The term “asset” has a very broad meaning and the one word encompasses many things for e.g. for a common man his house may be an asset for him, but for a businessman his plant is an asset. In the corporate arena assets can be differentiated as current assets and fixed assets. Current assets are assets that vary with time for example inventory, sundry debtors, and investments done for short term. Fixed assets include plant and machinery and other immovable assets. Though people call ‘asset management’ an art, financial experts believe that it is an art which develops over the period of time. Since the task involves a lot of responsibility and skill, the asset management managers are the highest paid individuals. Asset tracking and asset protection, if done carefully, can be quite instrumental for wealth creation.

The most common assets which an individual builds for wealth creation are cash, stock, shares, mutual funds, bonds, real estate, gold etc. All of these have the tendency to appreciate greatly.  If you look at the past 10 -20 years, the traditional assets that have appreciated are real estate (houses), commercial properties and antique items like rare coins and antique items, paintings, customary items like silverware, crystal articles and gold ornaments.

Financial eagles believe that in order to make the assets of an individual grow, he should always invest his in some kind of instruments or other.  This is the cornerstone of a good asset management system. A person’s asset will only grow if the person is successful in making his assets to work to bring in more assets. To make it simple, it is as good as asking your money to pull money. Usually it is seen that a person has some expenses associated with him- some of them are recurring and some are one time. A man purchases a house, he feels he has purchased an asset but in reality there are many ancillary expenses to make that asset function fully. This is because pragmatically there are many expenses associated with the purchase of the house; these are the electricity bill, sanitation costs, maintenance costs, the water bill and many other miscellaneous charges.  

A person’s assets are bound to grow if he can meet his expenses by the money generated by his assets. To explain this fact lets take an example, consider person Mr. A’s monthly expenses are 500$ and his salary is 1000$. He has also invested some money in shares which gives him a monthly return of 250$. In addition, he owns another house which he has given on lease. The monthly rent received by him is 250$. Now, if you go to see then all of Mr. A’s expenses are met by the money that his 2 assets viz., the shares and house are generating for him. The entire salary which Mr. A receives can be saved and he will be able to save his entire salary money which is 1000$. Soon his savings will help him to build another asset and he will start receiving income on this new asset also.  This process goes on and one fine morning he will find himself among the richest individuals in his town.

In business terms asset liability management is very important. Any mismatch in the asset liability management will result in the failure of the business. Asset liability mismatch means that your business liability is more than your business assets, and if the same trend continues then this will lead to the closure of the business.  To put it in commercial parlance, one very important asset related ratio is the ‘fixed asset turnover ratio’.  This is the ratio of sales with respect to assets. This ratio tells how efficiently the assets of the company were utilized to achieve sales. The higher the sales achieved with respect to the assets the higher the ratio, which is a good indicator of financial position. Thus the ‘fixed asset turnover ratio’ is one of the valuation parameters one should look when considering the profitability of the company.

It is seen that the value of the asset changes from time to time. A house purchased 10 years back may not cost the same today as its value tends to appreciate. This norm gives birth to the concept of the ‘Net Asset Value’ which is the value of the asset at a specific point in time. Normally mutual funds use this term often, as their net asset value fall or rise depending on the current valuation of their equity portfolio.  Asset managers with their task of asset allocation are always pinned to the task of maintaining a high ‘net asset value’. A common man can make investments in order to increase his assets. Whilst making investments in the equity trade, he should have a balance portfolio consisting of blue chip companies. A stable portfolio means that a person should make investments in various sectors such as FMCG (fast moving consumer goods), manufacturing, telecommunications, and software. He should also make investments in fixed deposits, as they are very safe investment bets. In order to keep track of all his assets and their current valuations there are many asset tracking software available in the market for efficient asset management.  Asset management can be done in various ways and there are no methods that can be overtly right or wrong. Experts are of the belief that you should only choose the method that suits you.

You can even break free from the conventional way of investing and invest in assets online. One of the asset investment programs are e-gold where you invest online in gold. You can also buy shares in major oil companies in the US and reinvest the dividends. If you have a good amount of assets, you can invest directly in direct participation oil or gas partnerships. In fact, the government encourages exploration through generous tax incentives for private investors.

Disclaimer- While there is no guarantee that these assets will appreciate, history has shown that investing in assets that appreciate can increase your wealth exponentially.