6 Best Appreciating Assets That Will Help You To Raise Your Net Worth

Who wouldn’t want to increase their net worth? Most likely everyone. Aspire to be a Hoover, but don’t confuse that with developing a practical strategy that will genuinely improve your financial situation.

Admittedly, since each of us has unique goals and circumstances in life, such a plan would be entirely unique for each of us. That being said, the kinds of assets that are likely to increase in value are almost universal, regardless of your particular circumstances.

We will look at the types of assets in this article that can be a reliable basis for increasing net worth because they have a high potential for appreciation over time.

APPRECIATING ASSET TYPES THAT MAY IMPROVE YOUR NET WORTH:

1. Real estate: The best-appreciating asset you can invest in overall is real estate because of its scarcity, high demand, and strong intrinsic value.
2. Stocks: Although riskier, they have greater upside potential than real estate. On the other hand, you can anticipate respectable asset appreciation over time even if you invest cautiously.
3. Cryptocurrencies: Like stocks, but more volatile because of their recent inception. A small percentage of your wealth invested in cryptocurrency could have significant gains and reduce losses.
4. Bonds: The best friend of the cautious investor. The returns are practically guaranteed even though they are minimal (if you avoid investing in risky bonds, that is).
5. Precious metals: An asset that appreciates over time. possesses special safe haven qualities, which can be extremely valuable in shaky economic times.
6. Collectibles: It’s renownedly difficult to determine the worth of fine wines, artwork, NFTs, and other collectibles. Nonetheless, there is a significant chance that their value will increase.

What are appreciating assets?

Investments or possessions that appreciate over time are known as appreciating assets. When sold in the future, these assets might increase in value and provide a return on investment. Appreciating assets include stocks, real estate, some collectibles (such as rare coins or artwork), and commodities (such as gold or silver). They stand in contrast to assets that depreciate over time, such as cars, which tend to lose value.

Some characteristics of asset appreciation are as follows:

• Consistent growth: Over time, the value of these assets typically rises gradually as opposed to suddenly fluctuating.
• Scarcity or limited supply: Due to their rarity, assets that are scarce or have a limited supply often appreciate in value.
• Strong demand: As more people try to obtain an asset, those in high demand typically see an increase in value.
• Tangible or intrinsic value: Assets with intrinsic value are more likely to appreciate in value because of their practicality, uniqueness, or physical characteristics.
• Historical performance: Good investments are frequently regarded as having assets with a history of steady appreciation over time.

How can one raise their net worth? Think about these six appreciating assets.

The 6 types of appreciating assets that we will look at in the upcoming sections may be able to assist you in gradually increasing your net worth.

1. Real estate

Real estate satisfies all the criteria for being a good appreciating asset: it is rare, in high demand, has intrinsic value, and has historically demonstrated steady growth. The median value of a single-family home in the US, which is one of the most traded real estate types, increased from $179,000 in 2013 to a peak of $410,000 in June 2023, according to the National Association of Realtors. This represents a return of almost +130%. According to a recent Fed report, one of the primary contributors to the average American’s net worth is the increase in real estate value.

Real estate, however, is a broad term that includes office buildings, land, commercial real estate, raw land, and much more than just single-family homes. While it is outside the purview of this article to delve into each of these, let’s look at land, rental property, and REITs as typical investment opportunities.

Rental property

Investing in rentals occurs when you buy an apartment or office space intending to rent it out. In the US and throughout the developed world, renting is becoming more and more profitable, as recent years have seen record-high rental prices. Depending on the location and caliber of the rental property, rental markets differ greatly from one another; nevertheless, over the last ten years, rent increases have been almost constant. According to RentCafe, the average rent for an apartment in the US is currently $1,702.

Land

If you want to be exposed to real estate, you don’t have to invest in houses and apartments; you can purchase undeveloped land and try to sell it when the time is right. Although purchasing raw land is far less expensive, there is still the possibility of significant future value growth.

Real Estate Investment Trusts (REITs)

Through REITs, people can make real estate investments without actually owning any properties. Typically, they own and manage a portfolio of real estate assets, including hotels, apartments, office buildings, retail centers, and industrial facilities. They are a good choice for real estate investors who wish to avoid the inconvenience of managing potential repairs, damages, and other issues related to property ownership. To qualify for a 20% deduction on your REIT investments, don’t forget to file for section 199A dividends.

