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What Are Trading Assets?

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum

Trading assets are investments that are held for the specific purpose of eventually reselling when and as it is possible to realize a certain amount of profit from that sale. Assets of this type are often held by banks and other types of financial institutions, as well as many businesses. By holding onto the trading assets until the demand within the marketplace is sufficient to offset both the purchase price and any costs associated with ownership of those assets, it is possible to set a sale price that is competitive and will earn a sufficient return to make the effort worthwhile.

The concept of trading assets is common in most nations around the world. It is not unusual for the central bank of a nation to hold a number of these assets at any given time, with bank officers and managers waiting for the ideal time to offer those assets for sale. In some cases, trading assets may be held for a number of years before they are offered for sale. More often, an asset may be acquired and held for only a short time before it is made available to other buyers, especially if events occur in the marketplace that suddenly increase the demand and the market value of those assets.

Man climbing a rope
Man climbing a rope

A wide range of investments may be classed as trading assets. Mortgage-backed securities are often part of this type of asset trading strategy, along with Treasury securities and even various types of interest rate contracts. In some settings, even assets like property may be classed in this manner, especially if the goal is to hold the property for less than a calendar year before offering it for resale. For example, a bank may purchase land in anticipation of plans to build a new mall in that general area, then sell the land to developers when three months later the construction of the mall is finalized and announced to the general public. At that point, the asking price for the land will increase quickly, allowing the bank to sell the real estate at a substantial profit based on the current market value.

As with any type of investment activity, trading assets are not free of some amount of risk. There is always the chance that something will cause the value of one or more assets to drop rather than appreciating. For this reason, investors who seek to acquire trading assets must evaluate the potential for an increase in value in a relatively short period of time, and compare those potential returns with the presence of any known risk factors. Doing so will minimize the chances of incurring a loss, allowing the investor to at least break even if the deal ultimately does not generate any real profits.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including WiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Learn more...
Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including WiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Learn more...

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