"Assets" Versus "Investable Assets"

I just spent some time this morning going over my balance sheet – taking stock of where our assets are placed and what our portfolio balance looks like these days.  We have a real variety of holdings – businesses, promissory notes, real estate, cash, retirement accounts, stocks – but we don’t have any BONDS… I am biased against them.

One thing I did notice, though, which I thought would be worthwhile pointing out, is that while I enjoyed looking at the big number at the bottom of our balance sheet, it was not representative of our true pool of money to invest.  There is a difference between assets and investable assets.

For those of us who are emotionally “rewarded” by looking at our big juicy balance sheets, it’s important to remember to not over-indulge in figures that make us feel good.  When it comes time to making investment decisions, we need to make those decisions based on our pool of “investable assets,” and not our net worth figures.

I consider investable assets to be money or equity in things that you are pursuing as investments purely for their rate of return.   Assets held in the stock market, bonds, promissory notes or mortgages you own (where people are paying YOU payments), and real estate, for example.

Your “other assets” – things like your car, boat, and equity in your house – may have a cash value if you sold them and can rightly be considered assets, but if your purpose in acquiring them was not chiefly financial reward, I wouldn’t consider them to be investable assets.

Take some time to take stock of your investable asset base.  Tomorrow we’ll talk about Portfolio Balancing, and beginning to determine or re-evaluate whether the assets in your investment portfolio are allocated the way you want.

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