What are the main assets to grow wealth?
Firstly, currencies or cash deposits facilitate the purchase of assets to fortify your wealth.
Asset puts money in your pocket, and liabilities cost you money.
The more assets you have making money for you, the richer you are
Cash is the most liquid asset and falls within the assets category because bank cash deposits earn interest.
But there is a downside to cash deposits at a bank, in that the interest doesn’t keep up with inflation.
“Asset puts money in your pocket, and liabilities cost you money”
WIN INVESTING
Why is cash at the top of the assets list by the wealthy?
Put simply, cash enables you to access opportunities that present themselves. Those holding cash in a recession can buy other assets at a discount. For example, if an opportunity arises to buy a waterfront property, which is limited in supply and appreciates over time, making it a solid investment, and you have cash on the sideline, you can make the purchase.
Peer-to-peer lending offers 15 to 20% interest on your cash, offering a higher return than a bank deposit.
So if you are low on income and willing to take a higher risk with your cash, peer-to-peer lending, sometimes called crowdlending, could interest you.
Here are the best P2P lending platforms.
But note that higher returns equals higher risks.
“Peer-to-peer lending offers 15 to 20% interest on your cash, offering a higher return than a bank deposit”
WIN INVESTING
Real estate comes second on the list of top assets investors purchase for building wealth
Most would agree that real estate has been their best investment.
Real estate as an investment provides capital appreciation and rental income.
Technology has facilitated owners the ability to make short-term rentals for higher yields.
Real estate appreciates due to scarcity, and since shelter is a necessity, demand for homes always exists.
The macro trend of remote working increases demand for areas outside the metropolis.
Real estate can be residential buildings, office buildings, Commercial buildings or land, farmland or land for development or left for appreciation.
“bonds are not a riskless investment” – Win Investing
Bonds come third on the list of assets for retaining and growing wealth
A bond is a fixed-income instrument and investment product where individuals lend money to a government or company at a given interest rate for a specific time.
The bond issuer repays individuals with interest in addition to the original face value of the bond.
Government bonds are less risky than corporate bonds.
But bonds are not a riskless investment.
The purchasing power of the bond investment deflates away if the inflation rate exceeds the bond yield.
The maturity risk of a bond is the unanticipated inflation over the bond’s maturity date.
So, the shorter the maturity date, the lower the risk to the bond investor.
US sovereign debt treasuries are perceived to be low risk due to USD reserve currency status.
Treasury bills, with a minimum maturity date of 1 to 364 days, are the lowest risk, as good as cash.
Treasury notes between 2 and 10 years have a lower maturity risk than treasury bonds with a maturity of 10, 20 and 30 years.
You can buy bonds directly from the treasury department or a brokerage firm.
Stocks and mutual index funds should also be in your portfolio of assets for building wealth.
Some prefer mutual index funds to individual stocks.
Buying individual stocks and consistently winning over a long time frame is very difficult, particularly if you have limited time for researching and have limited or no contact with the directors.
Individual stock pickers statistically lose money over the long term.
Mutual index funds bring multiple companies together to mitigate risks by buying into an entire basket of companies.
These mutual funds include Fidelity Zero Large Cap Index, Vanguard S&P 500 ETF, SPDR S&P 500 ETF, Ishares Core S&P ETF,
With index funds, when a company falls off the top 500 S&P, it gets replaced with a new, better-performing one.
Index funds should be in everyone’s portfolio who wants to build long-term wealth.
The average annualised total return for the S&P 500 index over the past 90 years is 9.8%.
Equipment and tools are all assets which build wealth
If you are a farmer, your tractor is an asset for a programmer, the laptop is your asset, and if you are an Uber driver, your car is an asset.
“Gangnam Style bagged over 10 million dollars just from that song, laughing all the way to the bank” – Win Investing
Patents and trademarks are also assets wealthy people own to build their wealth
If you invent something new, your intellectual property is an asset which can be protected by filing a patent.
A patent is a document listing you as the inventor, describing in detail what your invention does.
A single patent can make you rich, as most of the best inventions have patents.
Raw materials and commodities are assets which can build wealth.
Like everything, the knack of wealth building through commodities is buying them at the lowest price and holding and selling at higher prices when demand is high. This applies to everything from currencies to precious metals, cryptos, classic cars and art.
Over the past 15 years, the price of gold has increased by 278%.
Art and classic cars have been outperforming S&P for the past 20 years, which is why wealthy people have been investing copious amounts of money into them because it has made them even wealthier.
The same applies to other collectables like luxury watches.
Other assets include your property rights to your intellectual property
Books, songs, and digital courses can be sold multiple times and are instantly scalable. No genius is required to reinvent the periodic table.
Gangnam Style bagged over 10 million dollars just from that song, laughing all the way to the bank.
The lyric writer of “All I Want for Christmas” makes half a million dollars every year from royalty, and that song alone has made her over 60 million dollars.
So assets are the vehicle to building wealth, and the more assets you own minus the liabilities determines your wealth.
