What Are Investable Assets? Types, Examples, and Tips for Investors

When it comes to financial planning, understanding the concept of investable assets is crucial. These assets form the foundation of your wealth-building strategy, helping you grow your money over time. But what are investable assets, and how can they work for you? 

Investable assets are financial resources you can invest to generate returns, such as cash, stocks, bonds, mutual funds, and retirement accounts. These assets are liquid or easily tradable, allowing you to grow your wealth actively. 

Let’s explore this topic in a friendly, relatable way so that you can take control of your financial future with confidence.

Investable Assets Definition

So, what are investable assets? Simply put, investable assets are the financial resources you can invest to generate returns. 

These are typically liquid assets—meaning they can be easily converted into cash—or assets that can be quickly sold or traded. They do not include your primary residence or personal belongings like your car. Instead, they represent the money and securities you can use to grow wealth.

Investable assets are important because they allow you to invest in various financial instruments, from stocks and bonds to real estate and commodities. You can better manage your finances and make informed investment decisions if you know what assets qualify as investable assets.

What Are Investable Assets Examples?

Building a solid financial foundation starts with understanding what counts as an investable asset. Here are some common examples of investable assets:

1. Cash and Cash Equivalents

Cash and cash equivalents are the most straightforward investable assets. This category includes your savings account balance, money market accounts, and certificates of deposit (CDs). 

These assets are highly liquid, meaning you can access them quickly without losing value. While they might not offer high returns, they provide a safe place to store your money, especially in uncertain times.

2. Stocks and Bonds

Stocks and bonds are perhaps the most well-known investable assets. When you buy a stock, you’re purchasing a small piece of a company. If the company does well, the value of your stock goes up, and you can sell it for a profit. 

On the other hand, bonds are essentially loans you give to companies or governments. In return, they pay you interest over time. Both stocks and bonds are essential components of most investment portfolios, offering a mix of potential growth and stability.

3. Mutual Funds and ETFs

Mutual funds and exchange-traded funds (ETFs) allow you to invest in a diversified portfolio of stocks, bonds, or other securities without picking them individually. 

Mutual funds are managed by professionals who make investment decisions on your behalf, while ETFs typically track an index and are traded like stocks. 

Both options offer a balanced approach to investing, making them popular choices for both novice and experienced investors.

4. Real Estate Investment Trusts (REITs)

Interested in real estate but not keen on managing properties? Real Estate Investment Trusts (REITs) might be the solution. REITs are companies that own, operate, or finance income-generating real estate. 

By investing in a REIT, you can earn a share of the income produced through commercial real estate—without the hassle of buying and managing properties yourself.

5. Commodities

Commodities include physical assets like gold, silver, oil, and agricultural products. These investable assets can serve as a hedge against inflation and add diversification to your portfolio. However, they can be more volatile and complex to invest in compared to stocks and bonds. 

Commodities are often favored by investors looking for protection against economic downturns or those interested in capitalizing on global supply and demand trends.

6. Retirement Accounts

Retirement accounts, such as 401(k)s and IRAs, are designed to help you save for retirement while offering tax advantages. These accounts typically hold a mix of stocks, bonds, and other securities, making them valuable long-term investable assets. 

The funds in your retirement accounts grow tax-deferred (or tax-free in the case of Roth accounts), allowing your investments to compound over time and help secure your financial future.

How To Identify Investable Assets

Identifying your investable assets is easier than you might think. Here’s how you can spot them:

• Liquid Assets: Cash, savings, and other funds you can quickly convert to cash.
• Marketable Securities: Stocks, bonds, mutual funds, and ETFs that can be sold or traded.
• Retirement Accounts: 401(k)s, IRAs, and similar accounts designed for long-term growth.
• Real Estate Investments: Properties or REITs that generate income or can be sold.
• Commodities: Precious metals, oil, or other tangible assets held for investment.

How To Calculate Investable Assets

Calculating your investable assets is straightforward. 

Begin by listing all your liquid assets, including cash, stocks, bonds, and other marketable securities. 

Then, subtract any liabilities associated with these assets, such as loans or margin debt. 

