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An asset is something that is expected to be worth more in the future than it is worth today. At least by my definition. Some would call things such as your car an asset; a depreciating asset, to be specific, because it will be worth less in the future, rather than more. I don’t consider declining value items as assets, as they aren’t a building block of your financial portfolio. Twenty years from now that Tahoe in your driveway won't be paying for your retirement. So don't call it an asset.

Note that the definition is “expected to be worth more in the future”. Don’t fall into the trap of thinking that assets increasing in value continuously day after day. Tomorrow your assets may be worth less than they are today. The idea with owning assets is that as a whole, over time, the expectation is these assets will be growing in value. Unlike a car, which is guaranteed to decline in value over time. There is no similar guarantee on an appreciating asset. Actually you can get a guarantee, say in a certificate of deposit (CD), but in exchange for that guarantee you get a very low rate of appreciation.

So what are some examples of assets? Here are a few:

Fine art

Company stock

Rare coins (maybe)

Real estate (yes still an asset even with the recent implosion)

A growing business you own

I’m not going to mention gold because gold deserves an entire discussion in itself. In short, stay away from it. Beginning investors are often drawn to gold, seasoned investors know to avoid it.

In his book rich dad, poor dad (his only one worth reading), Kiyosaki says that what separates the rich from the poor is that the rich buy assets, while the poor buy depreciating ‘things’. Shiny things, I call them, those must-have items that seem so important at the time (see having vs wanting) that you’ve bought with zero down (see no payments, no interest, no way!).

How do you go about building assets in your investment portfolio, in your quest to rule the world and become master of the financial universe?

You start slowly, just like every now-wealthy person once did. It starts with the first savings account, with building the savings habit. It grows into a money market account. A stock market index mutual fund comes next. Slowly, the empire grows. Before you know it, you realize you’ll never be back in the situation of having no assets. Once you start, the only direction is forward. Yes, the value of your assets will rise and fall. Sometimes violently. But you will always have assets and the will to build them up. Just as a person with no money seems unable to climb out, the person who has assets finds it impossible to go back to zero. It’s weird but it’s the way it works.

Someday, if you are very successful, you expand into fine art, collectible automobiles, and other high ticket items. Unfortunately I am very far from that point. In the documentary ‘some kind of monster’, we saw metallica drummer Lars Ulrich auction off all the art he had accumulated. He commented (I’m paraphrasing here) “some buy houses with their money, some buy cars - I hung it on my wall. I never really thought about it as an investment”.

It is essential to have the right mindset for owning assets. How many sold out of the stock market after the recent plummet? You’re supposed to sell your assets after they go up, not after they drop! Better yet, hold them very, very long term – after all, they are the fundamental component of your financial empire, and you do want to rule the financial universe, right?

Your thinking should not be “It’s up, should I sell?” and “It‘s down, should I sell?”. Your mindset and philosophy instead needs to be that you are continually building this asset monster, which eventually will become an out of control beast spitting off cash.

Investing is life-long. It is not a jump-in, jump-out exercise.

What assets do you own? What do you plan to acquire?