Investing in assets, is it profitable? Like most people, I thought assets were about anything that has cash value. However, that’s not the right way to look at it. If you want to get rich, you have to treat your household finances like those of a business. An asset is something that can generate cash flows in the future. Assets are or generate money for you. Anything that takes money out of your pocket (cash or bank) is a liability. Things being clear, I will tell you about the most profitable assets in terms of investment.
I’m sure you’ve heard that your home is your greatest asset. Is it true ? When you buy a house, you will need to pay the mortgage, property tax, insurance, utilities, repairs and maintenance, yard work, and water and electricity supply. That’s a lot of money that needs to come out of your pocket every month. Sure, the house can appreciate, but would the appreciation be enough to exceed all the expenses?
A house is a good investment because it forces you to save. Part of the mortgage payment allows you to accumulate cash. And you will get it back when you sell. It’s good to have a lump sum in the bank and a house is a valuable guarantee. Most people use it as a down payment for the next home.
Investing in assets such as stocks can be a smart way to grow your money. Shares are issued by corporations. If you own all the shares of a business, you own the business. Most company shares are not traded on a stock exchange.
An investment in an unlisted company can be rewarding. But turning your investment into cash is much more difficult than with an investment in a publicly traded company. You will therefore have to demand a higher return for this type of investment.
As a shareholder of a listed company, you have two kinds of rewards. you receive :
Some people invest in commodities like gold, silver, iron, wheat, cocoa, oil, and timber. Commodities do not pay you income. In fact, some of them cost you money.
People invest in them with the expectation of realizing a capital gain. Physical commodity prices can be quite volatile. And they are unpredictable because of speculators who influence the situation in their favor. All this makes investing in materials generally high risk.
Hedge funds can invest in commodities. But they tend to invest in derivatives, financial contracts. These contracts can take many forms and give you the right to buy or sell the asset at a fixed price in the future.