly attractive to investors because they are exempt from federal taxes. Investors can also avoid paying most local and state taxes on these bonds.

Talk to us in a free session and learn about municipal bonds, treasury bonds, and other types of bonds.

Examples of Cash and Cash Equivalents

1. Treasury Bills

Treasury bills are government-issued securities. The United States Department of Treasury issues them to investors. They can have a value between $100 to $5 million. Investors cannot earn interest on treasury bills. However, they can get them at a discounted price and earn yield based on the price difference between when they purchased the bills and when they redeemed them.

2. Commercial Papers

Commercial papers are debt securities issued by large companies to attract investors. They are used to meet a company’s short-term expenses, such as paying employee salaries. The issuing company promises to pay the face value of the commercial paper on the maturity date.

3. Money Market Funds

Money market funds function like checking accounts. They pay a high interest using the money deposited in these funds. They are usually used by companies and organizations for managing their money. The share price of these funds is $1 per share.

4. Marketable Securities

Marketable securities are a type of financial asset that is very liquid and can get converted into cash easily. Their maturity date is less than a year. You can buy and sell them on a public bond exchange or public stock exchange.

5. Short-term Government Bonds

Short-term government bonds also qualify under cash equivalents. They are issued by the government for funding government projects. These bonds have a maturity date of up to 5 years. They are low-risk securities with a low return.

How Can You Get Started With Managing Your Financial Assets?

If you want to invest $5 million to $500 million in liquid assets, then the sooner you start, the better. Getting a financial advisor is essential here. Pillar Wealth Management offers comprehensive financial advice to investors that can help grow their portfolio sustainably. Here are some things we can help you out with:

Designing Your Portfolio

With over 60 years of experience in investment management, the experts at Pillar Wealth Management can help you design an investment portfolio that complements your financial goals. We can help you determine how to allocate your assets and what percentage of stocks, cash, and bonds you should have in your portfolio.

Managing Risks

We work with all types of investors and help them manage their risks within acceptable levels. Our team can offer tailored solutions on how you can control your portfolio risk. We utilize historical data, an Efficient Frontier, and conduct portfolio stress tests for this. We can help you monitor your portfolio risk at all times and adjust it to control your losses.

Paying Taxes

Managing taxes on your financial assets is crucial for achieving long-term financial success. Pillar Wealth Management has a team of experts that can help you minimize and control your taxes to maximize your returns. We can help you balance your short-term and long-term capital gains, invest in tax-exempt securities, and utilize other tax shelters.

Achieving Your Financial Goals

Utilizing the best strategies is important for proper financial asset management. However, if you are not achieving what you aimed for, then it is all for naught. Pillar Wealth Management tailors all strategies to focus on goal achievement. We have a highly robust system in place that allows us to:

• Understand your goals

• Recommend tailored strategies that help achieve your goals

• Execute approved strategies aiming for maximum efficiency and effectiveness

• Monitor the performance of strategies and track your progress

• Adjust strategies to remove redundancies and stay on track for achieving your financial objectives

Ultimately, we focus on financial serenity. We don’t push you to take unnecessary risks and seek to offer solutions that deliver value. To learn about financial serenity, go through our guide on critical shifts investors need to make to achieve their goals.

Wrapping It Up

If you are ready to invest $5 million to $500 million in liquid assets, book a free consultation with our team today! We can help you manage your financial assets, lower your costs, control your risk, and optimize your returns. Talk to Pillar Wealth Management in a free session!

Authors

To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.

We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.

You see, our goal is to only accept 17 new clients this year. Clients who have from $5 million to $500 million in liquid investable assets to entrust us with on a 100% fee basis. No commissions and no products for sale.

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