In the realm of personal finance, achieving a balance is crucial. Physical assets play a significant role in this balance. These assets encompass tangible possessions with monetary or transactional value, meaning you can exchange them for goods or services. Investing in physical assets allows individuals to grow their wealth, accumulate value, and enhance their overall quality of life. The key is to focus on acquiring physical assets that add value and contribute positively to long-term enjoyment and quality of life. The most favorable physical assets appreciate over time, helping individuals build wealth and increase their value over the long run.

Types of Physical Assets

Physical assets, while all occupying physical space, come in various shapes and sizes. There are many types of physical assets, and each asset offers a different monetary or transactional value and varying degrees of long-term value to consider when accumulating them. Common physical assets include those listed below.

• Precious metals (gold, silver, platinum, copper, etc.)
• Gems (precious and semi-precious)
• Oil
• Real estate (personal and investment properties)
• Automobiles, recreational vehicles, boats, motorcycles, etc.
• Livestock
• Farm equipment and machinery
• Collectibles (art, pottery, antiques, etc.)

As you can see, the list is long and diverse. Some items on the list are expected to increase in value (or appreciate) over time, such as real estate, precious metals, and collectibles, while others, like automobiles, recreational vehicles, and even farm equipment and machinery, depreciate over time, which means they lose monetary value.

The Value of Physical Assets

The value of physical assets is in the eye of the beholder; for some items, such as art and antiques, that may be true. However, for most physical assets, there are methods of evaluating or determining the approximate value of these items. If you need a reliable evaluation of your physical assets, consider having them appraised. That will offer a more accurate accounting of their value so you can exchange them, if necessary, and insure them appropriately to protect those assets.

Physical Assets and Wealth Building

When building wealth, physical assets are important tools for protecting the future value of your “worth.” Money in a bank builds little value. When you purchase certain physical assets, these assets become part of your “net worth.” They are important holdings to build wealth.

Managing and Maintaining Physical Assets

Another important consideration when amassing physical assets as you build wealth is that you do not want to accumulate more physical assets than you can effectively manage and maintain. Poor maintenance or an inability to manage your assets can lead to problems that could devalue those items, which is the opposite of your intent when accumulating them.

It isn’t about simply having the facilities to house these items, but also the proper facilities to secure and protect them. It is also about knowing how to manage, maintain and store the items and the best practices for building value when appropriate.

Converting Physical Assets into Liquid Assets

The easiest way to convert some physical assets into liquid assets is by selling them in exchange for cash. That isn’t always the fastest conversion method, especially if you hope to extract full value for the assets in question. Some exchanges allow you to list items for sale or exchange at a certain value and wait for interest. You might also consider auctions for converting physical assets into liquid assets. A good rule of thumb is that the faster you convert physical assets into liquid assets, the greater the loss you might take in the conversion process. If you have longer to make the “exchange,” you can wait for more favorable conditions.

Takeaways

Physical assets are important tools for building wealth and helping to grow your overall financial value. However, they are no replacement for having liquid assets available when needed. Look for balance and keep some assets liquid (or easily accessible) as you transition some of your investment portfolios into physical assets.