How to Build assets? The Surefire Way to Wealth Building (2024)

Why should you build assets?

That is because building income-generating assets is the surefire way to wealth building.

However, before wondering how to build assets, there are preliminary queries that you should consider.

Do you have a secured, reliable income?

Let’s dig deeper:

How to Build Assets? How Does the Process of Asset Building Go?

Building assets requires to consider the following:

• Secure a reliable income to cover your expenses and set aside a small amount of money to save.
• Saving small amounts of money for a long time can lead to a substantial amount that enables you to think seriously about investment.
• Investment means buying assets at low or even fair prices to get more money back.
• Holding assets for quite a long time allows them to accumulate, so the generated revenue grows steadily.
• The income generated from the accumulated assets may be re-invested entirely or partly through acquiring more assets.

As a result of asset accumulation, wealth starts growing exponentially.

How to Secure a Reliable Income

You may be just a fresh graduate looking for a job or any source of income to start your career. Or even you look for your passion and dream to be a budding entrepreneur. Read more about the secrets to success behind great entrepreneurs.

Anyway, you will get a low to moderate income as a beginner. No matter what you get, managing your income is the key here.

Be wise enough, live within your means, and be satisfied with the standard of living that you can afford.

Living a humble lifestyle at the beginning will help you make miracles later on in your life.

It’s important to know that if your current source of income can’t enable you to save some money regularly. You should look for a supplement source or any other solution.

Saving Money

Why Should You Save Money?

Saving money is the first step on the way to building assets. Also, you need to save money for emergencies and to save unexpected financial hardships or for a better life in the future.

According to Bankrate, the percentage of Americans with no emergency savings grows.

Below is a graph that shows the average annual household expenditure in the United States in 2022 (in U.S. dollars).

This graph shows the average annual household expenditure in the United States from 2010 to 2019 (in U.S. dollars).

As we see in the above graphs the expenditures of Americans grow steadily, which makes saving money a challenge.

We save money to initiate the cycle of building yielding assets. That comes at the heart of the answer to our question of how to build assets.

You have to consider that your ability to save money and manage your financial affairs is a litmus test for your financial future.

So always be careful and keep your eye on your expenses. Don’t pay an extra penny for something you can get at a lower price.

In other words, always look for ways to buy things at a discount instead of getting them at their original price.

Saving is one of the essential aspects that Warren Buffet (one of the most successful investors of all time) advises those who want to be successful entrepreneurs.

Buffet refers to the importance of saving by saying.

pay for yourself first

For more about successful entrepreneurs check out the Best Free AI Story Generator to get inspired stories.

Warren Buffett gives saving priority to ensure your financial security and financial independence.

“Don’t save what is left after spending; spend what is left after saving” Warren Buffett

How to Save Money – It’s Essential in the Asset-Building Process

To be honest the saving habit seems as if a personal qualification that varies among people.

So if you feel that saving money is easier said than done.

Then you need first to develop the saving habit to the extent that you spend what is left after saving as Buffett said.

Now, the question is:

How do you develop a saving habit?

And that can happen through:

• Reading more about saving and the stories of successful people who recommend saving as the cornerstone in the journey toward financial security and wealth building.
• Keep track of your expenses to find ways for more control.
• Set a tight budget for living expenses and stick to it.
• Set saving goals that suit your budget.
• Celebrate your saving progress.

The concept of saving starts from the feeling of responsibility as you have to save for your short-term obligations such as your bills or emergencies.

This feeling of responsibility should be developed into a long-term vision that dreams of investing and owning yielding assets.

By following the above steps you’ll develop a solid saving habit. Once that happens your mind becomes more eligible for making further decisions towards financial security and business in general. Read more about the real secrets to Success behind great entrepreneurs.

That leads us to the third step of asset building.

Investing in Income-Generating Assets Is at the Heart of the Assets Building Process

There is no way to build assets without investing in businesses or acquiring other assets at bargain prices.

Now you’ve saved some of your hard-earned money and want to take an advanced step towards growing your money through investment.

However, investment is not a game to go if you do have the right playbook, or else you’ll lose your money.

Of course, I don’t want to discourage you as that goes against the purpose of my article.

All that I want to emphasize is knowing the right principles of investment before doing it. Read more about how to invest like pros.

If you don’t know what you’re doing in investment don’t ever do it yourself and look for other ways where professionals are running the process.

Always remember that:

“ Risk comes from not knowing what you do” Warren Buffett

There is no optimal asset to invest in yet there are investment opportunities so you have to see what fits your situation.

So You Need to Choose the Investment That Best Suits Your Situation.

If you want to do it yourself it is crucial to consider:

• How knowledgeable you are about the type of investment.
• How soon will you need the invested money?

