Assets vs Liabilities and how to generate assets

put simply the difference between assets and liabilities is very very simple assets are things that put money in your pocket liabilities are things that take money out of your pocket it's obvious that your goal is to acquire as many assets as possible and as little liabilities as possible in this video i'm going to teach you the difference between assets and liabilities in more detail and then i'm going to tell you how to acquire more assets and acquire less liabilities the difference assets and liabilities are not to be confused the definition of an asset is very

simple in financial accounting it is anything that can be utilized to produce value and obviously by value i mean money still many often miss the difference between the two here's a classic example is a house an asset some think that buying a home is an asset unless you plan to sell the property it is a liability and a pretty big one it's going to take money away from you for years to come due to the mortgage not to talk about all the maintenance costs that you're going to sustain on a monthly basis that's no putting

money in your pocket if you ask me on the other hand if you plan to resell the property at a higher price that can be considered an asset you can also call assets investments if you pay to acquire why because investments are anything that can bring a measurable return on an initial payment for example acquiring stocks or shares and bonds is acquiring assets because they will generate money for you via dividends or you can resell them and generate profits through capital gains we'll explain that later is a car an asset another interesting one is a

car if you buy a car the price goes down tremendously the moment you buy it used cars are worth extremely less than new cars so it would be foolish to consider them assets right well many still discuss this arguing that since you can later resell the car you can consider it an asset in my world a good asset also needs to generate profit something like a car that rapidly depreciates is not to be considered an asset whether you sell it two hours or two years after buying it you will still not be profitable because you

won't sell it for a higher price obviously there are some exceptions there are historic cars or collectible cars that can raise in value we're not talking about those rare cases we're talking about what most people buy which is a day-to-day car to drive for personal purposes difference between tangible and intangible assets this one is very easy tangible assets are physical you can touch and interact with them some examples are land property equipment cash inventory and so on intangible assets are assets that you cannot touch they aren't physical some examples are brands patents copyrights and so

on financial versus real assets those are often confused and not separated people just lump together real and financial and tangible assets like they're the same thing and bring the same profit but that's not how it works in reality simply put real assets have an intrinsic value the intrinsic value is the real value of an asset without any market influence which is why they're called real assets financial assets use the market trading price to define their value which means you could more easily end up paying for something more than it's actually worth which isn't good because

you'll lose money which is also why people like warren buffett talk a lot about finding out the intrinsic value of a company so that you know if a stock costs more than its real value if the market price is lower than the intrinsic value you will very likely find a profit in the future when the market price will come close to or exceed intrinsic value financial assets on the other hand derive their value from contractual claims two examples are stocks and bonds which i will explain shortly and they're considered tangible assets amongst them financial assets

are easier to convert into cash assets like real estate and commodities are harder to cash in on the mother of all assets stocks if you don't know how they work i'm going to make it so simple that you're 100 going to understand them by the end of this video stocks are the most well-known assets and they have huge potential for those that know how to invest in them what are they stocks also called shares are a fraction of a company when you buy a stock you basically buy a very small percentage of that company imagine

having a house and you can come and buy one brick you're entitled to that brick and you're part of the household because you own that brick now why in the world would you want to own a brick give me a minute and i'll get there first i need you to understand that when you buy a stock you're basically becoming an associate to that company if you own enough shares which means you own a bigger slice of the company you could also have voting rights when the company makes important decisions two ways to make money with

stocks there are two ways mainly to make a profit with stocks the first which is the most common is capital gain this means that you buy a stock and you wait for its price to go up and then you sell it for example you might buy a stock for five dollars and then sell it for seven you would make a profit of two dollars and you're good to go do prices only go up no they fluctuate that's what all the graphs represent prices can go up and down depending on demand and supply of the market

the more demand a stock has the more it will cost so if you think that a stock will grow in demand in the future you should buy it because it's going to rise in value which means you will be able to sell it for a higher price however you should be careful if your predictions are wrong and the price doesn't go up but down you will lose money many consider this a gamble but if you know what you're doing and you evaluate the companies that you buy you should make money most of the time the

second way to make money with stocks is with dividends which are issued yearly quarterly or semi-annually twice a year dividends are the equivalent of your ownership in that company back to the brick example if you buy one brick out of a hundred you will get one percent of the profits of that house makes sense so far how do you acquire stocks the easiest way to do this is to open an investing account through an online stock broker your bank also probably offers these services so you might be able to invest old school with your bank

directly fees apply in both cases so every transaction is regulated and taxed you could also buy directly from the company but that is much harder it takes time and a lot a lot of capital real estate property is another asset in certain cases i say in certain cases because as i said earlier owning a home to live in for the rest of your life without the intent of selling it is not an asset it's an expense but then there are real estate investors who invest in underpriced property to resell or rent it then it becomes

an asset this one is very simple in theory but it's a whole other story when it comes to practice here's how it works as a real estate guy you start your day with looking for interesting deals you look for underpriced properties what is underpriced mean it means that you're looking for something that has a lot of potential but that has been mismanaged for a while so it might have some issues to fix which is why the price is low you're going to fix those issues and resell the property at a higher price by fixing issues

i mean doing anything that will bring up the price of the property like re-modernizing it repainting it or adding furniture there are a lot of factors that influence the price of a property it's not just about how it's been managed things like timing location neighborhood economic indicators and interest rates are just a few examples or instead of reselling the property you could rent it after fixing it this will ensure some extra cash coming in every month there are multiple types of property residential industrial raw land commercial special use but realistically you probably don't have the

money or the confidence and knowledge to buy and rent or sell property you probably don't even know where to look does that mean you can't start acquiring these types of assets well first of all you can always learn how to do it another option is you could purchase reits real estate investment trusts with reits you wouldn't need all the knowledge you would just trust a company to invest your money in real estate and they would give you a dividend in exchange for your investment many claim that those are great assets since they provide high dividend

yields and long-term appreciation aka the prices go up and you resist inflation is knowledge an asset knowledge is in fact an intangible asset the reason it's considered an asset is pretty simple let's pretend that you own a marketing company what you do is pretty simple you help businesses find more clients through internet marketing you figure out everything from marketing strategies to approach and copy you as the founder of this successful business can't do everything by yourself so you need to delegate first you hire an accountant and a financial advisor to take care of that side

of business then you start hiring content creators you need them in order to create the content that's going to be marketed then you need to hire good sales people to find even more clients for your company they're supposed to take on leads and convert them into buyers now the better the sales people you hire the more clients you'll close the more money you'll make see where i'm going with this if you invest into hiring talented people that know how to sell their knowledge is an asset it simply becomes something you're going to leverage to make

more money also the return on your investment is absolutely measurable since you can easily calculate how much you spend on a monthly basis or commission per sales guy and the value of their knowledge is defined by how much money they bring in how does this apply to you it's unlikely that you have a company that needs to hire people so here's the thing you can become the asset if you learn a valuable skill that you know entrepreneurs need to grow their business learning is key and the better your knowledge becomes the more you'll be paid

for it now you need to watch this how to make money work for you 10 money secrets you won't learn in school well that's it for the video guys i hope you enjoyed it and found value in it if you did give it a thumbs up and consider sharing it if you're new to the channel welcome and subscribe for more content like this with that said have a great day you guys and i'll see you in the next one