5 Assets To Include In Your Investment Portfolio (Simple Investing For Beginners)

5 Assets To Include In Your Investment Portfolio (Simple Investing For Beginners)

Hey guys, how many different types of assets do you invest in? Let me know in the comments below.

Now, in this blog post, I’ve put together what I think are the 5 most important assets you want to strongly consider having as a part of your financial portfolio.

Now, in the middle of this blog post, I’m going to share with you the rule of 120, which is just a rule of thumb that explains what percentage of your overall asset portfolio should be in each of the assets that I’m going to talk to you about on this blog post.

So stick around for that, guys, because asset allocation is super important to helping you build your investment portfolio.

Now, why 5 assets? It’s because diversification is the name of the game when it comes to investing.

Most of these 5 assets that I’m going to share with you are going to be working super hard for you in the background, and others are going to provide a safety net for you and give you some additional choices.

So let’s go ahead and jump into the top 5 assets that you need to have in your investment portfolio.

CASH

So the 1st asset you gotta have is cash.

Now why cash? Because cash should be a part of your overall assets just in case of an emergency.

You need to be able to get to some money quickly, and cash is very liquid, meaning that it’s going to be available at any given moment.

Guys, cash still works.

Now, although I get it, cash can be subject to inflation, right? Because cash typically goes down in value due to inflation.

It’s still important to have a little bit of cash when you need money quickly, right?

You need some type of medium of exchange, fast and in a hurry. I suggest you have a small portion of your overall portfolio in cash, primarily for emergencies.

And you want to keep your cash not underneath your mattress anywhere, but you want to have maybe a high-yield savings account where you can actually get some type of return on your money.

And there are some excellent HSAs that are out there right now that you should be looking into to hold your cash. And all of those high-yield savings accounts are going to be typically online.

Just be sure you read the fine print, you understand your high-yield savings account, and you also understand that high-yield savings accounts offer interest that is variable, so it’s not a fixed interest rate, it’s going to change and fluctuate, but that’s better than keeping your money under a mattress, right, where it’s going to lose value.

STOCKS

The second asset that you got to have and add to your portfolio is the elephant in the room, right? The stockmarket.Individual stocks,ETFs,indexfunds, or regular mutual funds, you want to have that asset as a part of your portfolio.

A lot of these stocks and ETFs, they offer income-producing returns in the form of dividends that can be taken out or reinvested.

The S&P 500, which is usually a pretty good indicator of the overall stock market, has returned an average of about 9.7% over the last 20 years.

So your investment should always include investing in American businesses, right? So that as businesses grow, your portfolio, your asset grows too.

The biggest key though, guys, is don’t just invest in the stock market in stocks and ETFs and index funds, but you have to be investing enough money into those things, right? Lots of people invest in the stock market, but a lot of people invest too little in the stock market. And the types of stocks or ETFs or index funds that you invest in should be determined by your risk tolerance, your age, your investing goals, and just your overall investing experience and knowledge.

I’m an ETF and index fund investor. I just prefer the ease of investing in a diverse bucket of stocks. It’s just more appealing to me than picking out individual stocks. But again, that’s going to be determined by a lot of different variables, and you’ve got to make that decision. But simply dollar-cost average into the stock market and make those investments an important part of your assets.

Real Estate

The third asset that you want to have in your portfolio is real estate. Rental real estate is a great asset that you want to have.

Stocks are considered paper assets, real estate is considered fixed assets, meaning it’s tangible, right?

You can touch real estate. And of course, it’s not as liquid as cash or even stocks, right? It takes a while to actually pull your money out of a piece of real estate unless you’re getting monthly income.

That’s why income-producing real estate is an incredible asset to have in your portfolio. And I’m a big fan of the Buy and Hold method of income-producing real estate, whether that’s single-family homes, multifamily properties like apartments, land, commercial buildings, warehouses.

Income-producing real estate puts money in your pocket every single month. So you want to really strongly consider making that asset a part of your overall assets in your portfolio.

With income-producing real estate, you have monthly income, other people are paying down the mortgage, and ultimately paying the property off. And of course, you have the tax advantages, you have the appreciation of the property going up in value, and you have flexibility and leverage, right?

So there’s all types of reasons why I believe that real estate is a super important asset.

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BONDS

The 4th is bonds. Bonds are also considered a fixed income security that pays a fixed amount of interest in the form of coupon payments to investors.

Bonds are merely a loan from an investor to a borrower that’s going to be paid back over a certain period of time, and they call that period of time the term or the maturity.

