WHAT RICH KNOWS AND WE DONT! PART-3

Asset types and examples

The general and simple kind of asset normal people can acquire are

Bank FD

Bonds

Debentures

Real estate properties

index funds

Sip in liquid mutual funds

Local chit funds

PMS (portfolio management services)

Let's say you purchase something as an investment and you think the intrinsic value of the product is going to increase in the future and you are planning to sell it for a higher price in the coming days, clearly those types of products or investments are called value appreciating assets. These assets basically increase your net worth over time and the actual fruits of these assets can only be obtained after a long period of time. the only drawback of these assets is, it is not easy to liquidate the asset suddenly during emergency times, doing so there is a high probability that gains earned over time may get wiped out.

The major examples for this type of value appreciating assets are real estate properties, valuable monuments, rare arts and value investing in any kind of business (shares of a company) etc.

Another kind of asset is called a dynamic asset, which is also considered a game-changer. basically, This kind of asset generates income regularly over stipulated intervals and also the intrinsic value of the asset appreciates over time.

Examples for this kind of assets are basically the IP's we own(the intellectual properties), patented inventions, setting up a startup(where you don’t work full time), Stock Market trading skills & etc. when you simply compare dynamic assets with value appreciating assets, majority of these comprises of the skills talents we possess rather than the product or things we simply own.

It's quite easy to own value appreciating assets but not the dynamic assets, it's not all easy to have dynamic assets under our asset column but still, our supreme goal should be to develop skills and IP’s in the field that we are interested in, and to come up with any sort of an asset which comes under the characteristics of the dynamic asset.

we have a broad understanding of different asset types and what type of assets we should concentrate upon. Now let's see some simple accounting diagrams that explain major topics shared in this series of blogs (courtesy- "Rich dad and poor dad") go through the diagrams slowly.

(Dividends are income generated from holding the shares of a company)

NOTE OF CAUTION

What makes a man rich is his excellent investment decisions, and what makes a rich man bankrupt is his wrong investment decisions usually taken due to the greed for getting rich quick, the example of Mr Anil Ambani shows the horrifying effects of bad decisions.

(And remember one thing that, the net worth of an individual is not equal to the net cash available, it is still possible that a person with 1 crore net worth may still not have than 1 lakh in his bank account)

Generally speaking, it's ok if you don't invest or manage money well, but if we make any wrong investments there is a very high chance that we may lose more than what we own.

(Risk hai tho Ishq hai!! Yes 100% true, but there is a formula to calculate your risk appetite efficiently 100 – x = riskable % of your total capital or assets)

Where x is your age.

The investments in the above-mentioned assets are rewarding and also they are subjected to high risk at the same level, recent examples are many private banks have gone bankrupt and all the accounts of these banks have frozen, so if you are interested in some private banks who are providing with higher interest rates than others, then not doing any research properly before dumping your hard-earned money puts you and your capital at a greater risk.

Finally, I am not a financial advisor and I have not got any formal education in the field of finance and management, all the things which I am sharing here are from the experience obtained from interacting with few experts and from a few good finance books and courses that I have undergone.

Disclaimer - before investing in any of the assets kindly contact your financial advisor or do your research properly

By this, we come to an end of the series what rich know and we don't, Hope it added some value to you. if you have any queries related to blogging kindly reach out at bos.solutions2021@gmail.com.

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