Assets: Growing Wealth

Assets: Growing Wealth

All investments can be divided into two categories, those the investor owns and those that are loans.

Two Ways to Invest




Real Estate


Natural Resources

Certificates of Deposit

Common Stock

U. S Treasuries

Fine Art

U. S Agencies

Rare Collectibles

Corporate and Municipal Bonds

Everyone who has a bank account invests by loaning money to the bank. Deposits are loans to the bank for which the bank pays the depositor interest, insures the depositor against loss and allows for money transfers, withdrawals and payments. With those deposits as collateral, the bank may borrow, from the Federal Reserve, ten times the amount they hold in deposits and lend that as mortgage loans or other debt. Banks, via mortgage loans and credit cards, lend at much higher rates than those at which they borrow. The difference is bank profit or net interest margin. Government, municipal and corporate bonds are loans to the bond issuers, which they agree to pay back by a preset date and with semiannual interest payments along the way.

The advantage of investing by lending is the certainty of return. A United States 1-month Treasury bill will certainly return the investor’s $10,000. A thirty-year corporate bond will pay the interest and return the principal if the issuing company is still in business. The greater the risk of default, the higher the interest rate demanded by the market. Market perception of corporate financial health between issuance and redemption determines the market value of the bond.

The Asset Advantage

Appreciating assets create wealth, but there is little certainty of return. Only those who can hold on through market and economic cycles can truly benefit from an asset’s appreciation. Uncertainty equals risk, and risk is proportionate to an asset’s potential appreciative return.

While a high-value appreciating tangible asset is held, its contribution to its owner’s current financial situation is reflected on the owner’s balance sheet as an increase to the left side, the asset side. The greater the difference between assets and liabilities, the greater the individual’s total net worth. A high-value asset is stored wealth that can be turned into cash or used as collateral for emergency borrowing. But only appreciating assets help. Motor vehicles, computer and communications technology, and other depreciating assets subtract from total net worth.

I. C.

Real estate property taxes cut into its net asset appreciation, but other tangible investments do not. Fine art, rare collectibles and precious minerals increase wealth by stealth. Their value is not regularly recorded and reported, and may not be taxed when they are sold, depending upon how where the assets are held and the circumstances of the sale. But for the 40% tax on estates of over $11.4 million ($22.8 couples), assets pass to the next generation. If taxed, precise appraisals of highly valued tangible assets may be unavailable or approximate. Neither appreciation of an asset, nor taxation of that asset is certain.


Real estate is the most common tangible investment and also possibly the logical: they’re not making it anymore. The ¼ of the earth that could be inhabited by mammals is already dominated by human beings, so there is less land available for expansion of residential housing, manufacturing and agriculture. World population growth has slowed to 1% per year, but most of that growth is taking place in the most populous places on the planet. Migration further drives up the prices of first world real estate. Add the potential loss of habitable land near coastal cities due to rising sea levels, and supply of planetary real estate becomes further restricted, driving prices higher.

Mineral rights may or may not be attached to the piece of land above them. Natural resources beneath the surface of the earth can be owned or leased separately from the land above. Once mined or refined, minerals can be used for manufacture, but some minerals have value because they are inherently scarce. Total annual worldwide gold production of 115 million ounces works out to less than two-tenths of an ounce per person on the planet. So for some natural resources, as it is for real estate, logic demands that their prices rise.

Homo sapiens have created tangible assets that they value because they are uniquely inspiring, revered, and even worshipped. Those most-desired pieces of fine art that do come up for sale draw the dollars not only of art lovers and collectors but also of the brokers, dealers and centuries-old auction houses that control the market. But art is more than just an investment of dollars for potentially more future dollars. Art also provides a feeling of connectedness, cultural heritage and history. For some, owning art and enjoying it is satisfaction enough.


An intangible asset is one, “That cannot be assessed, felt, measured, or moved because it has no physical substance.” Currency, coins and bills, are now intangible assets because the materials of which they are composed do not equal the value that they represent. A $100 bill is just a piece of paper that represents value in the most common currency.

Like dollar bills, the common stock of a corporation once belonged to the person who held the certificate. But now common stocks, as well as most other securities, are book entry, meaning that owners are registered and shares are transferred electronically.

A share of common stock entitles the owner to a share of the issuer’s profits, that’s why earnings per share and the price-to-earnings ratio (P/E) are important. If a company fails to produce earnings, the company will eventually fail as stockholders sell and the market price falls. If the company fails, common stockholders stand in line behind banks, bondholders and preferred stockholders for repayment as liquidation of the company’s assets takes place. In most cases, no earning means no reason to own the company.

A Royalty Income Trust allows an average investor to buy rights to the production of natural resource companies. Royalty Income Trusts also provide a tax advantage in that both depreciation of the operation and depletion of the natural resource protect distributions from being taxed as income. Depreciation is on a schedule; depletion is not. Depletion is based on estimates of how much oil, gas or ore are still in the ground; those estimates can be wrong.

Citizenship is a right to live, work and vote in one’s country of residence. For most people on the planet, a move to the United States opens greater employment, career and economic opportunities for greater wealth and security. U. S. citizenship cannot be purchased, but eligible immigrants can become lawful permanent residents by investing at least $1 million to finance a business and employ workers through the EB-5 Immigrant Investor Visa Program.


Intangible assets are liquid because they can be issued, recorded and transferred electronically. Their certificates of ownership move at the speed of light once the switch has been flipped. But more important than the ability to trade assets is access to information about those assets. That information also has a price.

Bitcoin brought to common knowledge the fact that particular encrypted computer code can have value unto itself. Ethereum then introduced “smart contracts” that can represent ownership of a real-world property. A real estate title or deed, encoded into a blockchain smart contract, unalterably and irreversibly represents ownership of that piece of the earth. Just as a dollar bill represents its value, a smart contract can represent the identity, provenance, appraisal and ownership of any highly valued, tangible asset.

The intermediaries of digital transactions can make money, but much less than before the Internet. They no longer control the flow of information. The intermediaries of transfer of tangible, highly valued assets retain the advantage which stockbrokers once had. In-depth research of a real estate investment is still a lengthy process that involves title search, credit reports, inspections and appraisals. A few brokers, dealers and auction houses dominate the market for fine art and rare collectibles, and they are also the main sources of information about those tangible assets. Growth in the size of the market for fine art, antiquities and rare collectibles is stunted by its financial barriers-to-entry. Participation in a Fine Art Investment Fund may require a $500,000 minimum, a 2% commission, a 5-10 year time commitment and sharing 20% of any profits. A broker, dealer or auction house may charge up to a 25% commission of both the buyer and the seller. Nice work if you can get it.

Appreciating assets build wealth over the long term, but information about which assets to buy, their market values, where to buy them, and whom to buy them from may be as valuable an investment as the asset. As Warren Buffet says, “Never invest in a business you cannot understand


Spire Wealth Management is a Federally Registered Investment Advisory Firm. Securities offered through an affiliated company, Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC

This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any strategy or investment product, or as investing advice of any kind.