Now, many bonds require some type of periodic payment to the investor in the form of a coupon, right? And that’s paid to an investor over the term of the loan before the principal balance is paid back at the end of the term.

Hey, bonds are not very popular nowadays, I totally get it. But guys, bonds are pretty important, and they’re probably more complicated than any of the other four assets that I’m talking about on this blog post.

Now, why are they unpopular? Because they just don’t have the returns that you see with stocks or with ETFs or index funds, right?

Bonds typically have a lower rate of return, right, more around the 2, 3, or 4% range. But they’re less volatile, right? They don’t go way up and go way down, they kind of stay right here, and that offers more security, right, more safety for people that don’t want to take the risk that may be associated with the stock market.

Then, hey, there’s bonds, and they’re available, and there’s many different types of bonds, right? There’s the US Treasuries, T-bills, and T-notes. There’s short-term bonds, there’s long-term bonds, there’s US government bonds, and there’s foreign government bonds, corporate bonds, municipal bonds, called munis, right?

There’s all different types of bonds that you could look into and perhaps invest in, right? You can buy individual bonds, or you can buy bond funds that you

can find on platforms like Vanguard and like Charles Schwab or Fidelity. Don’t slip on bonds.

I know they offer a lower return, but they can also help balance out your assets and investments as well, because the return on bonds tends to rise when stocks fall.

So bonds can offer sort of a balancing act, right? So keep that in mind as well.

The Rule Of 120

Now, before we go to No.5, this is an excellent opportunity for me to talk about the rule of 120.

The rule of 120 is simply a rule of thumb that’s used to determine the proportion or percentage that a person should allocate of their assets between stocks and other assets.

The rule of 120 basically says this, guys: Subtracting your age from 120 will give you an idea of the weighted percentage for the different investments and assets that are in your portfolio.

You simply subtract your age from 120, and whatever number you come up with, that’s the percentage that you should be investing in the stock market, and the remaining percentage, whatever’s left, should be invested in more conservative fixed income assets like cash, real estate, and bonds.

For example, if you’re 35 years old, you just simply take 120-35, that leaves you with 85. That means 85% of your investment portfolio, your assets, should be invested in the stock market.

The other 15% should be in cash, real estate, and bonds.

Now, if you’re 65 years old, you subtract 65 from 120, that leaves 55%. That means 55% of your overall portfolio, your assets, should be invested in the stock market.

The other 45% should be invested in more fixed assets like cash, real estate, and bonds.

Now, guys, the whole point of the rule of 120 is that the younger you are, the higher the risk tolerance level you have and the longer time horizon that you have to actually invest, and the opposite is true the older you get.

So that if you’re close to retirement age and you follow the rule of 120, then as you get older, you have more and more of your money in more stable fixed assets that are less volatile and don’t have all those big fluctuations like the stock market may have.

EDUCATION AND SKILLS

The 5th asset that you need to have in your portfolio is you need to invest in your own education.

Now, when I say education, I mean the whole gamut of education that includes higher education, trade schools, certifications, training, you name it, just any education that’s going to set you apart from the rest of the field.

There’s no better investment on the planet than investing in yourself and using your time, your energy, and your money towards increasing your skills.

Your income is going to be determined by the value that you bring to the marketplace.

So that means you gotta invest in you getting better at whatever you do, getting new information, getting new capabilities, right, increasing or getting new skills that you have to bring to the marketplace to up your income, to up the amount of money that you can command.

Because, listen, you have to command more pay for your expertise, you have to command more pay for your skill set and for your added education, added experience.

You have to command those things. But look, you can’t walk in anywhere and just command it because you want it.

You have to have the education, the certifications, the qualifications, the skills to actually command anything, right?

When you get the skills, it’s going to improve your ability to add more money to the previous four assets that I discussed in this video.

So please don’t forget about the added value of adding skills to your assets, because, listen, your education and your skills and your knowledge and your expertise are assets too.

So there you have it, guys. If you’re serious about building wealth, you owe it to yourself to consider all of the different types of assets that are out there and available for you to invest in.

Yes, that means cryptocurrencies, the gold and silver market, REITs, real estate investment trust, all those things are open and available to you, right? And they may be viable investment opportunities for you.

Just make sure that you fully understand whatever asset it is that you choose to put in your portfolio, and be sure that you’re comfortable with that investment. And don’t forget the rule of 120, use that as a guiding measure of how much you should be allocating towards each type of asset, and then go forward.

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