Table of Contents
- 1 The Top 10 Best Assets Build Wealth Now.
- 1.1 What is an Asset?
- 1.2 Assets That Make Money Now
- 1.2.1 1. Stocks
- 1.2.2 2. Bonds
- 1.2.3 3. Real Estate
- 1.2.4 4. REITS
- 1.2.5 5. Businesses
- 1.2.6 6. Index Funds
- 1.2.7 7. Patents or Trademarks
- 1.2.8 8. Digital Products
- 1.2.9 9. Copyrights
- 1.2.10 10. Influencer Audience and Social Media Brands
- 1.3 Recap: Best Assets That Make Money
- 1.4 Conclusion
The Top 10 Best Assets Build Wealth Now.
Question. What’s the quickest way to create personal wealth? Answer: By having multiple streams of income generating assets. If you want to be a millionaire that’s what you need to do.
This article will share with you 10 assets that make money both short term and long term. If you ever get the chance to ask any millionaire what their secret to creating wealth is, they will tell you that it’s by having multiple ways of making money.
They just don’t depend on one source of income. Virtually all rich and successful people have assets that produce money and long term wealth. What are these assets that are making people rich right now as you’re reading this article?
Well let’s get into it and share with you ten assets that are making people rich. But before we do that it’s essential we understand what an asset is.
What is an Asset?
If you’ve been delving into personal finance for even a day, you’ve probably heard of the author of Rich Dad Poor Dad, a popular book on investing and personal finance, Robert Kiyosaki. We will use his definition of an asset because it’s so simple yet very precise.
An asset is an object, a property or any possession that puts money in your pocket. The opposite of an asset is a liability. A liability takes money out of your pocket.
Wealthy people focus on collecting assets and limiting liabilities. This way they can grow their wealth.
Now that we understand what assets and liabilities are, let’s talk about the top 10 assets that make money and people are using to get rich, whether there’s a pandemic or not.
Assets That Make Money Now
These assets that make money are in no particular order of importance. Some are more popular than others. Pick and choose for additional investing study as your particular situation permits.
Stocks have made people wealthy for centuries. They are some of the best assets to buy in your 20s or 30s. Did you know that if you bought $220 of Apple stock in 1980, today would be worth over one $180,000? Stocks are not as complicated as they might appear.
When a person buys a stock they are buying a small piece of a company which makes them a small part owner of the company. In turn they are entitled to the growth and profitability of the company.
Here are some tips on how to invest in stocks for beginners: How to Invest in Stocks for Beginners.
For example if a company worth $10 million issues 1 million shares and you own 50,000 shares, this makes you the owner of 5% of this company. In other words you own $500,000 worth of this company.
Now there are two main ways people get rich using stocks.
If the company you own stocks in increases in value for example from 10 million to 50 million dollars then the value of your 5% ownership also increases from half a million dollars to 2.5 million dollars.
For example the company Apple in January of 2010 was worth around $192 billion and ten years later by March of 2020 Apple is worth around $1.3 trillion. What does this mean?
This means that investors who bought Apple stocks in January of 2010 have made an average of 670% return on their investment over the last ten years. In terms of money value, a $10,000 investment would be worth around $67,000 as of March of 2020.
Another way people make money using stocks is by collecting dividends. Many companies distribute part of the profits to share owners every quarter. Investors that receive dividends receive a quarterly check on top of their investment growth.
Investors can either use this passive income from dividends to use and spend as they please. Or better still they can reinvest this cash flow back into buying more stocks allowing them to compound their earnings even further.
Another group of assets that make money or investments that people use as part of their get rich strategy are bonds. If a government or a company needs to raise capital to fund a project that will issue bonds for investors to buy.
So this begs the question, “what is the difference between stocks and bonds?”
A bond is different than a stock. While a stock is a small ownership of the company that entitles you to the gains or losses of a company, a bond is a debt that a company has to investors. This means that if you purchased a bond you are lending money to the company or a government to be paid with interest at a predetermined date.
