When talking about appreciating assets, what’s the first thing that comes to mind? Building net worth. Appreciating assets are things that become worth more as time goes on, helping you increase your total wealth.
Investors have unlimited options when it comes to assets that appreciate in value. Choosing the best assets is not the only factor that you have to know, understanding how they work is also important.
Appreciating assets is like a double-edged sword, think about the sword as the economy. When it grows, so do our assets. When it declines, so do our assets.
In this article, we have one goal and that is to share with you how appreciating assets are the key to creating wealth, lifetime income, and financial freedom.
What Is Net Worth?
Net worth is the value of your assets minus your liabilities. It’s basically everything you own, from financial to non-financial, minus everything you owe.
Your net worth defines your financial status.
It is the number you get when you add everything you own from your home up to the money in your bank account, then subtract the total value of all of your debts. It could be mortgage, student loans, car, medical debt, or credit card loans.
If you want to know how much is the net worth you have to learn first how to calculate it.
How To Compute Your Net Worth
How to calculate your net worth? It’s quite simple. To compute your net worth, you will have to do an inventory of all your assets and your remaining debt. Every single thing you own, even those things that you are still paying for, such as your house, car, or appliances.
Suppose you have a house with a market value of $300,000 and your loan balance is $200,000, you can add the remaining $100,000 to your net worth. That’s the part of your home that’s yours.
Net Worth Formula:
ASSETS – LIABILITIES = NET WORTH
One exception that could not be added when computing your net worth is your income. Why? That’s because you still have to pay your bills and other expenses. After you settle that, the remaining amount will be included in the net worth.
You may have a huge paycheck but once you spend most of your money to pay bills and other recreational expenses, there may be little left to add to your net worth. On the contrary, people who buy appreciating assets are accumulating their wealth. It’s like the difference between rich vs wealthy.
Is 401(k) Included When Computing Your Net Worth?
Yes, your retirement accounts are assets too that are included when computing your net worth. Retirement-plans are among others a 40lK, IRAs, traditional pensions, and taxable savings accounts.
Why do you need to know about your total assets? There are two important reasons:
- First, it lets you know about your present financial situation.
- Second, it provides you a starting point to estimate how much progress you have made since the beginning and how far are you from your short-term financial goals.
Your net worth grows as you keep on earning and saving. Now if your resources are still low or you’re in the red, that means you need to do more saving than spending. Check the progress on your net worth and calculate it from time to time, once or twice a year.
What Are Appreciating Assets?
What are appreciating assets and why are some people into them? Appreciating assets increase their value over time, like stocks, currency, bonds, or real estate.
Most of your assets are used to merge and increase wealth, which will mostly appreciate over time. An asset can appreciate due to supply, demand, and adjustments in interest rates.
Appreciating assets are a leading factor in increasing your resources. Owning and investing money helps the process of accumulating a huge amount of wealth.
Appreciating Assets: The Key to Financial Freedom
Is one of your goals to be financially independent? Then appreciating assets is the key to achieving that. Building your net worth may seem a difficult task to accomplish, but with appreciating assets your success is a whole lot closer.
In order to do so, you need to level up your plan to increase your finances, and investing will play a crucial part in reaching your goals.
How do Appreciating Assets Work?
Assets can either be material or not, but it is always something that has a value and a price. An asset can go up or down in price, which happens to depend on the supply and demand of that asset.
To further understand appreciating assets, know that it has the capacity to go up in value gradually. You have to be aware, however, that assets can go down in value over time as well. These depreciating assets are declining in value over time and generally purchased for entertainment purposes instead of financial strategy.
23 Examples of Appreciating Assets
So what are those appreciating assets that you can add to your investment portfolio? Here are a couple of assets that you might like and can use to build your wealth.
1. Rental Properties
Residentials like single-family homes and condos can be easily modified into rental units. They are a great way to generate passive income assets. When you buy a property with a small portion of your capital and the rest will be a mortgage from the bank, you can make money by renting it to a good tenant.
Your rental income will make a valuable cash flow. Suppose your rent charge is higher than the costs of your mortgage, property taxes, and other expenses. It will be one of the ways to achieve financial freedom.
As the years pass by, residential homes and condos will become more profitable as your occupant is the one paying off your bank loan. Other than that, real estate costs go up and your home equity tends to increase over time.
Now it will be more beneficial for you to sell and cash out, or you can refinance the property and purchase more assets.
Stocks are very much the same with real estate, the difference rests on how much the stocks grow largely over time. Stocks are like owning a small portion of a corporation that is divided.
For instance, you buy one share of Amazon stock, that would mean you own a small percentage of the company. But that does not mean you will have any control of the company, with just one share you won’t.
It can be possible to buy more shares to have the support of the company and can help them make informed decisions. Stocks have a vital weakness too, businesses are also unstable and don’t always increase in value.
Most people would assume that investing in stocks is too risky and it takes too much time to earn. Investors on the other hand use a strategy short selling a stock, it is an advanced plan that they use when they are expecting a decrease in the stock.
