Real Assets vs. Financial Assets: Portfolio Strategies and Examples

When building an investment portfolio, one of the most important decisions is how to balance real assets and financial assets. Each plays a distinct role: Financial assets like stocks and bonds offer liquidity and growth potential, while real assets, such as real estate or commodities, provide stability and protection against inflation. By understanding how these two categories differ, and how they complement each other, investors can create strategies that not only pursue returns but also manage risk through changing market conditions. This balance is often key to achieving long-term financial goals.

Consider working with a financial advisor if you need help building out your own portfolio with the right mix of asset choices.

What Are Real Assets?

Real assets are physical or tangible investments that derive their value from their inherent properties and use in the real world. Unlike financial assets such as stocks or bonds, real assets are typically tied to resources, infrastructure or commodities. Their worth comes from their scarcity, utility or the income they generate, rather than from contractual claims.

Beyond potential price appreciation, many real assets can generate steady income streams. For example, rental properties provide monthly cash flow, while infrastructure projects may offer long-term revenue from usage fees. This income component makes them attractive for investors seeking diversification and stability within their portfolios.

Because real assets often move differently than financial markets, they can help reduce overall portfolio risk. In times of stock market volatility, tangible assets like real estate or gold may hold value or even appreciate. As a result, investors often consider them a defensive play to balance growth-oriented financial assets.

Examples of Real Assets

Some of the most recognized real assets are real estate, commodities like oil or gold and infrastructure, such as roads, bridges or energy facilities. Even farmland and timberland fall into this category because they produce resources directly. These assets often serve as inflation hedges since their value tend to rise when the cost of goods and services increases.

What Are Financial Assets?

Financial assets are investments whose value is based on a contractual claim rather than a physical property. They include instruments like stocks, bonds, mutual funds and bank deposits. Instead of deriving worth from tangible resources, their value depends on expected future cash flows, such as dividends, interest payments or potential resale gains.

Financial assets are generally easier to buy, sell and diversify compared to real assets. Stocks provide growth potential through capital appreciation, while bonds offer predictable income through fixed interest payments. This balance of liquidity and flexibility allows investors to adjust strategies quickly in response to market conditions or personal financial goals.

These assets are central to building long-term wealth, as they provide access to both growth and income opportunities. However, because they’re highly correlated with market cycles, they’re generally more vulnerable during periods of volatility. Pairing them with real assets can help investors strike a balance between growth potential and portfolio resilience.

Examples of Financial Assets

Shares of publicly traded companies, government or corporate bonds and certificates of deposit are common examples of financial assets. Investors also encounter them through retirement accounts, exchange-traded funds (ETFs) and money market instruments. Because financial assets are widely traded and relatively liquid, they serve as the backbone of most investment portfolios.

Major Differences Between Real Assets vs. Financial Assets

Both real and financial assets can play important roles in a portfolio. However, they differ in how they create value, generate income and respond to economic conditions. Understanding these distinctions can help investors decide how to balance real vs. financial assets for growth, income and stability.

Volatility: Real assets can provide stability and diversification in a downturn, whereas financial assets tend to be more closely tied to market cycles and investor sentiment.

Nature of value: Real assets derive value from their physical properties and scarcity. Meanwhile, financial assets are backed by contractual claims and expectations of future cash flows.

Tangibility: Real assets are tangible and investors can physically own them, such as land or commodities. Financial assets, like stocks and bonds, exist primarily on paper or in digital form.

Income source: Real assets often produce income through rents, leases or usage fees. Financial assets generate income via dividends, interest payments or capital gains.

Inflation Protection: Real assets typically perform well as inflation hedges because their prices rise with the cost of goods and services. Financial assets may lose purchasing power during inflationary periods unless they are specifically structured to counteract it.

Liquidity: Financial assets are generally more liquid and easier to trade in established markets, whereas real assets may require longer timeframes to sell and convert into cash.

Portfolio Strategies to Use Both Real and Financial Assets

A well-constructed portfolio often blends real and financial assets to capture the advantages of both. Financial assets like stocks provide long-term growth opportunities, while real assets, such as real estate or commodities, add a layer of stability. This combination allows investors to pursue higher returns without exposing themselves entirely to market volatility.

Including real assets can help shield a portfolio from inflation, which tends to erode the purchasing power of financial assets like bonds and cash. For instance, real estate and commodities often appreciate as prices rise, offsetting the drag on fixed-income holdings. Investors who expect inflationary pressures may strategically allocate more to tangible assets to preserve wealth.

Different asset types respond uniquely to economic cycles. During a market downturn, real assets may hold their value or generate steady income, while stocks can experience sharp declines. Conversely, during strong growth periods, financial assets may outperform. Combining the two creates diversification benefits, smoothing performance across market conditions.

The right mix of real and financial assets depends on individual goals and risk tolerance. Younger investors with longer horizons may lean more heavily on financial assets for growth, while retirees might prioritize real assets for income and stability. A financial advisor can help tailor an allocation strategy that aligns with both current needs and long-term objectives.

Bottom Line

Balancing real and financial assets allows investors to capture growth, generate income and protect against inflation, all while reducing overall portfolio risk. Real assets bring tangibility and stability, while financial assets offer liquidity and long-term wealth-building potential. By combining the two, investors can create a more resilient portfolio that adapts across market cycles. For those unsure of the right allocation, working with a financial advisor can provide tailored strategies that align investments with both short-term needs and long-term financial goals.

Tips for Investing

A financial advisor has the expertise to help you with your own portfolio goals, enabling you to choose the right assets to help you achieve your goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
An investment calculator can help you estimate what certain investment assets could be worth over time as it builds equity in your overall portfolio.