Bonds are considered safe for investments than stocks since they are not ownerships of a company but loans to be paid. So if a company loses market value, the stockholder also loses value but bondholders do not. Even in some instances they actually gain value since the company still has to pay their debts whether they lose market value or not.
Unless the company goes bankrupt they will have an obligation to pay their debts to bond issuers.
Now since bonds are typically safe for investments they also bring a lower return on investment with an average return of 3% per year. Investors use bonds to diversify their investment portfolio and limits their total risk.
Bonds can also be bought in major stock exchanges just like stocks.
3. Real Estate
Real estate is an investing tool that has made many people wealthy for years and for a good reason. As population increases more and more people need a place to live. This creates many different ways to create wealth using real estate and also as an asset to generate cash flow quickly.
The first one is by renting out your property to tenants and receive a check every month with no ongoing work needed, making this type of income passive income asset.
The second way people build wealth with real estate is by using debt. Yes many investors take out debt in form of a mortgage to buy a property. This allows them to buy a property even if they do not have the total amount to buy it while having their tenants pay down their loan building up their equity in their property.
For example if you bought a property for $100,000 with a $20,000 down payment this means that you took a loan of $80,000 for a period of say the next 15 years. This means that you have a mortgage payment of f$445 per month, excluding property taxes.
Since tenants are paying their rent this means that they are also paying for your mortgage. This means you’re making an extra $5,333 per year in equity on top of your monthly cash flow.
But we’re not done yet. Real estate values tend to grow over time. So if held for a long period of time a property can be sold at a much higher price than it was bought for. In fact the statistics prove that real estate property values tend to double every ten years.
The Different Types of Real Estate
Now there are many different types of real estate.
- There’s residential real estate are properties where people live in.
- Then there’s commercial real estate and these are properties where people conduct a business in like an office building or a restaurant.
- There’s also land or farm real estate that can be rented out to farming businesses to expand their operations while collecting a rent check.
Now if real estate sounds good as one of the best physical assets to buy but we don’t want to deal with all the management and the logistics of owning real estate then a REIT can be a good option for investors.
REIT stands for Real Estate Investment Trust. This is a company that owns and operates real estates where investors can buy shares and receive dividends. A REIT is similar to a stock. When an investor buys a REIT they are buying a share of a company that owns and manages real estate properties.
This company collects the cash flow generated from the properties and distributes their earnings to their shareholders as dividends. Real estate investment trusts can also be bought and sold in major public exchanges such as the New York Stock Exchange or the NASDAQ making it easier to buy and sell.
Businesses are one of the assets that make money and they are great ways people are making money as we speak. Most people do this by building their own businesses. Now for most people starting and scaling a business is not a passive way of earning money.
Building and scaling a business takes a lot of work. However, if done right we can systematize this business to be more passive turning this business into a passive income asset.
6. Index Funds
Personally I love index funds as a way of making money. We talked about stocks earlier and how many people have become wealthy using them. However, this type of asset takes it a little further.
Just as we can make money with stocks we can also lose money with stocks. Buying individual stocks can be quite risky. I’m sure you already know that no one can really predict what the market will do. And unless you are a master investor like Warren Buffett or Ray Dalio, chances are trying to predict how one specific company will perform is a risky move.
This is why index funds are an asset on their own. Index funds are types of mutual funds that match or track a section of the financial market like the S&P 500 which tracks the 500 biggest companies in the US. This means that if one company loses 20% of their value, your overall investment doesn’t. There’s less volatility.
The benefits of an index fund are:
- Instant diversification. Since you are buying not just one company but a whole sector of the market your investment is safer than if you put all of your money in one company.
- Low operating expenses. Since this type of fund follows a sector of the market it doesn’t require any active management. This means no management fees that eat up your profits.
Here’s a list of some of the most popular index funds with low operating costs. Now these are in no particular order and as always do your research and/or consult with a good financial advisor before making investment decisions.
Read more about index funds from this article: The Best 3 Fidelity Index Funds Tips For Beginner Investors.
