Your time is precious, and it would be easy to give you the information you are looking for in a single sentence. If that describes your intentions, then here you go: investable assets are liquid or almost-liquid assets, which means they are either already in cash form, or can be easily and quickly converted into cash without incurring significant costs.
If, however, you are not just interested in finding out what investable assets are, but why they could be important for your big-picture life vision, you might want to keep reading.
This blog will go through not just what investable assets are (with examples), but will also provide an investment rationale (a kind of “investment compass” to guide your decision-making) and a few brief pointers on investment techniques.
1. Financial Stewardship: Your Investment Rationale
At Iron Point Financial, we are staunch believers in knowing not just what or how to invest, but why to invest. That’s why we take time to sit down with each of our clients: to hear your dreams and ambitions, and to tie our wealth management and financial planning outcomes directly to what we hear you share (rather than to a market index).
We have found that prioritizing this helps our clients to engage in better financial stewardship, which we define as being intentional with your finances and making wise choices that align with your values and long-term goals.
Another way of framing this is to say that everyone has “gifts” they’ve been given, and that it would be a crying shame to “bury those gifts in the ground” — to let them stagnate or sit idly. In this way, we see our role as helping clients like you not just keep your investable assets — one example of the gifts you’ve been given — “above ground,” but actively directed towards pursuing your unique life dreams.
We believe that when you do this — keep your life goals front and centre of your investment practice — you will be more fulfilled, with a greater sense of momentum in life, especially when you consider how reaching these goals could positively impact you and your loved ones.
Avoiding Burnout
The opposite of the investment rationale described above is doing something “just because”: in our case, investing without a meaningful reason. We believe that taking that approach — investing mindlessly — is a recipe for burnout in the long-term, no matter how successful you might become from a “numbers perspective.”
Consider the cautionary tale of 23-time Olympic gold medallist, Michael Phelps. Despite winning six gold and two bronze medals at the 2004 Summer Olympics in Athens — an incredible achievement — he left the tournament feeling depressed and questioning life:
“[You] work so hard for four years to get to that point, and then it’s like you’re… at the top of the mountain, you’re like what the hell am I supposed to do? Where am I supposed to go? Who am I?” [Source: Healthline]
You might not be the most decorated Olympian of all time, but the principle stands: unless you are able to express something important about who you are — your identity, your values, what makes you uniquely you — your achievements are likely to end up feeling hollow at some point.
This is exactly what Michael Phelps experienced, and what he had to learn, as he started to look after his mental health:
“I think for a long time I looked at myself as a swimmer and not a human, so being able to learn more about me, how I worked, why I work that way, through treatment and unpacking all that extra crap that I had inside of me.” [Source: Healthline]
The crossover in our context looks like this: if you define yourself only by how much you have in your bank account, or how large your investment portfolio is, you could be playing a dangerous game. Numbers in and of themselves do not mean anything; it’s what you put those numbers towards that matters.
And this is what the financial stewardship of your investable assets is all about: choosing to invest your assets as an expression of your values, for the sake of those you love (you, your family, and your community). When you frame investable assets that way — how they go beyond you, to impact not just yourself but those around you — they gain a whole new meaning.
To summarize: when you know why you’re investing and who you’re investing for, we believe you will be better placed to avoid burnout and stick at your investments for the long-term. As an added bonus, we reckon you will also make fewer emotionally-charged, short-term decisions, as your “financial stewardship compass” holds you steady in the right direction.
2. Investable or Not? Categorising Different Asset Types
Now that we’ve established a clear investment rationale, we can start looking at which asset types are investable, and which are not. Although we’ve already defined investable assets at the outset, we like the metaphor our President, Greg Liszka, uses to frame them:
“Investable assets are things I can take under management and start ‘playing chess’ with. If we take you on as a client, we’re going to set up a whole strategy for you — kind of like a chess game.”
This strategy will be all about fulfilling your unique financial stewardship goals — the key things you’ve sat down to talk with us about, the goals that really matter in your life. In that way, the process we work through together will be far from meaningless:
“It all depends on what we’re trying to accomplish, but I can tell you we’re not just ‘moving pawns across the board until they get whacked; instead, we’re setting up a strategic front for the advancement of your goals.”
And now, without further delay, let’s dive into specific examples of the investable assets you can use to advance your goals…
What are examples of investable assets?
- Cash and cash equivalents (checking and savings accounts, certificates of deposit, money market accounts, and treasury bills);
- Shares, otherwise known as “stock” or “equity”, which represent part-ownership of a company;
- Bonds (essentially, loans you give to corporations or governments that offer regular interest payments over time);
- Real estate rental income (note that real estate in and of itself is hard to liquidate quickly and without fees, but real estate rental income counts as a liquid, investable asset);
- Mutual funds and Exchange-Traded Funds (pooled investment vehicles that allow investors to diversify their portfolios without having to buy individual securities);
- 401(k) and 403(b) accounts;
- Traditional IRA and Roth IRA accounts;
- Commodities like gold, silver, and oil (often bought to provide protection against inflation); and
- Cryptocurrencies (digital currencies that involve cryptographic security features).
What are examples of non-investable assets?
