Allow me to draw a straightforward breakdown about assets: assets you acquire either appreciate or depreciate. They do so for many reasons in either category, but the assets truly worth having tend to fall in the former category. If you hold assets that appreciate in value for enough time, you’ll go in the right direction toward building wealth. In other words, with time, assets either grow in value (appreciate) or lose their value (depreciate).
Capital appreciation means an asset increases in value, while depreciation means it is worthless as time goes by. With the exception of some rare, classic vehicles, it’s well known that cars depreciate quickly. If you buy a new vehicle and use it for a few years, it’s unlikely you’ll make more money reselling it than you spent on it.
Should You Purchase Assets that Appreciate in Value with Debt?
However, other assets gain value the longer you hold onto them. If you strategically purchase items you know will become more valuable, you can build substantial wealth through them. If an asset appreciates in value and is also functional, it can even be worth going into “good debt” for it.
Good debt occurs when you spend money on something that yields a return greater than what you paid. For example, student loans that secure a degree necessary for a high-income job you land might be considered “good debt.”
Bad debt takes your money without repaying it in some way, such as gambling debt. Below are some of the top assets that appreciate in value and can be used to build notable wealth.
→ Stocks
Shares of stocks represent partial ownership of a company that trades publicly on the open market. When chosen strategically, stocks can appreciate significantly. Some stocks carry greater volatility than others, meaning they represent riskier investments.
For example, penny stocks are notorious for sudden fluctuations and can rise and fall by a high percentage of their share value within a single day. For expert traders, this volatility can make them substantial gains, but there is also the risk of just as substantial losses.
A safer way to build wealth comes from investing in reputable companies that have proven to provide high returns. People who did their due diligence in choosing the best stocks over the last eleven years have made major gains. For instance, during the previous eleven years, the popular high-end athletic clothing brand Lululemon has had a return of +9,635%.
The eleven-year change for Nexstar Media Group, a television broadcaster that reaches 63% of American households, came to +18,262.3%! While these numbers do not represent every stock over the same timespan, they do represent possible outcomes.
As a result of the new reality created by the Coronavirus, investors have strongly preferred tech stocks likely to outperform like Apple, Tesla, and more. They do so in hopes of building significant wealth in the long-run. Make sure to research stocks with the best apps and tools thoroughly before purchasing.
You buy stocks through numerous types of investment accounts. I recommend using the online brokerage platform Webull. Through Webull’s app or website, you can gain access to thousands of stocks and they charge no commissions to trade them.
The platform provides in-depth charts and top trading tools so you can make informed decisions on which stocks to buy. Users receive a free stock just for signing up and funding their account with as little as $100. This can represent an easy way to learn how to start investing with little money.
→ Real Estate
Real estate acts as one of the most popular assets people purchase that appreciates in value. While the market fluctuates, real estate value historically goes up as time passes. There are many different avenues to consider if you’re interested in building wealth through real estate.
Purchasing a house can be a wise financial decision because it’s a functional investment. As your home increases in value, you continue to have a place to live. Home values often outpace inflation, especially in growing cities. Other forms of real estate, such as commercial real estate or office buildings, are things that appreciate as well.
However, buying an entire apartment complex or large office building often poses too great of an investment for most retail investors. If you want to own a stake in a property you wouldn’t be able to afford on your own, consider investing in crowdfunded real estate.
In this situation, multiple investors pool smaller amounts of money to own a proportional stake in the property, mortgage, or portfolio. Investors receive dividends as well as gain from the property’s appreciation when sold.
Fundrise is likely the most well-known and trusted platform for people who want to invest in crowdfunded real estate. Fundrise investors have funds containing multiple real estate assets. As individual assets appreciate or depreciate, the overall fund’s value adjusts.
For example, one might invest $1,000 and receive dividends over the course of the next year. Additionally, because the properties increase in value, the funds may then be worth $1,100 even without reinvesting dividends.
Using passive income apps like Fundrise allows investors to take advantage of real estate professionals, rather than spending endless hours researching on one’s own. These professionals identify the best properties to invest in based on sales comparisons, public infrastructure investments, demographic changes, and more. Investors can get started on Fundrise for as little as $500.
Another way to invest in real estate without buying entire buildings is through real estate investment trusts (REITs). REITs, companies that own (and usually operate) passive income-producing real estate investments, typically trade like public stocks. You choose a promising REIT and invest in your chosen amount of shares.
You have a likelihood to receive dividends and you can sell your shares at any time. Usually, the longer you wait, the more your shares have gone up in value and the higher your profit will be. Publicly-traded REITs list on major stock exchanges and you can purchase shares through brokers.
I recommend checking out the commercial REITs on Webull, especially if you already use their website or app to purchase stocks. The platform provides useful information about each REIT, such as the current price, market cap, analyst ratings, and more. It’s also possible to open an individual retirement account (IRA) on the platform, which is useful if that’s where you ultimately plan for your REIT earnings to end up.
