Traditionally, investments have been thought of as stocks, bonds, and other financial assets. However, there are other assets that can also be considered investments, including durable goods.
Durable goods are goods that are expected to last for a long period of time, such as cars, homes, and appliances. These goods can be considered investments because they can appreciate in value over time.
In this article, we will discuss the pros and cons of investing in durable goods, specifically cars and real estate.
Pros of investing in durable goods
There are several potential benefits to investing in durable goods.
- Appreciation: Durable goods can appreciate in value over time, just like other investments. This can be a way to grow your wealth.
- Utility: Durable goods can also provide utility, meaning they can be used to generate income or provide enjoyment. For example, a home can be rented out, and a car can be used to commute to work or for leisure activities.
- Diversification: Durable goods can be a way to diversify your investment portfolio. By investing in a variety of assets, you can reduce your risk.
Cons of investing in durable goods
There are also some potential drawbacks to investing in durable goods.
- Depreciation: Durable goods depreciate over time, meaning they lose value. This can be a significant loss, especially if you need to sell the asset before it has appreciated in value.
- Maintenance costs: Durable goods require maintenance, which can be expensive. For example, a car needs oil changes and tire rotations, and a home needs repairs and renovations.
- Liquidity: Durable goods can be illiquid, meaning they can be difficult to sell quickly for cash. This can be a problem if you need to access your money quickly.
Cars as investments
Cars are a popular investment for many people. Cars can be a source of transportation, which can be a necessity in many parts of the world. Cars can also be a way to express personal style and status.
However, cars are also a depreciating asset. The average car loses about 20% of its value in the first year of ownership. This depreciation can be a significant loss, especially if you need to sell the car before it has appreciated in value.
Cars also require maintenance, which can be expensive. For example, a car needs oil changes and tire rotations every 3,000 to 5,000 miles, and it will need major repairs every few years.
Cars can be a good investment for people who need a reliable source of transportation and who are willing to accept the depreciation and maintenance costs.
Real estate as investments
Investing in real estate
Real estate is another popular investment choice. Real estate can be a way to generate income, such as through rental properties, or it can be a way to build wealth, such as through appreciation.
However, real estate can also be a risky investment. The value of real estate can fluctuate, and it can be difficult to sell a property quickly for cash.
Real estate can be a good investment for people who are looking for a long-term investment that can generate income.
What did we see in this article?
Durable goods can be a good investment for people who are willing to accept the risks and costs associated with them. Cars and real estate are two of the most common durable goods that people invest in.