Assets are an integral part of a business' operations, that are either owned or leased by a company in order to create value. As valuable resources, they hold economic value that could potentially generate cash flows for your business. Assets can be grouped into different classes based on their characteristic and behavioural similarities in the marketplace.
The most common asset classes are equities, fixed income, cash and cash equivalents, real assets, and alternatives.
Managing these assets involves:
- Developing, and
Assets, in a cost-effective manner that gives you positive returns in the long run. Traders, portfolio managers, and research analysts are responsible for coming up with profitable ways to make the most of an investment in the financial market.
Accounting for their assets helps a company, not only identify and manage risks but also utilise opportunities in a manner that optimises returns. Asset management is a balancing act between fixed assets acquired for long term use and current assets that can be converted to maintain cash flows.
A centralised database with asset information helps streamline the reporting process at the end of every financial year. This ensures your company can comply with the various regulations and policies set by governing authorities.
What are traditional assets in finance?
Traditional assets generally comprise of publicly traded market instruments that can be converted into cash in a short amount of time.
Stocks – stocks are shares of ownership issued by publicly-traded companies on stock exchanges such as NASDAQ and NYSE.
There are numerous stocks that vary based on the perks of their characteristics, such as:
- Common stocks
- Growth stocks
- Value stocks
- Dividend stocks
- Small/mid/large-cap stocks
- Preferred stocks
Stocks can gain you quick returns in the form of periodic dividends, and increasing share prices.
Cash – These are the most liquid assets of a company. They include cash equivalents like treasury bills, and money markets that can quickly be turned into cash. Their liquidity benefits the company with the flexibility of being accessible on short notice.
Bonds – bonds are debt investments made by the company by loaning out money to corporations and government agencies. The debtor absolves their debt by paying the company back at a fixed rate of interest. Bonds can vary on the basis of the term, default risk, and yield.
The most commonly used bonds are:
- Government bonds
- Short-term/intermediate/long-term bonds
- Investment-grade bonds
- Foreign bonds
- Junk bonds, and
- Corporate bonds
How are Traditional Assets Typically Managed?
- Performing asset inventory – to effectively manage their assets, a company needs to know the number and value of each asset.
- Service levels and Life-cycle costs – the company needs to determine the quality, role, and capacity of the services an asset provides. Apart from the initial purchase of the asset, an asset manager also needs to consider additional expenses in its life-cycle, such as maintenance, operating, and renewal costs.
- Long-term financial planning – the information from managing assets, translate into long term financial plans that stakeholders prioritise workable objectives.
By completing the Hero Vired’s Certificate Program in Fintech, Blockchain, & Cryptocurrencies, you could open a whole new world of opportunities for yourself in the budding Fintech industry.
Opportunities in Fintech
Fintech is a rapidly growing industry that combines financial services with new technological innovations to offer new age solutions to the finance industry. Fintech is a broad spectrum that includes all activities associated with the financial system.
By digitizing financial services, Fintech is revolutionising the financial system. The newer and more modern systems of Fintech make it easier to provide modern solutions for assorted financial services, which can act be leveraged to gain market share. Countries like Sweden that rely on digital services and are willing to adopt new technologies, are perfect markets for Fintech and digital assets to thrive in.
Fintech may also be the answer to financial exclusion in certain developing countries. The geographical limitations of their financial system make accessing services impossible for a large chunk of their population. Digital assets not only make services more accessible for their people, but also facilitate cross-border transfers for other countries to support less developed banking systems.
The volatile cryptoasset market
Cryptoassets are an attempt to create a decentralised financial system without involving regulation from government or central banks. However, the volatility and lack of government backing also make it a risk.
Cryptocurrencies like Bitcoin and Ethereum operate on a proof of work and proof of stake consensus respectively. Once the consensus has been met, the holder of the asset is given a private key to access their winnings.
Although the term 'cryptoassets' and 'cryptocurrencies' are used somewhat interchangeably the latter term could be misleading.
Cryptoassets don't really work in the same way as a currency does.
- The volatility of cryptoassets make it a poor store of value
- The world is slowly becoming more accepting of crypto assets as a mode of payment, but it still isn't accepted across most regions
- It's fluctuating value also make it and unreliable unit of account
Digital fraud in the form of
- Pump and dump schemes
- Rug pull schemes, and
- Investment scams
have become all too common in the digital asset space.
The volatile nature of digital assets, and the lack of regulation, backing, and accountability from governing bodies make it a hard sell. Inadequate security measures make it hard for the industry to build trust and loyalty in this space.
Despite the drawbacks of digital assets, millennials are still optimistic about the Fintech market. The convenience of the new age Fintech solutions to financial services lead our next generation to believe that these are solutions for the future. With many millennials preferring Fintech solutions to traditional solutions, they hope to usher in technologies that will move the industry forward.
Fintech assets vs traditional assets
The Market – The volatile market of blockchain technologies result in better and higher returns for their investors. Stock markets on the other hand have much lower returns, that can amount to as little as 0.25% a year.
However, with the right asset management firm and Hero Vired’s Certificate Program in
Fintech, Blockchain, & Cryptocurrencies, can help you make better investment decisions.
Nature of assets
Fintech assests are digital, intangible assests that can lower your security costs and risks. Traditional assests are tangible and thus have storage and security requirements. However, both are liquid assets that can easily be accessed.
Compliance and regulations
Fintech assets are on the blockchain, giving free reign to the market to ascertain its value and conduct transactions through a common consensus (proof of work, proof of stake). They are not regulated or backed by any government or financial institutions, freeing them of nay compliance requirements. Traditional assests have certain government regulations regarding asset management compliance that they need to follow diligently.
Compatibilty with new technologies
Technologies like artificial intelligence (AI) and the internet of things (IoT) are intertwined with blockchain technology inn a growing Fintech industry.
The technology facilitates developing products at less cost and faster speeds while integrating digital asset management into it. Traditional assets are slowly falling out of favour as they aren’t compatible with new technology.
For anyone looking to explore & evaluate the transformational technologies that are changing the world of investment & finance, Hero Vired has the perfect program for you. Hero Vired’s Certificate Program in Fintech, Blockchain, & Cryptocurrencies is tailor-made for IT professionals, and senior managers in financial institutions and banks working on blockchain technology.
The program curriculum explores concepts such as:
- Demystified Blockchain and Metaverse
- Fintech for Asset Management Companies
- Explore Emerging Challenges and Issues
- Fintech and Banking
- Hands-on Classroom Projects
Giving you cutting-edge knowledge and an intricate understanding of all things Blockchain, including Cryptocurrencies and NFTs, AI, & its role in financial decision making.
Fintech is still in its infancy. It needs forward-thinking Asset management firms to find the right mix of technology and personal touch for a given customer segment to create a client experience that customers receive from their other, financial and non-financial, service providers.
Turning a blind eye to shifting market expectations and ignoring the quick and imminent rise of innovative products could severely harm the industry. Clinging on to traditional methods can only take you so far, with an increasingly diminishing market share.
Incorporating Fintech solutions will prove to be make or break for financial companies in the not so distant future.