What Exactly Is An Asset?

Do you really know the difference between appreciating and depreciating asset?

A strong foundation to financial literacy is understanding the components of a financial statement.

I’m sure most of you know what is an Asset and a Liability. Before dismissing this post, please read on.

What Is An Asset?

An asset is anything which appreciates in value and beats inflation.

This is how Robert Kiyosaki defines an asset -

An asset is something that puts money in your pocket.

I absolutely love this definition.

However, this is how I define an asset -

An asset is something that puts money in your pocket. And beats inflation.

In theory, any product (could be stocks, bonds, deposits, real estate, bitcoin, car, art) which, generates income and (or) increases / decreases in value, is an asset.

However,

Anything which beats inflation is an appreciating asset.

And,

Which doesn’t beat inflation is a depreciating asset. If it cannot beat inflation for you, technically it becomes a liability.

How Do You Make Your Depreciating Assets Create Value For You?

Yes, it’s possible to make your depreciating assets sweat and create value out of them. One can take the following approaches -

  1. Use them in your business - Depreciating assets, used in business, could be utilized for generating returns.

  2. Lease them - You could buy depreciating assets and lease them.

  3. Lend them - Not a great idea to lend your money. But it does have the potential to beat inflation.

Reach out to me if you have any questions or would like to discuss anything.

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