If there is anything we the practicing finance officials and portfolio management love emphasis when it comes to wealth building is the need to have assets, the need to ensure that your asset portfolio can cover your liabilities without much stress and indeed, that is very important, so have your assets in order, we still emphasis on that.
Having said that, now let us discuss our title today, because maybe you may think you have assets and indeed you do have assets, but maybe what you have is dead assets, which is worse than not having any asset in the first place.
Before we can have this discussion let us define what an asset is on basis of general accounting, “an asset is a resource that is owned with the expectation that it will yield future benefits, assets should increase the overall value of the owner or holder of them”. Now it is with this understanding that we can be able to dissect and understand our topic today.
Before then again it is just fair that we also give the general meaning of our topic, so here we go “a dead asset is one that is deemed not have neither a present value nor a foreseeable prospective value”.
With all that background knowledge let us list some of the assets that should fall in this category
- Money in a home safe – this is considered because inflation rate effects will with time render its purchasing power to every low if held for a long period of time
- Non-interest yielding account – this will borrow the above explanation as well inflation will affect the value of the funds at beginning of the period and after a certain period of time
- Stocks held in a non-performing name – this is even worse than the above as they may be deflated at a higher rate than the effects of the inflation as this is purely dependent on stock market changes which in most cases are more drastic than the effects of inflation
- Funds held in a below-inflation rate interest rate – this is will also borrow in inflation rate deflating the value of the funds.
- Piece of land lying idle – on this allows us to explain what we mean here, the land is one of the assets that’s not depreciated even in the accounting principles, this we do not dispute, our argument is if that piece of land is just bought for speculation with plan on making use of it as you await on the speculation, then that is a dead asset, those funds would be put in a better platform that will allow them to gain with time.
- A house that’s not occupied most of the time in a year – with this we mean if you have a holiday home that you only make use on maybe twice or thrice in a year and it says idle for the rest of the time, then in our opinion this is even a super dead asset (if a such a word exists) seeing as it is even costing you to maintain it, in this case, you may consider putting up as an air b&b with a trustworthy agent and make money on the time that you are staying in it.
Any asset that you hold that is not helping you make more money in one way or another or that is actually draining funds, or holding funds that if put in a different project would yield better returns is a dead asset, period!
When looking into your investment portfolio mix be very careful about the availability of dead assets as they can ruin a very good portfolio that would have otherwise yielded very good returns by draining the gains generated by the active assets in the portfolio, it is important to engage a qualified team that will understand your financial goals and needs and then use this information to prepare a portfolio that will suit you, then take time to explain to you what the components of your portfolio are and how that portfolio will work towards achieving your goals and needs.
At this juncture, it is important to differentiate between an investment agent and a portfolio management team, a portfolio management team has no investment to sell to you, what they do is advise on what investment will suit your needs and desires and then guide you on where the purchase can be done, while an investment agent is out to make a sale and hence they may be biased on what it is that they are selling, here at MA Financial Consultants we have a team of portfolio management that is dedicated to ensuring that you achieve the financial growth that will land you to the financial freedom that is the default by-product.
There are however somewhat good dead assets, not all dead assets are bad, this would be the money that’s held in a current account for day-to-day purposes, that’s the only good dead assets, and if you were to actually argue it out, it actually not a dead asset seeing as if this bills are not paid then the means to generate your daily income would not be possible.
Do you have an investment portfolio? Are you comfortable with the current investment components mix you have?
We’re here to offer our expertise to ensure that you get the financial freedom you so desire, contact us and we help you figure out something and you can start the journey to your financial freedom.
MA Financial Services Consultants