What are "real assets" primarily associated with?

Real assets are primarily associated with non-financial assets that can be directly controlled. This category includes tangible assets like real estate, commodities, and land, which have intrinsic value and typically generate value through their physical presence or utility. Investors in real assets benefit from their ability to provide a hedge against inflation and can also derive income through rent or lease agreements for properties.

The characteristic of being directly controlled is significant because it allows investors to actively manage these assets, unlike financial instruments that may be subject to market fluctuations or are more abstract in their value representation. Real assets can offer diversification in an investment portfolio, as they tend to perform independently of traditional financial markets.

In contrast, claims to future cash flows represent financial obligations or interests, which do not have a tangible presence. Emotional investments pertain to personal attachments to assets rather than their financial viability, and purely financial instruments refer to assets like stocks or bonds that rely on market performance rather than physical control or intrinsic value. Therefore, the association with non-financial assets that can be controlled is what distinctly characterizes real assets.