APPRECIATING AND DEPRECIATING ASSETS!!!

Appreciation

Refers to the increase in the saleable value of any asset over a time period and

Depreciation

Refers to the loss in such value due to usage over a time period.

There are no assets which always appreciate of depreciate but their types and characteristics are discussed in brief. Wrong or incorrect or untimely investments in assets have a considerable effect on the net worth of an individual. These figure as reasons why even high salary people do not have high net worth after working for many years.

Types of assets are :

1. Real Estate

2. Bank deposits

3. Retirement funds

4. Gold and Silver

5. Equity Investments

Note:While I plan to write another blog on asset allocation later stage once my investment strategy and process has been explained in brief. A point to be noted is as regards personal finance, one house, life long needed to stay in, is not considered an asset. Rest assets are just to be taken note of at present as some of these have been discussed in earlier blogs and those not discussed so far are on the agenda for the future blogs.

On Assets in Brief

Assets in general get acquired by the prudent savers and investors who invest in learning and making themselves worthy of owning and preserving such assets. Some times these are also inherited.Entrepreneurs create assets for their organizations and their personal by leveraging bank loans too. Individuals mostly take loans only for a house.

1.Real Estate

Investments in real estate and related factors or variables on which appreciation or otherwise depends have been discussed in Blog No- 21.

2. Banks Fixed Deposits again has been a subject of my Blog No-11.

3. Retirement Funds- one important avenue for this is Public Provident Fund (PPF) which has been discussed in Blog No-20

4. Gold and Silver and Equity Investments will be discussed in the blogs to follow.

Their characteristics as regards appreciation or depreciation are in brief as under

1. Real Estate - Real estate is generally considered as an appreciating asset but it is not always true and depends on locality or area and other factors discussed in Blog-21.Appreciation must consider the inflation factor and be better than that to be really beneficial. Fairly secure but less liquid.

2. Bank Deposits- These generally give appreciation as interest earned which is lower than the inflation rate.However these are very liquid, secure and serve well as an emergency fund.

3. Retirement Funds- PPF is a very good Compound interest scheme and has been discussed in Blog-20. National Pension Scheme is another essential scheme which must be used by the salaried class as well as others to save for retirement. Backed by the state these are most secure but less liquid.  

4. Gold and Silver. I plan to discuss this in a future blog but easy liquidity globally is its main characteristic as its utility as “Stridhan” is a lot less with changing times but its appeal to women continues.

5. Equity Investments. Direct equity investments is the best course for investments and its simple but not easy. They are liquid, appreciate given long time and grow and beat inflation and are tax friendly too.

It is not time consuming once mastered but developing the right mind set and skill to make such investments requires one on one sustained support and guidance. My aim is to exactly do this and make a difference to the lives of those few who are worthy of learning it.In this we are our own enemies I am discovering mainly because of procrastinating and getting psyched and confused by the media promoted by vested interests in many cases diverts learners away from real learning.    

I plan to share my leanings, in brief, in future blogs for those who can by DIY (Do It Yourself)method and teach to those who are keen to learn it after getting prepared.

Thumb rules for investing in these assets

1. Pre-pone buying an appreciating asset.

2. Take a loan for appreciating asset like a house especially the first one

3. Postpone buying a depreciating asset

4. Never take a loan for buying a depreciating asset - most common mistake is buying a new car on sizable installments or EMI in early stage of the career. As this affects their savings and net worth in the long run by loss of compounding effect.

5. Equity investments have inherent risk so never take loans to invest in equity.

6. Equity investments require initially making investment in learning and developing right attitude as well as making some preparations before starting. This is required to minimize risk.