Ever heard of the adage of not putting all your eggs in basket? Well this simple age old quote holds a significant meaning especially in present times of investments and taxes. Apart from regular savings one should choose wisely and allocate their savings into long term assets.
So what is exactly long term asset? In layman’s terms long terms assets are those assets which have a life span of more than one year. Ideally these assets are for investment purposes and are usually not converted into cash in a year. So all in all long term assets are good investment tools that can garner good returns over a period of time. Also many long term assets are not liquidated. However there is a fear of depreciation as well.
Fixed assets, intangible assets and long term investments are a few types of long term assets. Long term assets are also called as noncurrent assets. Property, plant and equipment also come under long term assets. Current assets are the opposite of long term assets. Liquid cash or short term assets that can be converted into cash within a year all comes under current assets.
From individuals, to families to businesses everyone can and should invest in long term assets. The profit margin is relatively higher in long term assets and safe as well. However one should wisely choose which assets is suitable for you. Long term assets provide a continuous source of income too.
For example if you buy a house and put it up for rent, then the rent money can be a source of income for you. Similarly investing in long term mutual funds, or long term investment provide a cushion once you retire or might even help you to set up a business.