What kinds of assets are out there?

The first step to identifying the best way of investing  your hard-earned money is to understand what  different kinds of assets are  out  there. 


While  most  people  will  tell  you  that  there  are  only  two  kinds  of possessions: assets and liabilities, in reality our classification system is much more subtle.  We  need  to  take  into  consideration  two  factors  when  we  examine  any given  investment: 1) its value and 2)  whether or not  it puts  money in our pocket each month. Let’s look at both of those factors in more detail.

When  you  think  of  making  a  major purchase, like a house or a car, you may be thinking  that  the  item  should  be  classified as  an  asset  because  of  its  implied  value.

Well,  while  that’s  what  the  conventional  wisdom says,  the  truth  is  that  not  all  assets  are  created  equal.  For  example,  as soon as you drive  a  brand new car off the lot, it loses a significant portion of its value.  Some experts say that  a new car  loses about 11%  of its value the instant you  drive it  home  and  up to  33% after two years  have passed. And new devices, like laptops,  are  quickly  outdated  and  replaced  by  newer  models.  So  taking  the two  factors  we  mentioned  in  account,  let’s  try  to  put  common  assets  into  four categories: GREAT, GOOD, OKAY,  and TERRIBLE.

We’ll have a look at them, starting with the worst, over the next few blog posts.

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