Monday, September 28, 2009
We all remember from our elementary school days in social studies learning about the basic human needs of food, clothing, and shelter. Well, real assets are those assets which meet those basic needs for survival. I would add transportation and energy to these basic needs as well when we get into the real asset discussion. Everybody around the globe needs these things to stay alive. You could live without the iPod, but not without food.
So, real assets are things in your possession that everyone would need virtually everyday of their lives. If you had actual physical possession of these items, that would be ideal. If not, make sure you have some solid claim to those items.
One example of a real asset is real estate. If you actually own the land, you can use it to grow food by planting a garden or keeping livestock. You could build your shelter on it. If there are trees, you could use those trees to supply the lumber for building your shelter or for fuel to heat that shelter and cook your food.
One way to think of a real asset is that there will always be a demand for it and because of this, its value will never go to zero. Land itself cannot go bankrupt. Cattle cannot go bankrupt, and they will always have value. Chrysler bonds can lose all of their value, but a tree will not. This is an important distinction when it comes to real assets. Businesses can go bankrupt and be worth nothing (take Enron for example), but real assets will always have some value to someone.
That is why you want to include these in your retirement plans. You don't want to have your retirement savings wiped out. You always want to be able to get some value out of your retirement assets. That is not to say that you can't overleverage your real assets and lose them that way. That happens a lot and is a subject for another time. But if you actually own the assets (as opposed to paying back the financing of the assets), then you are in great shape.
Next time in part 2, I will discuss how that retention of value and inflation combine to make real assets an ideal class for retirement savings. Until next time--Keep it REAL!
Saturday, September 26, 2009
The main reason for investing is to provide for our everyday needs and wants when we are no longer willing or able to work. It used to be that humans would spend each day meeting their survival needs. This would be done through hunting, gathering, farming, tending to livestock, etc. People would work until they died due to disease or injury. Few lived to old age. If they did, family and community members would help care for them. These matrons and patrons might help out with simple chores and share wisdom with the younger generations.
Now, the average life expectancy for a male in the United States is 74 years and 80 years for a female while the average retirement age is about 62. That leaves anywhere from 12 to 18 years of daily needs for which we need to provide. Unless you want to take up hunting and gathering at the age of 62, you need to invest out of your current income building up assets that will eventually provide you with income to last a lifetime.
You may say that you want to travel or spend time volunteering but unless you can provide income for food and shelter, these "reasons" for investing mean nothing. It may be difficult to think about being 65 and 70 when you are 25 and 30 years old, but you have to. There really is no other option. You need to start thinking about investing and thinking about it now. If the current financial crisis hasn't caused you to start thinking about your financial future, then nothing will.
In my next post, I will discuss why you should invest in real assets when thinking about retirement. Until next time--Keep it REAL!
Thursday, September 24, 2009
- I believe that real assets are an important part of an investment portfolio and will help protect an individual investor from the ravages of inflation.
- I enjoy investing in real assets myself for the above reason. I own physical gold, silver, and real estate. I will be discussing these topics throughout this blog.
- There should be an increased interest in real assets over the next several years with the weakening U. S. Dollar. Investors are looking to maintain their purchasing power through ownership and exposure to real assets.
- Finally, I view this blog as a nice addition to my other online assets which will earn me online passive income in the long run. Yes, this blog is an asset!
I am passionate about this topic as you might be able to tell from my other online writings. I plan on making 2-3 posts per week about various aspects of real assets. Feel free to stop by and comment or send me a note to suggest a topic. I would love to hear from you.
And be sure to read some of my other writings about real assets in between posts. I have included some links that might be interesting:
Until next time--Keep It REAL!