3. Rent Out Extra Room, Parking Spot, Or Storage Room
Another way to make use of those spare rooms, parking spaces, or basements is to consider subleasing it. This has become popular in major cities like New York, San Francisco, and Los Angeles.
Spare rooms also became in demand. If you have a spare closet or basement, then you may be able to rent it to store items. And for parking spots, where everybody wants one, you can consider renting it out for consistent cash.
4. Crowdfunded Real Estate Investments
Crowdfunding is where you can invest in real estate assets to build your wealth. Investments like these are necessary means for people to fund larger real estate assets that you don’t have access to such as commercial buildings or complexes.
5. Real Estate Investment Trusts (REITs)
As discussed before, real estate investment trusts are companies that fund a portfolio of properties. They are famous in generating assets for both American and Canadians. These companies are widely known for producing long-term, steady revenue.
Real estate investment trusts (REITs) are some of the largest real estate companies in the world. They own tens of millions of rentable square feet.
They focus on properties that produce income where tax laws motivate them to distribute most of their earnings to their investors. REITs tend to keep away from raw land or long-term development projects.
Number 6 on our list is bonds. Bonds are liabilities capable of being purchased by investors in exchange for regular payments with a fixed interest rate and maturity date.
Since bonds pay you money over time, they are regarded as an appreciating asset and perfect option for creating wealth.
There are different types of bonds such as corporate, treasury, or municipal. Each of them has a variety of offers in maturity dates, interest rates, and ratings.
If you have accepted a savings bond that would fall under a treasury bond issued by the United States Government. Because the United States government has a strong credit, the interest you will increase will be minimal but your risk is very small.
7. Mortgage Investment Corporations (MICs)
These assets are an unfamiliar investment driver that serves as an essential income generated asset. They are exclusive to Canada and they invest more on mortgages.
Mortgage Investment Corporation (MICs) doesn’t pay taxes since 100% of the tax burden is passed towards the stockholder. Although they can be held within tax-sheltered accounts like Registered Retirement Savings Plan (RRSPs) and tax-free savings accounts (TFSAs).
For you to be qualified as a Mortgage Investment Corporation under tax legislation, your company must meet a specific set of criteria. In particular, invest at least 50% of its assets in residential mortgages, cash, or insured deposits. However, All investments should be created within Canada.
8. Mutual Funds
A mutual fund is a group of assets that pools money from many investors and invests the money in securities such as stocks, bonds, short-term debt, and other treasuries that increase in value and are well diversified.
Mutual funds can be bought through many brokerages as well as stash, one of the interesting investment platforms. Mutual funds are a powerful appreciating asset because of how differentiated they are.
For those who are new to investing, mutual funds can be a great start for you to grow your money and net worth.
9. Syndicated Mortgages
Syndicated mortgages are real estate-secured loans that are owned by numerous parties. For instance, a group of 15 people gives $50,000 each and creates a $750,000 loan. As for the other mortgage loans, the one who lends will profit from fees and interest payments.
Mortgage syndicates are different from Mortgage investment corporations and other mortgage funds. They are businesses that investors own shares in and invest in individual loans.
They are often run by administrators, who make the informed decision on behalf of the group. Voting powers of investors rely on how much capital they provide to the deal.
10. Exchange-Traded Funds (ETFs)
They are very much alike to mutual funds and with that they are often considered as a group of shares or other assets that hold together. The difference between the two is that mutual funds are more actively managed, while the exchange-traded funds are inactively managed.
Exchange-traded funds (ETFs) are more likely to have small fees making it a perfect deal to make your money work for you.
11. Peer-To-Peer Lending
Peer to Peer lending (P2P) has developed in search of large bank withdrawals from unsecured business loans. Peer-to-peer lending firms bind retail lenders with borrowers online.
On the other end, when a borrower applies for a loan. Once approved, the peer-to-peer lending platform then sells the interest in the debt to the investors. The loans are generally syndicated into small amounts.
For investors, the result has been access to an income generating asset that was traditionally reserved for banks. With these, they can simply join in interest payments produced from loans. In which will be paid every month or quarterly.
Borrowers can also benefit from access to newfound capital. It’s a win-win!
12. High-Yield Funds
In general, funds produce interest, it may not be as high as mutual funds but it still adds up making it an appreciating asset. High-savings accounts offer upward of interest yearly, it is higher than the common savings account.
Its interest rates change depending on the current market rates. Aside from that, having a high-yield online savings account will pay you interest on your cash balance. Just like with the traditional savings account earning money at your bank can also be convenient for high-yield funds such as accessible vehicles for your cash.
The great thing about it is it has fewer overhead costs, you can usually earn much higher interest rates at online banks.
13. Investment Funds
Investment funds are businesses that share money from different investors, most of them are from a big corporation and sometimes they have to reach a certain number of people like hundreds or thousands before deploying it into an asset.
The Investment fund has an objective of earning a financial return for investors, less than the management fees and expenses. There are funds that concentrate on producing revenue for their investors and to have a strong income generating assets.
Investment funds can either be private or public, there is a lot of trade on the stock market that can be bought using a brokerage account.
