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appreciating assets vs depreciating assets

appreciating assets vs depreciating assets

 


Today we're not going to talk in an academic way, but I'll give you a real-life example, and you would understand it in one or two minutes.

Let us say that you have just bought a Mercedes, that is worth 76,200$ dollars, and it's a great car, but let us see what will happen.

Fast forward, and we're now 4 years later, and your car is roughly now worth 35,000$, because it was used for 4 years, and you've crashed a couple of times, traveled a lot, and it doesn't look or perform as when you bought it.

So now the car is an asset, but an asset that has depreciated in value, you bought it for 76,200$ and sold it for 35,000$, and you've lost 41,200$ in the process, that is why it's called a depreciating asset, unlike the other case.

If you invested in Mercedes' stocks rather than a Mercedes car, this 75,000 would've maybe doubled, and you'll end up making a profit because even if Mercedes weren't performing well the value would've increased, because of inflation and we'll talk about it in another article.

So the stocks, are most probably appreciating assets, and when you make the second case, you end up being rich, you end up multiplying your worth, and you end up "winning"

Unlike when you choose to spend your money in depreciating assets, because it's a matter of time before you lose all the money you've spent in, so as I said people overestimate the value of depreciating assets like buying a new car, but underestimate the value of appreciating assets, like for example buying stocks in google, which we know for sure that it will just keep increasing, today's lesson is, don't be most people.

I hope this was helpful, and I wish you wise decisions in life that would lead to a great happy life, and thanks for your precious time :)

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