Weekly Thoughts 19 February 2016

I had good conversations with a couple of clients this week over various asset types and how they function. Thought I’d write a bit here about this. I’ll mention the asset type, whether or not they experience ‘value change’ and if they can, or should, supply income. I call it value change, rather than capital growth. This because, if an asset can grow in value, then it can also decline in value. Hence we cannot promise growth, but the possibility of value change should, over time, result in growth.

Property: Value change – yes. Supply income – yes, in the form of Rent. (I’m not talking here of your residential property, which supplies no income. This is either listed property or your 2nd, 3rd and 4th fixed properties that you rent out.)

Listed shares, meaning money on the stock market: Value change – yes. Supply income – yes: Dividends.

Private shareholding – meaning shares in a private company, maybe your own company: Value change – yes. Supply income, besides just salaries – hopefully: Dividends.

Cash: Value change – no. Supply income – yes: Interest.

Gold: Value change – yes. Supply income – no.

Bonds: Value change – yes. Supply income – yes: Yields.

A 1968 E-Type Jaguar: Value change – yes. Supply income – no. (Although you could rent yourself out to drive brides to weddings!)

Useful and real assets have the ability to pay an income.