- Real estate (your home or other properties you own);
- Vehicles (your car, motorbike, RV, etc.);
- Jewellery (note the difference between this and “commodities” above); and
- Art collections.
It’s worth noting that all of these are good examples of investments in a general sense, but that does not make them investable assets. In other words, we couldn’t use them in the strategic ‘chess game’ we mentioned earlier (although they could be connected to other big life goals you’ve told us about).
The reason they are not investable assets is their liquidity. For various reasons, it would be difficult to convert any of these into cash quickly, without affecting their market price. You just can’t guarantee you will find the right buyer exactly when you need to, and rushing the sales process could incur considerable transaction fees as well.
3. Tax Implications of Investable Assets
Other than liquidity, there are a few other factors to consider when assessing an asset’s “investability.” These include things like your risk tolerance level and the potential return on investment for a given asset class (e.g. bonds typically offer lower ROI than stocks, but also come with a lower risk tolerance) but one area we want to highlight today is the potential tax implication of an investable asset.
As Greg puts it,
“If there’s something we want to buy [for your investment portfolio], we need to look at the tax treatment of that particular asset to determine whether and where we want to buy it. Taxes over a 25-year investment period (an investment lifetime) are worth paying attention to. They could make a half-million dollar difference.”
Expanding on the chess analogy we touched on earlier, tax implications could be the difference between ‘capturing your opponent’s queen’ and ‘losing one of your rooks.’ Some investable assets have minimal tax implications (capturing the queen!), while others come with a hefty tax bill further down the line (losing a rook), which can eat into your potential returns, and have a knock-on effect on those stewardship goals we mentioned earlier.
Taking factors like this into account is exactly what it means to adopt a strategic approach: if we manage your investments for you, we will be sure to communicate how a particular investment type aligns with your goals, and whether there are any tax implications you need to be aware of.
4. Practical Tips for Building an Investable Asset Portfolio
With the proliferation of investment vehicles like Robinhood, Charles Schwab and SoFi, you might be tempted to put your investable assets to use on your own. If that’s something you are keen to do, then we wish you all the best, while reminding you of the importance of the financial stewardship rationale we discussed in depth earlier.
And if you would like to take this route — building your own investable asset portfolio — then here are three helpful tips to navigate that journey, plus an extra one if the first three feel like they’re just too much…
1. Set Clear Goals
Define your financial goals (what is really important to you), your investment horizon (how long you are willing to set aside an investable asset for investment use only), and your risk tolerance (how ‘safe’ you want to play it when investing). As we have suggested elsewhere, SMART goals can be a good framework for approaching this step.
2. Conduct Thorough Research
Investigate potential investments thoroughly and stay informed about market trends through resources like The Economist, The Financial Times and The Wall Street Journal. There are plenty of financial resources out there; some are free, some you have to pay for. Just find a source that works with your lifestyle, and stay consistent.
As you research, be sure to ask yourself questions like: “Does this trend or particular investment align with my financial stewardship compass? If so, how? Who does this investment serve? Which of my values comes into play?”
3. Regularly Review and Rebalance
Finally, remember that building an investable asset portfolio is a long-term process and, as such, requires long-term rebalancing and review. We recommend a large-scale yearly assessment of your portfolio.
Again, that could be a good time to ask yourself questions like: “How do these investments align with my goals? Are they accomplishing what I thought they would when I first invested? Are they still relevant to my values?”
4. Seek Professional Advice
If the idea of putting your investable assets to work using a financial stewardship rationale sounds great to you, but you’re just not sure you have the time to do it yourself, you might want to sign on with a certified financial planner like Iron Point Financial.
If you choose to work with a financial adviser like us, the only thing you need to do is schedule an appointment, discuss your life goals and values, and consult on the investment strategy we provide you with after that conversation, with regular review conversations over time.
If you’re anything like our president, Greg, who himself relies on IPF’s investment team to manage his portfolio, you could find this an appealing option:
“I have an investment team. They manage my money too. They implement the strategy. What I have found is that: 1) it’s less stress, and 2) you usually get better results when you hire a team that has the tools and resources that I could never have [on my own].”
In this way, asking a professional to manage your portfolio for you doesn’t have to mean compromising on your values — it just means trusting the right people to do what’s best for you, and what aligns most with who you are and what you care about.
Final Words
If you have made it all the way to the end: well done, and thank you for taking the time to read our blog today. By pressing on past the first paragraph, where we gave you the easy answer to the question, “What are investable assets?” you have already demonstrated some essential traits for long-term success: perseverance and a desire to learn more about the world around you.
We trust that applying what we have shared here and putting your investable assets to work in service of your personalized financial stewardship rationale will be a rewarding journey that requires more of the same qualities (perseverance and a continuous learning mindset). We’re wishing you all the best!
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Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.
Further Resources
- Comprehensive Financial Planning: What to Look For and 5 Things to Avoid
- How to Find an Investment Consultant: 5 Things to Look For
- Tactical Asset Allocation: Controversial or Convenient? (3 Perspectives)
- What is Lifestyling? Is it Risky or Rewarding? (3 Investment Views)
Disclosures
- Rebalancing may be a taxable event.
- Before you take any specific action be sure to consult with your tax professional.
- All investing involves risk, including the possible loss of principal.
- There is no assurance that any investment strategy will be successful.
