The Definition of Tangible & Intangible Assets

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Stocks and bonds are two forms of intangible assets.
Stocks and bonds are two forms of intangible assets. (Image: John Foxx/Stockbyte/Getty Images)

Until the 20th century, the world's economy was completely tangible. People could own only what they could see and touch. Tangible assets such as gold and silver formed the basis of currency, and real estate and commodities were primary investments. With the creation of stocks, bonds and other tradeable investment products came the beginnings of intangible assets. Today, intangible assets come in more varieties and form an important part of the global economy.

Physical Presence

Tangible assets can be seen and touched. In many cases, such as computers and equipment, you can pick them up, move them and even trade them. The thing that makes them assets instead of just objects is that they provide value and can often be sold or traded for cash. Traditionally, precious metals and gems have been among the most valuable tangible assets. In today's world, equipment, appliances, and vehicles are also important tangible assets.

Real Estate

Perhaps the most valuable tangible asset is real estate. Although it cannot be transported or moved, it is physical and can be traded in kind or for cash. In many of the world's major cities including New York, London, Paris and Hong Kong, real estate can reach incredibly high values. Real estate speculators and investors can make livings just from the trade of land.

Invisible Assets

They key to identifying intangible assets is that you can't see or touch them, yet you can own them. Investments including stocks, bonds, derivatives, annuities and money market funds are common intangible assets. The Internal Revenue Service, financial institutions and probate courts all include these financial instruments when accounting for your net worth. That's because they can be traded, sold and converted to cash.

Intellectual Property

Ideas too can be assets. Inventors and innovators can patent and trademark their ideas -- which legally turns concepts into property. Laws in America and many other countries prevent others from using or profiting off patented ideas, also known as intellectual property. Protected ideas form the basis of value for numerous industries including pharmaceuticals, entertainment, software and mechanical engineering. The first person or company to come up with an idea has the right to profit from it. This why, for example, only the Walt Disney Co. can make money from Mickey Mouse while other entertainment companies must develop their own characters. Mickey is an intangible asset.

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