Fixed assets, also called fixed tangible assets, are defined as physical assets that cannot be changed into cash and are instead used to purchase or lease a fixed asset. This can include tangible personal property like land or buildings, machinery and equipment or vehicles. If the fixed asset is depreciated on its purchase, it is called an intrinsic value. However, if the asset has no depreciation in its purchase, it is considered an immaterial value.
The primary purpose of assets that are fixed is to create the basis for future income that can then be used to buy other assets or funds. Fixed assets include stocks, bonds, business properties and real estate. It is important to note that there are two general ways to classify fixed assets, either tangible or immaterial.
Immaterial fixed assets, also called immaterial tangible assets, are considered “neutral”. These assets have no effect on the market prices and they will not appreciate or depreciate because of any change in economic conditions. These assets include bank deposits, certificates of deposits and trust funds.
Fixed tangible assets are used to purchase or lease a fixed asset. Examples of immaterial tangible assets are cars, homes and furniture. When purchasing or leasing immaterial assets like cars, homeowners are usually paying more for their investments than if they had purchased these items directly from a manufacturer. A homeowner who purchases a car and leases it usually must pay taxes on his or her investment. If a homeowner purchases a home and leases it out, he or she is paying less on the purchase than he or she would if the home was being purchased outright from the manufacturer.
Fixed capital assets are assets held to produce income by borrowing money at a specific interest rate. Common examples of fixed capital assets are business franchises and stocks, bonds, mutual funds and insurance policies. Fixed capital assets are generally used by corporations, governments and other organizations to produce income by issuing bonds or shares. Fixed capital assets may also be loans, mortgages, tax liens, and business loans.
Fixed-income securities are commonly invested in bonds and stocks. Fixed income securities are typically have a predetermined return that is tied to the performance of the financial markets. Examples of fixed-income securities are treasury bonds, stock indexes, government bonds, and municipal securities.
Fixed-income securities are different from other forms of investments because they are designed to pay their investors a fixed rate of interest regardless of the direction the economy is going. For example, treasury bonds are designed to grow at a pre-determined rate that is determined by the U.S. Federal Reserve. The government issue treasury bonds to pay for the debt of the federal government and the interest payments on these bonds are tied to the rate of the money supply.
Government securities provide the investor with a level of safety as the government issues bonds that are guaranteed by the U.S. government. Treasury bonds are issued in exchange for the federal debt owed by the government. Because the U.S. government has the ability to borrow at this level of security, the interest rates that can be paid are at a certain level that is determined by the Federal Reserve.
Fixed-income investments are generally made when the investor believes that the interest rates will rise over time, because the government bonds will eventually be retired. The investor does not need to worry about an immediate increase in interest rates because the bonds are guaranteed by the federal government. Fixed-income investments are often made to purchase stocks, bonds or other assets that can grow over time, such as real estate, corporate shares and commodities.
There are many different types of fixed assets. Fixed assets include corporate equities, bonds and treasury bonds. Bonds are issued by companies and other organizations and are offered to bondholders. A corporation’s stock is one type of fixed-income investment. A corporation can issue shares to its shareholders, but only the shareholders that are registered owners can purchase shares.
One of the benefits of investing in fixed assets is that they are much easier to sell than other types of fixed-income securities. Fixed-asset investment yields a higher rate of return on their value over time than other types of investment. Fixed-income securities are a popular investment choice among many people because they provide a guarantee that the money will be invested in an asset that will appreciate in the future. Another benefit is that you do not need to hold on to your investment forever because they mature over time.