Appreciating Assets That Bump Up Your Net Worth - 10 Examples
However, some assets go up in value, known as appreciating assets, while others go down in value, which are known as depreciating assets.
If you want to increase your net worth and your monetary value through collecting assets, then you should ensure that you invest in appreciating assets rather than depreciating ones.
The purpose of this article is to first define exactly what appreciating assets are, before walking you through 10 different examples of the most commonly obtained assets.
And without further ado, let’s get straight to it.
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What Exactly Are Appreciating Assets?
Appreciating assets is basically an umbrella term used to describe any asset that tends to increase in value over time, and therefore increasing the net worth of the owner of these assets.
But, it’s important to note at this point that while appreciating assets are generally expected to increase in value, these assets remain susceptible to market conditions and the health of the economy.
10 Examples Of Appreciating Assets
As promised, here follows descriptions of 10 of the most common appreciating assets. They aren’t listed in any particular order, and can vary in value depending on a number of different factors.
Real Estate Or Property
One of the more common assets that people like to invest in is real estate, since there will always be a demand for land and buildings, whether for housing, commercial use, or elsewhere.
On the whole, real estate does rise in value over time. However, when the housing bubble burst in 2008, this demonstrated that investment in real estate is not 100% foolproof, and there is an element of risk involved.
Real Estate Investment Trusts (REITs)
Investing in Real Estate Investment Trusts, or REITs, is much like investing in real estate, but without you having to dedicate time and effort to flipping properties (usually commercial real estate and apartment buildings) with a view to making a profit from them. It’s a means of passive income.
A REIT is basically a pool of money used to purchase and occasionally sell real estate properties. Those who choose to invest in a REIT will receive a steady stream of income in the form of dividends.
Even low value savings accounts with a low interest rate can be considered an appreciating asset. What’s more, it’s also considered one of the safest appreciating assets you can put your money in.
That said, however, even the savings accounts with a relatively high interest rate (of up to 3%) don’t always keep up with the rate of inflation. So, although it’s a very safe asset, it isn’t always a particularly profitable one.
A bond is basically a debt of a company or government department, where the debt is owed to you as part of mutual funds. You will receive your share of the interest paid on the debt.
The catch is that you will have to wait for the bond to mature, which can take up to ten years, at which point the bond can be repaid in full.
Bonds may be a slow appreciating asset, but they tend to be a safer investment than stocks and shares.
When you invest in stocks, you’re effectively becoming a part owner of the company. And this means that you’re entitled to your fair share of the profits, known as dividends.
There is no limit to the number of companies you can invest in. But there is an element of risk, you can’t always predict how well a company will perform financially.
A commodity can be defined as “a raw material or agricultural product that can be bought and sold”.
Examples of commodities can include oil, gas, grains, gold, or silver. So commodities are a rather broad category.
Again there is risk in investing in commodities because the value of them can go up and down, although on the whole they tend to be considered strong appreciating assets.
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Private equity is basically your slice of the pie when you invest money in a private firm. The larger your proportion of company ownership, the greater proportion of the net worth of the company you can consider your own.
This is one of the riskiest types of appreciating assets that you can invest in. And it typically requires a large amount of capital.
Certificates of Deposits (CDs)
Certificates of deposits allow you to deposit money in a bank for a fixed period of time (known as a term), and you will receive it back with interest on top at a fixed interest rate.
Any certificate of deposit you put your money into will be insured by the FDIC up to a quarter of a million dollars.
Owning A Profitable Business
Becoming an entrepreneur can be very rewarding, even if the business doesn’t necessarily do as well as you would hope.
And if you were to start a business that really takes off early on, you may soon be in a position to employ other people to take care of the running of the business for you.
Also read: 5 Ways A Renter Can Show Proof Of Income
There are many collectors items that can increase in value over time. This can include anything from vintage cars, wine, art works, coins, trading cards, and more.
Now you know of 10 different types of appreciating assets that you can seek out to boost your net worth, because these assets are expected (but not guaranteed) to increase in value
It’s hard to say whether one asset is truly better than another. Many investors choose to diversify their portfolio by choosing more than one appreciating asset to invest in. And this prevents putting all your asset eggs in one basket, which in turn helps to mitigate risk if one of the assets should start to decrease in value.
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