With that said let’s dive deeper into what is common with investments in our world today:

Stocks

Stocks are the most common type of investment. They are shares of businesses that trade in the stock markets where you can buy and sell in whatever publicly traded company you want.

However, investment in the stock market is a game where most average participants lose their money in favor of experienced investors.

So don’t rush following the crowd. Read more about value investing and how to do it like the most successful investors.

Bonds

Bonds allow large organizations to borrow your money to fund their projects. Investing in bonds has a high safety margin and stability. So, it is considered a type of fixed-income investment.

Risks and interest rates of bonds vary depending on how creditworthy the borrowers are.

Bonds are safer than stocks, although their returns are not appealing when the economy is doing well. So be wary when you resort to bonds. You have to make sure that their yields can beat inflation.

Funds

In an investment fund, you purchase a portion of the fund holdings while the fund managers run the investment process of all the fund capital collected from the contributors.

Investment in funds is the most recommended way of investment for beginners who are still unfamiliar with the investment principles. You will pay investment fees for fund managers to manage the whole process.

Funds often tend to diversify their investments in wide-based investment assets. For example, all mutual, exchange-traded, and index funds invest in different asset types that align with their stated goal.

Real estate

Real estate is a lucrative investment strategy that generously pays off to those who know what they do.

There are different ways to invest in real estate based on the amount of your invested capital. Which is encouraging about this investment asset.

Just like investing in mutual funds to buy stocks and bonds, there are similar funds, groups, or platforms that you use to invest in real estate without the hassle of running the processes.

For example, REITs (real estate investment trusts) together money from investors to purchase and operate properties. Next, the investor gets regular income in the form of dividends.

Some savvy investors see that investing in real estate has the virtues of stocks and bonds.

Because it could provide as high returns as equities while keeping your investment safer and less volatile.

Gold

Gold has been the # 1 safe-haven investment over the ages. Why do investors put such faith in gold?

Because gold has proved that it’s almost the only commodity that could weather the market changes during economic instabilities.

The history of gold shows that it holds its value and even gets better in the circ*mstances of downturn and recession. That is when compared to other assets.

Below is a graph that illustrates 30 years (from 1995 to 2022) of the gold price in USD/oz. That is an amazing growth in value over time.

Gold is a kind of asset that generate a great income over over years.

So, investing in gold needs patience and a long-term strategy. Our recommendation is not less than 5 years for your investment to pay off.

Now, the question is:

How can you invest in gold?

There are different ways to invest in gold and deciding on the best choice depends on how much capital you have and how long your investment strategy will be.

Let’s break down the available types of gold investments:

• Acquiring the physical gold bullion outright from a reputable gold dealer.
• Buying shares through gold funds like mutual gold funds or exchange-traded funds (ETFs).
• Buying gold certificates.
• Trade gold options.
• Acquire jewelry! However, this option often requires an extra cost in exchange for manufacturing.
• Also, buying shares in mining companies or other industries that revolve around gold.

That’s how to build assets that generate income over a long time.

Building and Accumulation Assets

Once the highly selected, income-generating assets start accumulating, your wealth will startgrowing at a significant rate as well.

As an investor, When do you think about acquiring other assets?

This surplus in cash is known as free cash flow (FCF) and should be reinvested in the best possible way otherwise it’s better given to shareholders as dividends.

The key here is reinvesting the FCF in acquiring new assets to accumulate other income-generating assets. And the process goes on.

How the Different Asset Classes Have Performed over More than a Century

What was the rate of return on the invested capital in each asset over this long period?

It’s appealing to me to shed light on one of the most valuable pieces of research in this regard. It’s a new paper from economists at the University of California, the University of Bonn, and the central bank of Germany.

The study has shown that real estate investments (housing in particular) can get you high returns as equities while providing low volatility as bonds. That of course over a very long period.

You can download the PDF of the study here.

Historical returns could help us get some ideas of what to expect in the future. Right?

However, when listening to the great investors we can figure out that there is an important secret behind their success.

What is that secret?

It is the focus on what they fully understand. They put most of their focus on what they understand and what best suits their situation.

Buffett has long said “Risk comes from doing what you don’t know”

Final Thoughts on How to Save Money

If you want to build wealth you have to think seriously about acquiring valuable assets at or less than their true value.

The process of acquiring the right assets is all about knowing the basics of investing and following the path of successful investors.

That requires a lot of self-discipline to curb yourself from following the crowd.

It takes knowledge about the industry you would like to invest in to do things you already understand.

So you need to read a lot about what you’re going to do to make informed decisions on time.

Always be reminded that success takes time and there are no shortcuts to it so always be armed with patience to do the right things at the right time.

Just do what you know and in case you want to be venturous do that after building the required knowledge about what you want to venture into.