An asset can be almost anything of value, but for the purpose of this post, an asset will be considered any physical property, commodity, or business ownership stake (e.g. stock/interests).
Building assets takes investments. Whether that investment is in your own business or property, or whether its owning gold, bitcoin, or stocks is irrelevant. What does matter is rate of return you achieve by making these investments.
From a statistical point of view, business ownership has been the biggest asset builder, while real estate has been the most widely spread. In other words, the wealthiest are all business owners first, property owners second, while the majority of America’s assets are placed in home ownership.
The average annual rate of return on home ownership is about 4% nationwide, roughly 7% in hot cities like DC, NY, SF, etc. That’s still far less than the 10% average annual return on the S&P 500 in the last 50 years. As with anything some periods of time are better than others and some individual assets are better than others.
When someone tells you about the building they could have bought in Brooklyn for $1 million that’s now $10 million, just remind them about that million dollar investment in Apple or Amazon that’s now worth $100 million. Point is that while real estate has been fantastic for more people, mostly because of psychology tied to tangible assets, the stock market has been better net net.
I’m not trying to convince you that one is better than the other. Facts are facts. What I’m trying to illustrate is this: while there are assets that will generate 10x, there are other assets that will generate 100x, and if you know about the ones that generate 100x but still choose the one with 10x potential, there’s a long term risk involved.
Don’t get me wrong, 10x is a great return. Most people will never see 10x on their money EVER. However, risk is tied to your knowledge of something. NO WAY would you want me performing any type of surgery on you, like EVER. But, if I can help you know about an alternative asset with better return potential, then I’ve done my job.
So, all that said to say this. To build assets you need to make investments. That usually calls for some kind of sacrifice. Whether that means not getting the new smart phone or eating ramen for a year to put a downpayment on a new home or investing the additional in stocks. Or, not buying that fancy car, boat, jet, etc. to invest in the next great building in Manhattan, startup in Silicon Valley, or just buying into an incredible company at the right time like Apple circa 2004.
The Bottom Line: To build assets takes investments. To build assets faster takes investments that yield higher rates of interest (yield).