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- Real Assets are physical assets like real estate, diamonds, oil paintings and other investments in physical things. In the case of some real assets the investor enjoys non-financial income called Psychic Income. Investing in real assets differs from investing in securities in the type of income derived, the manner in which the asset is valued and the way inflation affects the value of real assets.
- Real assets are valued using quantitative or qualitative methods. Income Approach, Direct Income Capitalization method, Band of Investment nnethod, Built-up method are quantitative methods.
- The qualitative methods are further classified into macro and micro factors. Under macro factors, business cycle, interest rates and inflation, population demographics, legal environment, taste and preference for real estate are classified. The micro factors are identified as physical characteristics like size, age and quality and location and leasehold/freehold.
- Most of the times, investors like knowledge about the intricacies of the securities and end up doing mistakes. Therefore mutual funds have come to their rescue them. The next chapter focuses on Mutual Funds.