What is a primary characteristic of financial assets?

The primary characteristic of financial assets is that they may fluctuate in market value over time. Financial assets, such as stocks, bonds, and derivatives, are fundamentally related to the performance of underlying entities or economic conditions. Their value is influenced by a variety of factors including market demand, interest rates, economic indicators, and company performance, leading to price volatility. This potential for value change highlights the inherent risk and opportunity in investing, making financial assets unique compared to tangible assets, which generally have a more stable and intrinsic value.

While tangible assets are associated with physical goods that hold intrinsic value, financial assets exist as claims or rights based on contracts and therefore are susceptible to market-driven changes. The mention of insurance and guaranteed returns are not inherent qualities of financial assets, as not all financial instruments come with these protections or assurances.