Assets Assets Assets!!

Wealth = Assets

If you want to get rich then you need to build assets. Unless you have an extremely high paid job you aren't going to get rich without assets!

Okay so you've got the picture: build assets.

I'm my mind there are 3 types of assets that you need to focus on, plus one additional investment. The three main assets are property, fixed income investments such as cash and bonds, and equities or other investments in Companies. The additional investment is in a pension.

Ideally you want to put money into all 4 investments simultaneously to get a good spread, building a diverse portfolio of assets. However this may not be practical so I will go through each in turn, explaining how you should prioritise each in turn.


Your pension should be your priority, even before your savings. If you have a Company pension where they match your contribution then you should try to maximise your contribution to fully utilise the amount that your Company matches. For example, my Company matches 6% of my gross salary if I contribute that much. So I invest 6%, they match and so I end up with a pension contribution of 12% of my gross salary by the year end. Furthermore, the government gives tax relief on pension contributions. So if you're a basic rate tax payer then for every £80 you contribute, the government contributes £20.

It can be quite confusing to know how much you need to save into a pension. For more information and guidance on calculating how much you will need check out my previous article on the subject.

Cash and Bonds

Cash is a highly liquid asset meaning that you can access it quickly and move it around. You need a portion of your wealth in cash so that you can cover immediate expenses, purchase other assets and cover yourself in the case of any emergencies.

You should have a standing order each month from your current account (into which your salary is paid) into a savings account each month. Try to have at least 3 months worth of expenses in cash. Then add any excess into bonds, equities and property.

Bonds are essentially a title to interest. You give the bank/ financial institution some of your cash for an agreed period (typically one to five years). After that period the financial institution will return your money with interest.

Personally, as I am young I don't want to tie my money into bonds. This is because I am looking to buy at house in the next few years and so can't afford to not have access to my cash. Furthermore, I am happier to take a little more risk with my cash as thus invest more heavily in stocks and bonds.

Equities and Investments

Unless you take a particular interest in stocks, shares and companies then I would suggest you don't attempt any stock picking yourself.

Instead, for the majority of people I would suggest having a portion of their savings in a low cost index tracker. This is an investment fund that tracks the market and should increase in value over the decades.

In my opinion everybody should invest stocks and shares regardless of your risk appetite. If you don't require access to the money for a substantial amount of time (5 to 10 years) then you should definitely be investing. You only need a couple of hundred pounds/ dollars to begin investing in index trackers. The key to successful investing is to keep your costs down. Anything that looks like more than 0.5% (of the money you've) charges then you want to avoid it like the plague.


Investing in property is by far the most difficult of investments. The minimum amount of capital requires makes it far more difficult to make a reasonable investment.

Many people believe that the home that they buy to raise a family is an investment (buying your first home). I disagree. A house is not an investment. An investment is something that offers you a return as in the case of interest with bonds or dividends with stocks. There is no increase in your cash flow from owning a house. Only, there is an increase in outgoings as mortgage payments bite.

Nonetheless, many people aspire to be home owners. I would suggest that a person save for a home that they can reasonably afford. This means that they shouldn't stretch themselves in any way when it comes to a house. You know that figure you have in mind for your first property? Halve it! A good gauge if you're overpaying is that your mortgage costs in total should not be anywhere near one third of your net monthly income. Ideally, you should aim to get it even lower.

Once you've purchased your home and are growing your assets and cash inflow, then you can start thinking about an investment property. Even though you will be getting a tenant(s) in to help to cover the mortgage, you need to be in a situation whereby you could cover the mortgage costs should you be without a tenant for an extended period. You should be in a position such that if you had to you could afford to cover all your mortgages and still live at the same standard of living. For my property portfolio strategy read.

Read my other article to help to understand what the balance of your assets should be.

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