The remaining amount represents your investable assets. 

For example, if you have $50,000 in a savings account, $100,000 in stocks, and owe $10,000 on a margin loan, your total investable assets would be $140,000.

Is A House An Investable Asset?

This is a common question—Is your house an investable asset? The answer is a bit nuanced. 

Your primary residence is considered an asset, but it’s not typically viewed as an investable asset. Why? Because it’s not liquid. You can’t easily convert your home into cash without selling it, and it serves as your living space, not an investment vehicle.

However, if you own additional properties, such as rental homes or vacation properties, these can be considered investable assets. They generate income or can be sold for a profit, making them part of your investment portfolio. 

Additionally, the equity in your home—the portion of the property you own outright—can be leveraged through loans or lines of credit, potentially making it an investable asset in certain scenarios.

Investable Assets By Age

Your approach to investable assets may change as you age. Here’s how it typically breaks down:

• In Your 20s and 30s: You might focus on growth-oriented assets like stocks, given your longer investment horizon. The goal here is to maximize growth, even if it means taking on more risk.
• In Your 40s and 50s: As you get closer to retirement, your strategy might shift towards a balance of growth and preservation. This could mean a higher allocation to bonds or dividend-paying stocks, which offer more stability.
• In Your 60s and Beyond: Now, the focus is on preserving capital and generating income. You may want to hold more conservative assets like bonds, cash equivalents, and REITs to ensure a steady income stream during retirement.

Investable Assets Percentile

Investable assets percentiles can show how your assets stack up against the rest of the population. 

According to the 2022 Survey of Consumer Finances, Americans reported a median income of $70,260 and a median net worth of $192,700.

Here’s a table outlining Investable Assets Percentiles, using hypothetical figures to illustrate different levels of financial standing:

Percentile	Investable Assets	Description
10th Percentile	Up to $5,000	Starting point, often includes minimal savings.
25th Percentile	$5,000 – $25,000	Modest savings, early stages of investment.
50th Percentile	$25,000 – $100,000	Average range, balanced between savings and growth.
75th Percentile	$100,000 – $250,000	Above average, includes diversified investments.
90th Percentile	$250,000 – $1,000,000	Significant investments, focused on wealth building.
95th Percentile	Over $1,000,000	High net worth, advanced wealth management strategies.

Knowing your percentile can help you gauge your financial health and set realistic goals. For instance, if you’re in the 50th percentile, your investable assets are about average. If you’re in a higher percentile, you might be on track to meet your financial goals sooner. Conversely, being in a lower percentile might indicate a need to ramp up your savings or adjust your investment strategy.

Investable Assets Vs Net Worth

It’s essential to distinguish between investable assets and net worth. Investable assets are the portion of your wealth that you can actively invest to generate returns. Net worth, on the other hand, is the total value of all your assets—both investable and non-investable—minus your liabilities. In other words, net worth gives you a complete picture of your financial situation, while investable assets represent the money you can put to work in the market.

For example, your net worth includes your primary residence, personal belongings, and perhaps even your car. But these are not considered investable assets because they aren’t liquid or typically used to generate income. Understanding this distinction can help you make better financial decisions and plan more effectively for your future.

Does Investable Assets Include 401(k)?

Yes, your 401(k) is indeed considered an investable asset. While you can’t access the funds without penalties until retirement age, the money in your 401(k) is actively invested in stocks, bonds, mutual funds, or other securities. This makes it a powerful tool for long-term wealth building, thanks to the potential for compounded growth and the tax advantages it offers.

Conclusion

Investable assets are the backbone of your financial strategy. By understanding what they are, how to identify them, and how to manage them effectively, you can take control of your financial future. Whether you’re just starting out or looking to optimize your existing portfolio, making informed decisions about your investable assets is key to achieving your financial goals.

As you explore your financial options, remember that building wealth is a journey. It’s about making consistent, smart choices over time. So, take a deep breath, start where you are, and know that every step you take brings you closer to financial security. And the next time you gaze up at the night sky, ask yourself—what are investable assets?—and remember that understanding them can be as enlightening as admiring the moon on a clear night.