Correct asset balance

Published by Uday Jethva on

Good day to all! Yesterday I got the idea to tell you about the correct asset balance of assets and why a novice renter and investor need it at all. You all probably know that all your assets have quantitative indicators. For example, you have 5 units of real estate, 700 thousand shares, 8 units of business, etc., that is, each of your assets that brings money is taken into account and has a quantitative indicator.

If you translate all this into money and count how much money is invested in each asset. then it will probably turn out that the most money is invested in the business, in real estate and less securities, and even less other assets.

Why do this? Sooner or later, you have to think about the safety of your investments and take into account the risks, as a result of which you can lose everything. 

If, for example, you lose most of your business or real estate, then you will have other assets that will generate income, but will there be enough of them to support life at the same level at which it was before these incidents? Probably, if the business brought you the most money, then no. How to insure in this case?

The answer is simple – you need to maintain a balance of assets that will not allow all your previously created capital to disappear at one point. The balance of assets is able to visually display your investments made in exactly the proportion in which they actually are. 

As we said above, for this you will only need to calculate the amount of money invested in one or another asset and build a graph that clearly reflects the state of affairs. This is what a graph like this might look like:

Here you can see how many assets constitute a percentage. This is very convenient, because you can immediately see how many assets you have in monetary terms. As you have already noticed in this diagram, most of the percentages in the total share of assets are given to the most liquid ones, that is, those that can be quickly exchanged for money without losing value. And the least liquid ones take the last places in terms of the amount of money invested in them, because they are most difficult to quickly exchange for money. As a rule, it makes no sense to keep a lot of money in less liquid assets, so their share must be constantly reduced and try to invest in other instruments.

How to find out what is the maximum share you can have for certain types of assets? To do this, you need to use the “Thirty” rule. Try to keep the share of any instrument in which money is invested does not exceed 30 percent of the total share of investments or assets made. Then your money will not be at great risk and the necessary balance will be observed.

What if there are few assets and the share of each is more than 30%?. Then you need to look for other instruments and assets in which you need to invest money and thus expand your investment portfolio in order to minimize risks and insure money. 

The more assets you have in your pocket, the less likely you are to burn out. Always look for new opportunities for your money and try to distribute them in different places.

I am sure by following these simple rules you will be able to make a balanced portfolio of assets and not lose money even in a crisis. By the way, it was this approach to organizing my capital that helped me avoid bankruptcy in 2008! I am sure you will not have such problems, because now you have the necessary knowledge in this area. See you on the blog pages! While!

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