There are many currencies that can be considered appreciating assets. They are the most common ones where everyone has knowledge of it. Investing in it can be a bit risky as there is no specific return on investment.
Here are examples of currencies that you can invest in the United States Dollar (USD), EURO currency, the Japanese Yen, and the Great British Pound.
15. Short-Term Corporate Bonds
If large businesses are appreciating assets, short-term corporate bonds are too. Corporations often increase money by issuing bonds to investors, and these can be wrapped up into bond funds that are bonds issued by hundreds of corporations.
Short-term bonds have an average maturity of one to five years, which would make them less liable to interest rate fluctuations than intermediate or long-term ones.
Corporate bonds can be a perfect choice for investors that are looking for cash flow, for instance, those who are thinking about early retirement or retirees. Although short-term corporate bonds sound almost perfect for retirement plans, it can be a good risk-averse for investors who want a bit more flexibility than government bond funds.
16. Private Lending Companies
In case of shortage of money, banks are no longer the only option to go to but rather in private lending companies. Businesses are no longer controlled by banks, private lending companies or they call themselves “middlemen” are the ones who will take care of it for you.
A hard money loan is those that is backed by collateral, mostly titled properties, vehicles, or something that has a certificate with value. If the borrower fails to pay, according to the loan agreement or promissory note, they can attempt to retrieve your capital by taking the asset you secured it against.
Lands are very much the same with home and other real estate assets. Lands are appreciated in value faster when the supply is low. When land becomes scarce, it will be appreciated and makes you earn money.
Investing on land has the same requirement as a mortgage, doing so you will have to provide a deposit and a proof of income to support your monthly payments. Purchasing a land can add value to your net worth.
18. Master Limited Partnerships (MLPs)
Master Limited Partnerships are American business structures, they are publicly-traded tax, tax-efficient companies that mostly invest on real estates and resource-based projects.
Some of the examples are mines, energy projects, road widening, and pipelines. Master limited partnerships are similar to royalty funds, the difference relies on the focus on generating revenue for businesses and known as providing investors with consistent cash flow.
19. Dividend Stock Fund
Having a stock market investment is safer with stocks that pay dividends. Dividends are sections of a company’s profits that can be invested to shareholders quarterly. With a dividend stock you only not gain on your investment through long-term market appreciation but you will also earn money in the short-term.
If you purchase individual stock whether they pay dividends or not, it would still be best for intermediate and advanced investors. You can also buy a group of them in a stock fund and have lesser risk.
Cryptocurrency is a digital electronic-only currency that can be used to purchase goods and services. Cryptocurrency uses an online ledger with powerful cryptography to secure all online transactions.
In the last decade, cryptocurrency became popular because of Bitcoin. Bitcoin is widely known as the leading digital currency. Crypto became valuable in recent years, as dollars soar into the asset the prices skyward and drawing even more traders.
Bitcoin’s prices change a lot and that is why there are a lot of traders attracted to it. Contrary to the listed assets, cryptocurrency is not funded by the Federal Deposit Insurance corporation (FDIC) or any profitable government agencies or companies.
21. Vintage Car
Vintage, historic, or classic cars are one of the most popular appreciating assets. As the time passes, cars increase in worth.
Depending on the kind of vehicle you own and the state they’re in, you may earn up to $1 million for a car.
Have you ever thought about why our grandparents, uncles, or your aunts love collecting stamps? Well this is it! Stamps are collectibles that increase its worth over time. The rarer it is, the more value it has.
23. Non-Fungible Tokens (NFT)
Lately, the newest type of investment is the non-fungible tokens, they are similar to collectible cards and cryptocurrencies. In other words, a non-fungible token (NFT) is a digital asset that can be bought and sold.
Examples of non-fungible tokens (NFT) are digital artwork, sports highlights, and other digital possessions.
That’s a long list! Now that you have some ideas you can start planning on what assets would suit you or what assets that you have that you can use for investments.
Appreciating assets are goods, services, holdings, or estates that increase in worth over the years. It is a major pointer in building your personal wealth and in achieving your financial goals in life.
How do appreciating assets help build your net worth? As they grow over time, your wealth grows too. As the price increases your earnings too will rise, and it will be added to your net worth.
As you compute your net worth from time to time, you will notice a difference that could be depending on the economy. Investments have advantages and disadvantages that is why there are a lot of options to choose from when appreciating assets.
You don’t have to wait to start investing in assets that can be appreciated, choose the one that befits your target and resilience. Let your money do the work for you!
Founder of Spark Nomad, Radical FIRE, Journalist
- Expertise: Personal finance and travel content
- Education: Bachelor of Economics at Radboud University, Master in Finance at Radboud University, Minor in Economics at Chapman University.
- Over 200 articles, essays, and short stories published across the web.
Experience: Marjolein Dilven is a journalist and founder of Spark Nomad, a travel platform, and Radical FIRE, a personal finance platform. Marjolein has a finance and economics background with a master’s in Finance. She has quit her job to travel the world, documenting her travels on Spark Nomad to help people plan their travels. Marjolein Dilven has written for publications like MSN, Associated Press, CNBC, Town News syndicate, and more.