What are investable assets? (definition + examples)

What are investable assets? (definition + examples)

If your financial literacy journey has led you here to our virtual doorstep to learn about what investable assets are, I am very excited. Right now, there’s a good chance you’re doing the research necessary to make a long-term financial plan. 

Sure, you’ve pursued financial planning in the traditional ways we’ve all been taught. Financial planning for retirement, financial planning to pay for college, financial planning for that first or second house you’re looking to buy … even with the housing market as it is today. 

🔑 Free resource: Financial planning template for individuals and families

But now you’re starting to think bigger with your finances. Instead of more transactional outcomes like retirement and college (although they are still important), you may be thinking more broadly about the potential of true financial freedom. 

What becomes possible with financial freedom?

What does that free you up to do?

Is there a greater purpose or cause you’d pursue?

What new opportunities could become available for your family?

Truthfully, these questions may feel somewhat scary to consider at first. You may not have even allowed yourself to think about these topics before. But a whole world of possibilities is waiting for you when you start to think about money as a tool, rather than the accumulation of wealth as your ultimate destination.

With all that said, what are investable assets, and what do you need to know about them as you think about the financial goals you’re truly trying to achieve? I’m so glad you asked.

Investable assets are one of the building blocks of your financial future

Let’s start with a basic, academic definition of investable assets, shall we? (For those of you who are new here, I’m also the investments professor at Mississippi College, so you’ll have to forgive my reflex to reach for a textbook.)

Investable assets are simply assets you own that you can sell or liquidate efficiently to raise cash. Common examples of investable assets include (but are not limited to) the money in your bank accounts, stocks, mutual funds, ETFs, index funds, and retirement accounts. 

Now, you may have noticed my definition did not include any variation of the word “invest” in it. That is absolutely on purpose. 

🔎 Related: Investment strategy, the Sound Financial way

That’s because this is where the media has really hurt us in how we view the idea of investing. Pop culture has taught us to have a very short-term outlook, when it comes to investing, because movies and television make it look so easy — when we apply money to something, we should quickly see a return.

If we buy stock, it should go up and then we sell it to gain profit. It’s that easy, right? Why is this hard?

I’ve seen this way of thinking with folks hundreds, if not thousands, of times over the course of my 20-year career. And investors who subscribe to this way of thinking end up very frustrated, because they don’t understand investing is all about delayed gratification.

What is the true definition of investing?

You guessed it, we’re going to begin with another textbook definition — the very same I use with my students. Investing is the current commitment of money or other resources in the expectation of reaping future benefits. 

Put another way, the act of investing means you sacrifice something of value now, expecting to benefit at a later point in time from that sacrifice. And I want to emphasize that piece of it — ”sacrifice something of value now.”

However, while you may have the expectation of reaping future benefits, those benefits are not 100% guaranteed. 

🔎 Related: How much does investment management cost?

If you’re a business owner, this is something you’re likely already doing every single day. You’re investing your time, energy, and skills now to make profits later on. That’s part of what it means to have an entrepreneurial mindset.

All of us would benefit from this way of thinking.

When you understand delayed gratification as an intended feature of investing, this is where the term “investable assets” becomes valuable to you. 

“It takes money to make money.”

That’s the old industry saying you’re likely familiar with, and it usually discourages people. And the more money you have to invest, the more access to better investments that you have. That’s just a fact of life. 

This is where developing a savings discipline becomes absolutely essential to your financial success, particularly in the space of investing. 

The 4 types of “self-made” millionaires

Author and accountant Tom Corley spent five years conducting a study he dubbed “Rich Habits.” As a part of his research, he interviewed 225 millionaires to see if he could find any similarities in their characteristics or habits. 

Corley found there are four clear categories of self-made millionaires:

• Dreamers: People who feel they have a calling, a clear purpose or passion. In many cases, this translates into them starting their own business. By definition, these folks love what they do for work.
  
  
• Virtuosos: These are the top-tier folks, in terms of what they do … whatever that may be. They’re compensated at a premium for their expertise, often possessing advanced, real-world expertise and academic degrees.
  
  
• Company Climbers: These folks give their all to climbing the corporate ladder until they end up in a senior executive role, often with a very high salary.
  
  
• Finally, Savers-Investors: This is the most fascinating category of self-made millionaires, and it’s the one most relevant to our discussion. It doesn’t matter what they call their “day job,” these folks have found financial freedom by way of saving and investing as a daily practice. 

Most people in America — that includes you — can become #4, the saver-investor millionaire. You don’t need a specialized set of skills, you simply need to have discipline. 

🔎 Related: Tax savings strategies for high income earners (+ examples)

I try not to use my own children as examples in my work, but I can’t help but highlight my 15-year-old daughter (who is a swimmer) as a case study in discipline. Four days a week, she’s up and at ‘em at 5 a.m. working out, because she wants to make Olympic trials. With that kind of goal, she can’t be inconsistent with her routines. She has to be disciplined. 

And when it comes to your finances, particularly when it comes to investing, you also need to be disciplined. You’re going to do some of the same savings and investing steps over and over again, for decades. These steps must become second nature, habits that are never questioned. 

The moment you question them is the moment you fail. For example, when I start working with new clients — especially young individuals or couples — we’ll create their financial plan. Then I will start them down a path of setting aside 10% of their income in a savings account. 

Once they’ve established this discipline, they will step up the savings ladder, to the point where they’re saving and investing 20% of their income.

The only question left is what do you want to accomplish?

Truth be told, investable assets is a simple conversation about fairly straightforward concepts and practices. 

🔎 Related: Asset vs. wealth management (What’s the difference?)

The greatest challenge you have ahead of you — the only thing you must master to potentially attain financial freedom — is developing your unflinching savings and investing practice.

Practicing patience and discipline with investing will sometimes feel counter to your nature. Heck, we know this from lived experience here at the McAlpin household. My wife (a former accountant) knows how absolutely essential discipline is to our family’s financial present and future … but she still calls our savings and investing account The Bully, and I don’t entirely blame her! 

I often feel the exact same way she does! 

So, when I tell you this is going to be hard, I’m not doing so from a place of it being hard for you and easy for me. Quite the contrary! But our discipline doesn’t waiver. Because the future we’re building toward (and why) are too important to set aside.

You're not always going to be perfect at this. You're not always going to feel like you're succeeding. But if you're consistent overall in maintaining your discipline toward saving and investing, you'll come to appreciate the results of those character-building exercises.

I can hear my girls somewhere telling me that I'm using my "dad voice" now, but this is just the simple truth, folks! The sacrifice and the delayed gratification are worth it.