With excess funds available, as a result of your rising income, it makes sense that you invest in assets. However, we need to get the definition of "assets" very clear. From a finance perspective, assets are items that generate current or future cash flows. If it does not generate current or future cash flows, it is not an asset.
For example, car owners may be tempted to buy a second or third car for your families, but you should apply careful consideration. At the end of 5 years, a car depreciates to less than 50% of its purchase price, the same money invested even in a high yielding debt fund is likely appreciate more than 50%, over the same period of time.
If you are a current home owner, you may consider, buying a second house to get you rental income and capital appreciation over a period of time. When making investments in assets, you should consider the trade-offs income versus capital growth, risk versus liquidity, tax efficiency versus short term capital gains, and make appropriate investment choices based on the requirements of your financial plans. Certain assets, like commercial real estate, requires special expertise in managing, and you should avoid such assets, if you do not have the required expertise
Investing in real estate has become increasingly popular over the last fifty years and has become a common investment vehicle. Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stocks and bonds. Perhaps the biggest difference between a rental property and other investments is the amount time and work you have to devote to maintaining your investment. When you buy a stock, it simply sits in your brokerage account and, hopefully, increases in value. If you invest in a rental property, there are many responsibilities that come along with being a landlord.
