Why One Asset Class ISN’T Better Than Another
The Investing World is one filled with various Types of Assets and many a great opportunity. There is also much polarity in terms of which asset class is best based on the potential return and the time for those returns to be realised. In this article we give three reasons why one asset class is not superior to another. Feel free to check out the different asset classes at this link.
1. Each Asset Class Has Made Somebody Wealthy
It has been proven that regardless of which assets you choose to acquire, you may achieve a significant level of wealth. A look at the Forbes 100 will make it very evident that wealth can be created in any industry and with any asset class.
2. It Is More About What Asset You KNOW
Being a successful investor in any arena is more about what you know than about the arena itself. Robert Kiyosaki says “It is not the asset itself that makes you rich, it is what you know about the asset that makes you rich.” For any asset class, there is a multitude of people who will tell you not to get involved with that asset. In many cases, the reason for this is because they (or someone close to them) were at one point involved with the asset and lost their money.The problem was not the asset, it was the person, it was that they did not know something. Something that would have made them successful.
If you really want to succeed with a particular asset then you should surround yourself with information about that asset and then immerse yourself in that information. Additionally, you may consider creating or joining a reference group comprised of individuals who are also involved with that asset class. In doing these things, you will always be receiving information about the asset and the industry.
3. To Every Asset There Is A Season
Like the seasons of the year, each asset class has its time of prominence and profit. At one point, paper assets may be doing well, whilst at the same time, commodities or real estate are doing poorly. At another time, commodities might be doing well while paper assets are under-performing. This is why Emotional Fortitude is such an important skill as an Investor. Emotional Fortitude is the ability to stay the course when assets you have invested in are not doing as well as you expected. It is a great determinant in the Investor’s success. It allows the Investor to brave the winters because he knows that sure as Spring follows Winter, his asset will rebound. Now this may take months or it may take years but if you have invested soundly, it is certain to happen. The only question is, will you be reaping rewards or regret when it does.
4. A Few Words On Diversification
Diversification is quite possibly the most used word in investing, that is, after cashflow. The word is often misinterpreted by would be investors because of misuse by Financial Advisors. Many Advisors encourage their clients to “diversify”, however, they often mean to purchase stocks in different industries or buy both residential and commercial real estate. This is not TRUE diversification. Why? The investor is still investing in ONE asset class. When we use the term diversification we mean holding assets from multiple asset classes. A diversified portfolio will have stocks as well as real estate, commodities such as precious metals (gold and silver) or grains and businesses.
Although the Investor’s world comprises many different asset classes, one asset is not superior to another. It has been shown that success can be achieved in any asset class, provided the investor is informed regarding the matters of the asset and has an understanding of it’s seasonality.
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