You can determine your financial value using your net worth, but investable assets might be a better way to measure it. Getting help from a financial advisor is also smart to keep track of your investable asset and the value you should hold.
What Are Investable Assets? Investable assets are your liquid and near-liquid assets. They include:
- Cash, checking, and savings accounts
- Central Deposits and money market accounts
- Stocks, bonds, and mutual funds
- Retirement accounts and trusts
NOTE: Physical assets or properties like your home, vehicles, real estate investments, art, jewelry, or collectibles are not in this category of liquid or near-liquid.
Investable assets are your financial value without selling your possessions or properties. Financial advisors and money lenders use the investable asset for different reasons. Investable assets are a helpful, fast guide to determining how much money you can invest financially.
Why Do Investable Assets Matter?
Financial advisors are interested to know your investable asset to understand better the amount you can invest. A straightforward report of your available value that they can put forward for your investment venture. The money in your bank accounts can easily be converted to investable assets. All these efforts are geared towards putting together more money for investing.
Before banks or money lenders give you a loan, they will assess your financial assets to determine if you qualify for new debt, like a mortgage or personal loan. The more investable asset you have, the more likely you will continue paying your debt in the event of a financial emergency.
How to Calculate Investable Asset
Investable assets are liquid and near-liquid assets, which is where we begin. A total of all these assets then subtracting all debt will give you their value. Your mortgage is not considered a liability but an expense, so you should leave it out.
There is a difference when calculating your investable asset and your net worth. Your net worth depends on the market value of your physical properties, unlike the others. Investable assets do not rely on the market value but on the debts you owe.
Before you seek the help of a financial advisor or get in the market for any investment, it is wise first to calculate your investable asset. Professionals advise that you should keep track of your assets, both liquid and non-liquid monthly.
When you know your worth, it is easy for any financial advisor to chip in and help you handle your investments. Knowing the value of your investable asset will also determine which firm is right for you since some have minimum amounts that members can invest.
Managing Your Investable Assets
When you keep track of your investable asset, investing will be easy for you. Make it a culture to update the calculations monthly or quarterly. With this information at hand, you know your worth if faced with an emergency need to liquidate your assets.
A survey by the Federal Reserve in 2017, an adult’s net worth on average, is only $97,300, although it may vary depending on your situation. Knowing your worth will help you invest and keep your properties. The value of your investable asset depends on several factors: Age, family status, cost of living, and income.
An individual can have a goal of $500,000, while another aims at $50,000. For instance, a college graduate has a smaller income than a person who has been employed for 20 years. On the same note, if you have a family with little children, your emergency kitty or savings must be different from another whose children are grown and moved out.
Net investable assets: Net investable assets determine the amount one can invest. As earlier discussed, when calculating net investable assets, all your personal properties are left out. You only sum up your savings and then subtract all debts.
Net worth: It is the most popular metric that illustrates your worth once all your assets are disposed of and debts paid. Although it is a standard method to determine your financial strength, it may not be the most appropriate because you have to sell your assets no matter the current market situation.
Investable assets are valuable to you, and you should track them monthly or quarterly. If you don’t know how to make investment decisions, seek help from a financial advisor. It should be easy because you know the value of your investable assets.
Also, bear in mind that your age and family status is a factors to consider when saving or making an investment. A young family requires more savings than a family of grown-ups. Manage your finances wisely and invest right. You can also check this guide on How to buy stocks for investment in the stock market.