→ Gold, Silver and Gemstones
Not only are these common jewelry elements beautiful and functional (if worn), but they also tend to appreciate in value. Gold tends to go up during inflationary times and during times of economic and financial stress. This means that when the U.S. dollar loses value, people turn to the security of gold and, in turn, gold prices rise.
You can purchase this alternative investment option directly as bars or coins. Alternatively, companies offer exchange-traded funds (ETFs), such as the SPDR gold trust, to invest in companies which closely track the price of gold.
Silver receives less press coverage than gold, but may act as an even better investment because it has more practical applications. Silver also carries a lower price point, therefore making it more accessible to invest in than gold. Like gold, you can also purchase silver outright or through silver ETFs.
Gemstones historically rise in value over time, even when the stock market is down and currencies lose value. Some of the top gemstones, in terms of appreciation, include:
- Rubies
- Blue Sapphires
- Emeralds
- Spinel Gems
- Tsavorite Garnets
- Spessartite Garnets
This is not an exhaustive list. Whether you inherited precious gemstones or can acquire them cheaply, they will likely carry higher prices in the future. If you choose to invest in gemstones, check with a certified gemologist to ensure your gems are genuine.
Also, see here for advice on how much to spend on an engagement ring.
→ Rare Art
If you prefer to look at paintings over jewelry, collectible art may be an investment you should consider. When looking into building wealth, not all art investments are created equal.
It’s important the art you invest in comes with certificates of authenticity. Additionally, fine art will most likely increase in value if a well-known artist created the piece. This applies especially to an artist who has passed away and therefore cannot release new pieces.
Buying famous artwork on your own carries a high price tag and comes fraught with risk for those without the knowledge of the industry. To reduce your costs and risk, you may want to consider using Masterworks or a similar platform. Masterworks allows you to purchase fractional shares of ownership of famous paintings. For example, you might have partial ownership of a painting done by Claude Monet.
Masterworks’ expert art collectors specifically choose paintings they believe will have the highest appreciation rates and lowest risk. This is a wonderful option for people who want to invest in art, but don’t know how to find private buyers on their own, don’t have the funds to purchase these costly works of art, or aren’t sure how to store them properly.
The minimum investment to get started through Masterworks is $1,000. It should be noted that this type of asset is illiquid and can’t be sold as quickly as other appreciating assets. If you’re passionate about art and looking for a long-term investment, you may be able to capitalize on blue-chip paintings appreciating in value.
→ Fine Wine
You don’t need to be a wine connoisseur to understand why fine wine can be a worthwhile investment. Wine often increases in quality as it ages and that makes it more valuable.
With rare wines, supply and demand works in your favor. Only a finite amount of wine is produced in specific regions each year and as people drink that wine, the supply diminishes. As demand increases for the dwindling supply, the price people are willing to pay for it rises.
Fine wines usually deliver long-term, stable growth. Wine does not correlate strongly with the economy and can hedge against inflation and economic recessions. The U.K. government considers wine with a lifespan of 50 years or less as a “wasting asset” and therefore doesn’t typically qualify as taxable income. If the wine counts as a “wasting asset” in the U.S., you shouldn’t need to account for wine as taxable income, which helps with your overall profit margins.
Unfortunately, you can’t simply buy a bargain wine from the grocery store, stick it in your basement for a few years, and expect profits. If you want to make money from wine, it needs to count as rare, authenticated wines which investors store in optimal conditions. Unless you already have vast knowledge about wine, and a professional storage setup, I recommend using the app Vinovest.
Vinovest ensures wine authenticity, stores it for you and ships it to buyers. Investors simply need to select an investment style, fund an account with a minimum of $1,000, and patiently watch their account balances grow. Vinovest charges annual fees of 2.85% (or 2.5% for balances over $50,000).
If you decide you want to drink some of your rare wine yourself, Vinovest will ship it to you for free. To learn more about the service, read our Vinovest review.
Buy Assets that Appreciate in Value
To get ahead and secure a safe retirement, you must save money. However, you also want to invest your money in assets that will appreciate in value. Inflation can decrease the value of your savings because prices usually go up in the future.
While tempting for their risk-free nature, the interest earned in a high-yield savings account or certificate of deposit (CD) can balance out what you lose to inflation, but not always. Even above-market yielding assets like secured P2P loans through Constant stand can fall behind a diversified, long-term oriented investment portfolio.
Comparatively, many assets rise in value quicker than inflation and become worth more the longer you hold onto them. Some of the best investments for young investors, such as your private home, have a practical use as well. Additionally, if your appreciating asset provides dividends, you can earn money even before selling your assets.
To build wealth, try to avoid depreciating assets (unless they qualify as functional) and obtain assets that will appreciate in value. Diversification counts as a key to successful investing, so consider which assets complement each other well enough where if one declines in value, another makes up the difference.
The sooner you purchase appreciating assets, the more time works in your favor for them to increase in value as much as possible.
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This post was previously published on Youngandtheinvested.com.
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