While the term asset in this context refers to financial assets such as stocks, bonds, and real estate, almost anything you own could be an asset if it has a monetary value and can be sold.
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How to grow your money and assets with confidence
When it comes to building wealth, what you do with your money is often more important than how much you make. That’s why it’s so important to evaluate all the financial tools available and put together a comprehensive strategy that helps you make the most of your money.
How to make your money grow—the basics
They say knowledge is the best investment. So now that you’ve started making money, it’s important to know what to do with it. But these days, there are so many financial tools available that it can be hard to know where to begin. That’s why you need to gather as much information as possible and work with a financial professional who can help evaluate your options and guide you along the way.
Ways to build assets
Building wealth is more than just looking for the highest possible return: it’s about using your money smartly and accumulating assets so that you can reach your financial goals. Here are just a few of the assets you may want to consider:
Savings vehicles
When you’re just starting out, your savings could be the most important asset you have. The more savings you have, the less likely it is that you will need to borrow money during a financial emergency. So even though your account may not be earning as much interest as you’d like, it could save more money in the long run.
Life insurance
You may be surprised to learn that life insurance can be a valuable financial asset. In addition to being there for your loved ones in case you pass away, some policies—like whole life insurance—grow cash value that you can use to help send a child to college or to make a down payment on a home.1 And in most cases, you won’t have to pay federal income tax on any money you take out.
Real estate
While owning a home has long been associated with the American dream, it can also be a wise investment. In fact, 40% of a typical millionaire’s net worth2 is made up of real estate. So, whether it’s your personal residence that appreciates over time, or a rental property that generates income, real estate is a tangible asset that has been proven to build long-term wealth.
Retirement accounts
Retirement accounts such as a 401(k)s and IRAs can be one of the effective ways to help grow your money—since these plans come with tax advantages that make it possible for them to build up faster than other investment options. And because 401(k) contributions are often matched by your employer, these plans may quickly become the largest financial asset you own.
Stocks and bonds
Investing in stocks and bonds can be another effective way to build long-term wealth. Stocks make it possible to generate high returns through appreciation and dividends, while bonds are designed to offer current income and are generally less volatile than stocks. Best of all, you don’t need much capital to get started since you can use a mutual fund or exchange-traded fund (ETF) to gain access to these traditional investments in a way that may be affordable than making direct investments in stocks or bonds.
Consider a portfolio strategy to help diversify your investments
So now that you know a bit more about financial assets, how do you decide which ones to choose? That’s where a portfolio investment strategy can help. With this strategy, you can spread your investments across various asset classes, such as stocks, bonds, and real estate. This approach offers two distinct advantages:
1. Diversification
Since the performance of different asset classes can vary from time to time, diversifying your assets can help manage some of the risk in your portfolio by reducing the impact a declining market may have on any particular investment. For instance, if the stock market is underperforming, your bond portfolio may be able to offset some of the losses.
2. Customization
A portfolio strategy allows you to create a mix of investments that fits your goals, risk tolerance, and time horizon. Aggressive investors may want a portfolio that focuses heavily on stocks, while those who prefer a safer approach may use a higher percentage of CDs and municipal bonds. The important thing is to create a portfolio that makes you comfortable.
While a portfolio strategy can be effective, please keep in mind that it does not assure or guarantee better performance, nor does it completely eliminate market risk.
Focus on long-term investment strategies
One of the most effective ways to grow your wealth is through long-term investments. This approach involves holding on to investments for an extended period, typically five years or more. The stock market, while volatile in the short term, has historically generated higher returns over the long haul.3
Types of investment strategies
While there are always risks involved with investing, there are several - investment strategies that people have used to invest with confidence. Here are just a few of the more common strategies to explore:
1. Dollar cost averaging
Dollar cost averaging (DCA) is a strategy in which you invest a fixed amount of money at regular intervals, regardless of market conditions. This approach helps reduces the impact of market volatility and lowers the average cost of your investments over time. By investing consistently, you avoid the temptation to time the market and benefit from both high and low market periods. You should also consider your financial ability to continue purchases during periods of fluctuating securities prices.4
2. Buy and hold
The buy and hold strategy involves purchasing investments and holding them for an extended period, regardless of market fluctuations. This approach is based on the belief that the market will grow over time, and selling in response to short-term movements can result in missed opportunities. Warren Buffett, one of the most successful investors, advocates for this strategy, emphasizing patience and long-term vision.
3. Rebalancing
Rebalancing is the process of adjusting your investment portfolio to maintain your desired asset allocation. Over time, the value of different investments can change, causing your portfolio to become unbalanced. By periodically rebalancing, you ensure that your investments align with your risk tolerance and financial goals.5
With the right approach, you can invest smartly
Starting your investment journey can be overwhelming, but by employing long-term investment strategies and building a diversified portfolio, you can grow your money with confidence. Remember to stay informed, be patient, and stick to your plan. Over time, these strategies can help you build assets towards reaching your financial goals.
How to grow your money and assets FAQs
Most assets have the potential to make money, but there are no guarantees. Even the housing market—once considered one of the safest places to put your money—has had periods of decline, which is why diversifying your assets is so important.
Diversification is just another way of saying “don’t put all your eggs in one basket.” It’s an important concept to know because it can help protect your portfolio in case one or two asset classes unexpectedly decline.
While it seems like everyone is looking for a way to get rich quick, it doesn’t usually happen that way. The best way is to put a little away at a time—a good place to start is your 401(k)—and do it consistently.
You should rebalance your portfolio whenever you feel you have too much, or too little, of a particular asset to meet your objectives. You could also rebalance your portfolio if your personal or financial circumstances change and you need to adjust your strategy.
There are many ways you could go about it, however, it’s probably wise to add one asset at a time so that you don’t get overextended. It’s also important to remember that some assets—like stocks—have the potential to increase in value so you may be able to use the extra capital to purchase additional assets.
Compound interest makes your money grow quickly because it builds upon itself. The initial amount you put down (the principal) generates interest, which then increases its value and helps it generate even more interest, and so on. The returns of investments vary, and generally investments are not guaranteed to grow in value.
Want to know more?
Ask a financial professional about building wealth today.
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1Accessing the cash value of a life insurance policy may reduce the death benefit and the available cash surrender value.
2“The Making of a Millionaire and Why $100K is No Longer the Benchmark Salary for Wealth in America,” Forbes.com, May 23, 2023.
3“What is the Average Stock Market Return?” NerdWallet.com, May 3, 2024.
4Dollar cost averaging may help investors achieve a lower average purchase price, but it does not guarantee a profit nor protect against a loss in volatile markets.
5Rebalancing may be a taxable event, before taking any specific action be sure to consult with your tax professional.