7. Patents or Trademarks
Another set of assets that make money for investors is patents and trademarks. If you have an invention that you think can be potentially lucrative, you can file for a patent to protect your invention and companies will have to pay you to use your invention.
This could be an idea a product or a software. If your invention has marketable value you can license your patent to companies and make residual income from it. Have you ever heard of the Slinky?
This simple little invention has made around $3 billion in profits. Same with the Furby. This little patented idea made around $500 million per year at its peak. The Koosh patent invented by Scott Stillinger in the 1980s was sold to Hasbro for $100 million.
Now trademarks are a little different. Trademarks protect other properties such as logos, names and even phrases. There are many popular catchphrases that are trademarked. For example this phrase that you can see in the screen was trademarked by Disney and cannot be used commercially by any other company without cutting Disney a check.
8. Digital Products
The next set of income-producing assets that can make you rich are digital products. Digital products are becoming a massive asset for any business or individual. Have you ever noticed how some of the biggest celebrity entrepreneurs and people like Daymond John for example are getting into the digital information business?
This is because digital products are highly profitable assets that make money all the time, all year round. It’s something that you can create once and profit from it day in and day out in a passive way.
Now there’s a variety of different types of digital products. For example let’s say that you’re a filmmaker. I don’t assume that a filmmaker would be reading this article but let’s indulge our imagination and say that you are. There are many different digital assets that you can create to add income to your business.
For example if other filmmakers like the way you use color, you can create a preset for your color grading styles for other filmmakers to use. You can also create music stock footage or sounds that you can sell to other creators.
As a filmmaker you can create plugins to make editing easier for other creators. You can also create a training course teaching others your process of producing films. And just like that you will now have six money making digital assets that starts creating cash flow on top of your film making business even if you’re not actively there.
Our next item is one of the non-physical assets that make money and that is copyrights. Copyrights protect intellectual property such as books, music or poetry among others. This is a great income generating asset since these copyrights can also be licensed out for a royalty.
One of my favorite examples is JK Rowling. She’s the author of the popular book series Harry Potter. This provides her with royalties every time the book was bought. She also got another layer of royalty when the books were made into movies, because her intellectual property was used for the movies.
Another layer of royalties come from the merchandise sold based on her characters. Then Universal Studios created The Wizarding World of Harry Potter where the attractions are based on her intellectual property adding more to her royalties.
Reportedly Rowling earns royalties from ticket sales, merchandise, food sales and even beverage sales sold within the park since they all use her intellectual property. Even more royalties come from her licensing deals to produce the Broadway shows based on her writing of the Harry Potter and the Cursed Child.
10. Influencer Audience and Social Media Brands
A lot of people may not think of social media following and branding as assets that make money because it’s something that’s fairly recent. Many people didn’t think it was real a few years ago. Then when influencers began making as much money as A-list celebrities, people took notice and now celebrities are becoming social media influencers.
It’s not only the high levels of attention that is possible with social media but the level of relationships that we can build on these platforms is incredible and highly valuable. Ten years ago you couldn’t interact with a business or your favorite celebrity by watching them on TV.
Imagine if you were to send a message to your favorite artist and actually get a message back. Now we live in a world where this is a reality. How much more likely are you to buy their CD or go watch their movies or even buy their products right when they come out?
The best thing about this income generating asset is that there is no barrier of entry. Anyone can take advantage of these platforms and build great businesses around. For example there are lots of YouTube channels with millions of subscribers and Instagram accounts with 1000s of followers that were started with very little capital input.
So anyone with a camera on their phone can begin building an income generating assets with social media.
Recap: Best Assets That Make Money
- Real Estate
- Real Estate Investment Trusts
- Index Funds
- Patents and Trademarks
- Digital Products
- Social Media Brands and Influencers
These are the top 10 assets that make money and are making people rich right now. You can start looking into acquiring any of these passive income assets and begin creating cash flow for yourself and business.
Is there any other assets that generate cash flow which are not on this list? Do you agree with the list? Let me know by leaving your comments, questions and recommendations below.