Who doesn’t want to build wealth and who doesn’t want to do so quickly? Unfortunately, there is no quick fix or magic sauce when it comes to building wealth quickly; a high degree of financial wealth may be attained but over a long period of time by human standards. One of the ways this wealth can be reached and maintained is by taking account of how your wealth is broken up. One of the essential distinctions to make when assessing your wealth involves your assets. There are two primary classifications for your personal assets: real and financial. Real assets refer to physical components of your wealth that add to your overall financial value. Examples of this include land, your level of knowledge and education, a house, gold, silver and more. On the other hand, financial assets refer to the output of the financial sector: stocks, bonds, derivatives and contractual business-related assets (ownership levels, stakeholder rights/powers, etc.).
MBA/CFA candidate Yelian Garcia of Toronto has amassed significant knowledge relevant to managing assets and building wealth. Yelian says it is crucial to understand the differences between these asset categorizations, as knowing how each of them function can allow you to store your wealth in more effective and secure ways.
With all of this in mind, here is Yelian Garcia’s breakdown of various ways you can store your wealth using these asset distinctions.
According to Yelian Garcia and other financial professionals, it is so important to know that the intangibility and fluidity of these assets means that values and, thus, your wealth can change through them. Do you hold a sizeable investment in a company? Well, that’s a financial asset that, should the company fail, will directly impact your wealth negatively. This is how you can store your wealth in various stocks and other financial instruments. Yelian Garcia urges individuals to remember that you need to be extremely careful when considering investment shares and make consistent assessments. Financial and insurance experts like Yelian understand the value of holding on to financial assets and understanding that they do not exist in isolation and their past, present, and future value is a function of the macro and micro-economic environment. Monitoring such environments dictates whether one should hold, buy, or sell these assets. One of the biggest problem investors run into is that ever-present human bias is to buy at the tops and sell at the bottoms (the exact opposite of what one ought to do). This is where having your very own IPS (Investment Policy Statement) and working with an Investment professional can add tremendous value.
Up and coming professionals like Yelian Garcia know that investing in physical assets can be a tough proposition. There’s storage cost, generally lower levels of liquidity and often a steep or prohibitively expensive initial outlay. However, it is real assets that guard your wealth when the you-know-what hits the fan. The most obvious choices here are: real estate, precious metals, art and other collectibles. There’s a variety of funds which make it easier to have exposure to real assets without having to burden of storage and such, however Yelian Garcia warns that due diligence is an absolute must. For business owners where their business or corporation owns productive assets the game can be fine tuned further and may require a closer look by a financial professional.