Hello All,
Can you please explain the difference among “tradable assets”, “investable assets” and “risky assets”? I googled these terms, but I couldn’t find anything. I would appreciate any help.
Thanks in advance.
I should think that tradable assets and investible assets are synonymous.
Risky assets are any assets other than the risk-free asset; i.e., any assets with a nonzero standard deviation of returns.
S2000magician,
Thank you so much for your response. Shouldn’t investable or tradable assets also be risky? Moreover, risky assets should also be tradable or investible. Isn’t it? Can you please elaborate a bit? This is a bit confusing.
Thanks in advance.
I think tradeable assets are those which are traded for short term trading purpose. And investible assets stay invested for long term . Risky assets as earlier said they have non zero standard deviation of returns. Risky assets may fall in any category like investing assets or tradeable assets .
You can invest in and trade the risk-free asset (at least, in theory; in practice, we use things like Treasuries as proxies for risk-free assets: they’re close).
Thank you S2000magician for your response. I am a bit lost here. If I understand your post correctly, every risky asset (necessary condition) is tradeable/investable (sufficient condition). Similarly, if an asset is tradeable or investable (necessary), its risk should be ascertained (sufficient). So there is bi-directional relationship between these “risky” and “tradeable/investable” thing.
Is my understanding correct? I have to be honest: I am a bit lost.
Thanks in advance for your help.
An investable asset isn’t necessarily tradable. One can invest in a private company but it isn’t tradable on an exchange and is considered illiquiid. A tradable asset is liquid and can be easily liquidated,.
Depending on the market there can also be restrictions on investment so while tradable for a local investor, there are restrictions on ownership limitting the ownership of foreign investors so while technically tradable it is not investable to foreign investors.
This is why index providers have local and foreign versions of their indices that take these restrictions into account.
Think they actually covered this distinction best in Level 3 (back when) when discussing indexing and how to define an index as needing to be observable, investable and tradable.
Both investible and tradeable asset can be risky and fall under the non zero standard deviation of returns . It all depends upon how frequently you trade in a particular asset . If you trade very frequently in the short run it is called tradeable asset otherwise if you invest for long term It is called investible asset.