2. Stocks

Another asset class that appreciates in value and doesn’t require introduction is stocks. You should anticipate that, if you invest in the right companies, the value of their stocks will increase over time—sometimes dramatically. For instance, during the last few decades, tech behemoths like Apple, Microsoft, and Google have seen gains of thousands upon thousands of percent.

That does not imply that you must aim high to boost your wealth. Investing in the S&P 500 Index as a whole can also yield respectable long-term returns. The Index has increased at an average annual rate of 11.13% over the last 50 years. By investing $100 a month in the S&P 500 for the next 27 years, you could increase your investment to $176,011 in 2050 if we assume that the Index will continue to perform that way.

Unlike real estate and some other types of appreciation on our list, stocks are included in calculating your liquid net worth—the amount of your wealth that you can access and sell with ease. Even though your total net worth may be lower, having a high liquid net worth typically gives you more flexibility and directly affects your standard of living.

3. Cryptocurrencies

The newest asset class on our list is cryptocurrency. They have the biggest potential for appreciation among the listed assets, but they are also the most volatile. Although we wouldn’t advise putting all of your money in one place—especially if you’re new to cryptocurrency investing—allocating a sizeable portion of your net worth to cryptocurrency might be a very smart move.

Following the decline in 2022, the cryptocurrency markets recovered, rekindling investor interest in cryptocurrencies in 2023. To invest in cryptocurrency without taking on excessive risk, you can choose to invest only in Bitcoin, which has increased by more than 110% in the last year and more than 1,300% in the last five. We recommend that you follow our weekly updated selection of the best cryptocurrencies to buy if you’d like to look into investing options outside Bitcoin. The following table, which lists the top ten cryptocurrencies by market capitalization and their corresponding year-to-date gains, can be used to get a sense of how cryptocurrencies performed this year.

4. Bonds

Bonds may be your best option if you have more conservative financial goals. In essence, governments and businesses issue bonds as a means of raising capital. Essentially, you lend the money to these organizations when you purchase a bond in return for interest rates, which are determined by central banks. Assume you purchase a $1,000 US government bond with a one-year maturity rate. Holding the bond will earn you 5% annually from the Treasury, and you’ll get your $1,000 back in full when it matures. In our fictitious example, this implies that after a year, your $1,000 investment would increase to $1,100 ($1,000 principal plus $50 from interest payments).

Since the companies that issue high-quality bonds almost always never default on their loans, bonds are regarded as the safest investment choice. Purchasing high-yield bonds from smaller firms carries a higher default risk, but it also carries a higher potential return. We advise using any of the leading bond brokers, such as Interactive Brokers and E*TRADE, to make bond investments. If you are from the UK, you can also purchase bonds straight from the government; for more information, see our UK bond purchasing guide.

5. Precious metals

Precious metals, such as gold and silver, are another class of assets that appreciate in value. Precious metals have a reputation for increasing in value over time, but what makes them particularly alluring is their resilience to negative economic trends without experiencing sharp price drops. They are therefore the ideal kind of safe haven asset.

Similar to bonds, you should view precious metal investments as safeguards for your wealth with little potential for profit. Don’t expect to become wealthy through precious metal investments. Still, there are instances when that finite upside becomes relevant, like this year. As an illustration, over the last 12 months, the price of a gold bar increased by +11.7%, whereas the price of a silver bar increased by +13.7%.

6. Collectibles

Collectibles encompass a wide range of possessions, including paintings, fine wines, collectible playing cards, and more. Non-fungible tokens (NFTs) are another kind of collectibles that exist on the blockchain. These possessions may sometimes appreciate significantly over time, particularly if you own a very rare collectible that suddenly gains a lot of popularity.

Collectibles differ from other assets that appreciate in value in that it is challenging to estimate their future value. It is nearly impossible to predict how much a random baseball playing card will increase in value over time or which artist will become well-known in the future due to the skyrocketing value of their paintings.

Conclusion

You can increase your wealth over time by investing in a variety of appreciating assets, such as stocks, bonds, real estate, cryptocurrency, and more. Generally speaking, it’s not a good idea to put all of your eggs in one basket, which means you shouldn’t solely focus on one asset class. Rather, you should, based on your unique circumstances, distribute a part of your net worth to one or more of them.

If you want to put some money into cryptocurrency, you can begin by researching coins that have shown to be wise long-term investments. If you would rather take a more conventional approach, you can look up the best stocks to buy.