I love sneakers.
A few years ago I fell down the rabbit hole of sneaker culture and I've been there ever since. I love love the unique (or just plain cool) designs coupled with the stories tied to them.
I like them so much that I buy way more pairs than I should. In the last 2 years, I've bought over 12 pairs of shoes costing me well over $2,000.
This may seem a bit out of character for the guy who recently wrote a post saying he wasn't buying his dream car because it was a waste of money, but I can explain.
I keep buying sneakers because it's not just a hobby, it's an investment. My sneaker collection has gone up in value by roughly 46% since I started it.
I'm literally making money buying things I enjoy.
Let's talk about appreciating assets.
What is an Appreciating Asset?
An appreciating asset is anything that increases in value after you purchase it. These assets often act as investments and sources of passive income.
Common appreciating assets are:
- Real Estate
- Stock
- Bonds
- Certificates of Deposits (CDs)
- Cryptocurrency
Appreciating Assets vs. Depreciating Assets
Appreciating assets are the key to growing your wealth over time. Unfortunately for us, most of the things we purchase in life will be depreciating assets.
A depreciating asset is something that decreases in value after you purchase it.
Think of a McDonald's cheeseburger. As good as they are, they're not limited and you can get them at any McDonald's across the world. This means that as soon as it touches your hands it loses almost all its value because no one wants a secondhand cheeseburger that they can just buy themselves.
On the other hand, let's consider McDonald's infamous Szechuan Sauce. This condiment was only available for a limited time in limited quantities, and thanks to the adult cartoon Rick and Morty, the demand exponentially outweighed the supply.
Even though this sauce initially had no value (I'm assuming it was free since it was a condiment), it was selling for hundreds of dollars after its release.
Depreciating assets are unavoidable. Most purchases don't hold their value. There's nothing wrong with that, it's just a fact of life.
On the other hand, appreciating assets are completely avoidable. Meaning that if you're not looking for them, they'll rarely fall in your lap.
So how do we get more Szechuan Sauce in our life?
Building Your Life Around Appreciating Assets
The boring side to appreciating assets revolves around the tried and true approaches to investing that everyone talks about.
- Buying a house
- Investing in the stock market
- Opening a savings account or a CD
If you want to know the most common appreciating assets, they can pretty much be summed up by that list above.
Don't get me wrong, yes, all those things work, and yes, they are crucial to quickly growing wealth and gaining financial independence, but that's not what I want to talk about.
I want to talk about finding appreciating assets in things you enjoy. A lot of those things I mentioned above are means to an end, that end being wealth.
What people don't discuss is how you can find appreciating assets in hobbies you love. If done right, you can spend money on things you're passionate about and never lose a dime.
Let's go back to my sneaker collection that I mentioned at the beginning of this post. I think sneakers are cool because they can be worn, displayed, traded, and sold. They're something I like to collect and learn about in my free time.
And even though I've spent thousands collecting sneakers, if I decided to sell my entire collection today I'd have roughly 46% more money than I put in.
I'm essentially partaking in this hobby for free, and if you look hard enough you'll find that many hobbies operate have similar opportunities.
- Vinyl records are often limited and appreciate in value
- Pokemon cards rocketed in value in recent years
- Certain designer watches can often hold or go up in value
- Art has been an appreciating asset for centuries
- NFTs are still not a completely proven market, but this year they have shown that they have the potential to appreciate exponentially
Now obviously every hobby doesn't have appreciating assets associated with them, but many do. Take a close look at what hobbies you're spending a significant amount of your time and money on and see if there's a way to get a portion of that money back.
Minimizing Loss on Depreciating Assets
Appreciating assets are nice, but they're rare to come by. Let's talk about how to manage depreciating assets.
Just because you own an asset that loses all its value, doesn't mean you have to let it lose all of its value.
Let's take use a car as an example, as soon as you drive a brand new car off the lot it will lose about 10% of its value. That's ridiculous. There's no reason you should take that hit.
Here are a few strategies to minimize your losses:
Buy Things Used
If you're like me, you may have an urge to buy things brand new, but often buying used is the way to go. Especially with big purchases like a car, buying assets used can save you a lot of money. You'll be taking advantage the initial depreciation and making it work in your favor. A lot of times you won't even notice a huge difference between a new product and its used counterpart.
Sell or Trade
Sell or trade things you no longer have a use for. Stop collecting things that aren't mean to be collected. Get back some of the value of that initial purchase while you still can and you'll probably be better off.
Learn Market Cycles
There's typically a good and a bad time to buy things. For example, buying a pair of Jordan's during the time the Michael Jordan documentary was releasing was a terrible time to make that purchase because prices were spiking.
A lot of products and industries have market cycles, so if you're able to time them right you may be able to save yourself a good bit of money on the initial purchase.
Making Money Doesn't Have to Be Boring
I hope I've helped demonstrate that appreciating assets aren't just limited to the traditional strategies that are always being recommended.
A lot of times you can save and grow your money through fun and interesting hobbies.
If you search hard enough, you can find creative ways to make money and fund your hobbies at the same time.
Let me know if you have ever made money through uncommon appreciating assets!