The term asset gets thrown around in finance quite a bit.

And the truth is: Most of us were never taught what a real asset actually is.

However, there's one question that separates people who build wealth from people who just earn a living.

It's not "how much do you make?"

It's "what do you own?"

That question comes down to assets. 

Understanding what an asset is - and how to build them - is the starting point for every serious investor.

So let’s break down what an asset really is, the different types, and why investors should care.

But first: Assets = opportunities for investors.

Our CEO Jaspreet Singh is hosting a free live investor workshop on March 18th.

In this workshop, he’ll be breaking down how investors spot market shifts and use assets to build wealth.

Register for free by clicking here.

What Are Assets? (The Simple Definition)

An asset is anything you own that has economic value.

In even simpler terms - assets are anything that makes you money, instead of costing you money.

If it's worth money - or could be turned into money - it's an asset.

For public company’s, assets show up on a balance sheet, which is basically a financial snapshot. 

It shows what you (or a company) own, what you owe, and what's left over. 

The formula looks like this:

Assets − Liabilities = Net Worth

Your assets are everything you own. 

Your liabilities are everything you owe. 

Whatever's left is your net worth.

Think of it this way: At one point, Home Depot had about $72 billion in assets. 

Those include buildings, inventory on the shelves, cash, and money customers owe them. 

All of that adds up - and it tells you a lot about how financially strong the company is.

The same math applies to you personally.

Types of Assets: What Counts?

On a company’s balance sheet, assets are broken down in two main ways:

Current Assets vs. Non-Current Assets

Current assets can be turned into cash within 12 months. Think:

• Cash in your checking account.
• Money market funds.
• Stocks and ETFs.
• Money owed to you.

Non-current assets (also called long-term assets) take longer to convert to cash. Think:

• Real estate.
• Business equipment.
• Long-term investments.

Both types count as assets - the only difference is how long it takes for each one to become cash that can be used.

Hard Assets vs. Paper Assets

This is one of the most important distinctions in investing.

Hard assets are physical. You can see them, touch them, and stand inside them. 

Real estate is the classic example. When you buy a rental property, you own something real - the bricks, the windows, the land.

Paper assets represent ownership - but you don't hold anything physical. 

When you buy one share of Apple, you own a tiny piece of Apple. It's on paper (or a screen). 

You don't get to walk into Apple's headquarters and grab a laptop.

• Paper assets include stocks, bonds, ETFs, and mutual funds.
  
• Hard assets include real estate, gold, and other physical commodities.

Neither is better than the other. They serve different roles in a healthy portfolio.

Tangible vs. Intangible Assets

For company’s, assets are broken down further into two categories:

Tangible assets have physical form. 

Equipment, real estate, inventory - things you can see and touch.

Intangible assets don't have physical form - but they absolutely have value. 

A brand name, a patent, a drug pipeline - these all show up as value on a company's balance sheet. 

When analysts evaluate a company like Pfizer, part of what they're paying for is patents and intellectual property that don't exist as a building or a machine, but are worth billions.

The Most Common Asset Types for Investors

Here's a quick look at the most common assets you'll encounter as an investor:

Each of these has different risk profiles, tax treatment, liquidity, and reasons to own them. 

Investors may own just a few of these or all of them. But, these are important to understand because many of these items appear on a company's balance sheet.

And as an investor, you want to know what assets a company has - as it’s going to use those assets to grow the business.

Assets vs. Liabilities: The Wealth Gap

Here's where most people go wrong.

They spend their income on things that feel like assets - a new car, a designer watch - but are actually buying liabilities. 

A liability is something that costs you money. 

• A car payment is a liability. 
• Credit card debt is a liability.

Real assets either grow in value or generate income (or both).

A rental property that generates monthly cash flow? Asset. 

A stock that pays dividends? Asset. 

A savings account that earns interest? Asset.

The more assets you build, the wider the gap between what you own and what you owe. That gap is your net worth - and growing it is what wealth-building is actually about.

Why Assets Are the Foundation of Wealth

Most people are trained to think about income. 

Make more money, spend less, repeat. 

But wealthy people think differently.

They make money - then they buy assets first. 

Then they spend whatever is left.

The goal is to build assets that work for you around the clock, even when you're not working. 

• A stock portfolio grows while you sleep. 
• A rental property generates rent whether you're at your desk or on vacation.

That's the power of assets - they separate your time from your income. 

ANd when you no longer need an income to live the life you want, that is true financial freedom.

What Assets Mean for You

If you want to build real wealth, the question to ask yourself isn't just "how do I earn more?"

It's "what assets am I building?"

Individuals and S&P 500 companies all build assets in order to generate wealth - this wealth pays you while you sleep.

Now, that doesn’t mean you shouldn't have an income at all.

Using the money you have now to buy assets will help you to become financially free down the road.

The goal is to not only climb the corporate ladder (make more at your job) but to also own the corporate ladder (own assets that appreciate in value, or pay you).

Once you understand how to do that efficiently, you’ll be one step closer to building generational wealth.

Reminder: Spots are limited for our CEO Jaspreet Singh’s free live investor workshop - he’ll be showing you exactly how the pros identify market shifts and stocks to invest in.

Save your spot by clicking here.