Protecting the value of your assets is something that both individuals and businesses need to do. People accumulate assets over the course of their life whether these are smartphones, jewelry, cars, art or property. Businesses, meanwhile, usually have multiple assets for their operation that can include vehicles, equipment, property and inventory just as a few examples. These assets can change in value, so you want to make sure that you find ways to protect or even increase the value of your assets.
Assets can lose value through deprecation. Depreciation represents the use of an asset’s value and assets that are losing value can significantly impact an individual’s net worth and a business’s finances. There are also some assets that hold their value well, such as gold, which is why many people invest in assets like this during turbulent economic times. Some assets are known to lose value quickly, such as cars, as a new vehicle can lose around a third of its valuein just a year and over half of its value after 3 years.
While the value of an asset is determined by many factors and those outside of your control, there are also some factors that you can control. Many assets you can protect the value of simply by keeping them in the best possible condition, which can include regular cleaning and maintenance, as well as storing them safely.
With the above-mentioned example of cars as an asset that depreciate quickly, you can use gap insurance to protect the value. What is gap insurance? This is a type of cover that will pay the shortfall between the insurance payout (current market value) and the amount originally paid. This is a smart way to protect your finances which could end up saving you thousands.
It is also intelligent to diversify your assets and this is something that you will always hear recommended to investors. This is because it is a safe way to protect and increase your net worth as you do not have all of your eggs in one basket. This will make your portfolio more resilient and less affected by black swan events (rare and impactful events that can have severe repercussions on markets).
This post should be informative and help you to better understand the importance of protecting the value of your assets. You do not want your assets to lose value over time, so you need to understand the best ways to preserve and potentially increase the value of your assets over time. Additionally, it is important to recognise the importance of diversification so that you can spread risk in your portfolio.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence
