Depending on who you ask, you might end up with a variety of definitions of what is a financial asset. Sometimes, you might hear an asset is something of value. There are times you might hear that an asset is something that appreciates in price. I do not think that there is a right or wrong definition as everyone has different views. While there are many definitions of a financial asset, the one that I most agree is that an asset is defined as something that generates revenue or income. An asset may not necessarily appreciate in price or value but it must generate revenue and income. I personally think this is the foundation of what financial freedom is.
Something (an asset) needs to work hard for you so that you don't. What about “assets” that does not generate revenue or income but appreciates in value? These “assets” while considered by many to be a financial asset, in my opinion is not considered as an asset because it will not help or make life any better until it is sold for a profit. What is the point of an asset when it does not help you right now or immediately? What do you do when you need money?
Even worse, what do you do when you need money and this particular “asset” cannot be sold for a profit? Understanding what is an asset is important in your financial journey because it will determine what you invest in today. If you invest in “assets” that will appreciate in the long run but cannot help you when you are in financial need, then you might be investing the wrong way. It is similar to know who you friends are in life. Friends are people you can count on when you are in need. Is your asset a friend or a foe when you are in financial need?
This principle holds true whether you are in Malaysia or any part of the world. For a safe financial journey, a friendly asset is something that will come to your aid in good times and in bad times. If you are investing for capital appreciation, then this “asset” will only be there when there are good times. Investing for capital appreciation would mean that you are hoping the price would increase so that you can sell for a profit. This is a trait of a trader – not a typical investor. What you might want is to focus investing the right way for assets that will be there, good or bad times, to help you out every month.