What kind of assets can make you wealthier? Luxurious homes and fancy cars? Certainly not. Even Hollywood stars like Nicolas Cage and boxing legend Mike Tyson, who earned millions annually, ended up bankrupt. Assets put money in your pocket, while liabilities take money out of your pocket. Understanding the difference between the two is crucial for accumulating wealth. Here are eight types of assets that can make you wealthier over time.

1. Loan Contracts

Loan contracts, often referred to as high-interest loans, can be a lucrative investment. This doesn’t mean lending money to friends or family but rather short-term loans backed by real estate. For instance, lending to real estate flippers with the property as collateral can yield 10%-18% interest. If the borrower defaults, you can sell the property to mitigate risk. However, this requires knowledge of real estate, property valuation, renovation costs, and the experience of the operator. Some recommend peer-to-peer lending platforms like Lending Club or Prosper, but these unsecured loans carry higher risks.

2. Stocks

Investing in stocks means buying a stake in a business. If the business is profitable, the stock becomes an asset. Stocks can generate income through dividends and price appreciation. The advantage of stocks is their low entry barrier; you can start with as little as $100. With proper research, stocks can offer an average annual return of around 8%.

3. Index Funds

If you lack the time or interest to research individual stocks, index funds, or ETFs, might be more suitable. Index funds are passively managed and allow you to buy a basket of stocks, providing instant diversification. For example, investing in the S&P 500 means you own a share in 500 companies like Apple, Amazon, and Google. Historically, the S&P 500 has offered an average annual return of around 9%. If you had invested $10,000 in the S&P 500 in 1990 and held it, it would be worth over $260,000 by the end of 2023.

4. Real Estate

Wealthy individuals often buy properties not just to live in but to generate cash flow. In the U.S., 23% of investment properties are owned by small investors. These properties offer steady cash flow, potential appreciation, and tax benefits not available with stocks and bonds. However, being a landlord involves active management, such as dealing with tenants and maintenance. For those unwilling or unable to manage properties, real estate syndications offer a passive investment alternative, where investors provide capital and professional teams manage the properties.

5. Bonds

Bonds are fixed-income investments that come in the form of corporate or government bonds. Corporate bonds’ risk can be assessed through credit ratings, with higher-rated bonds being safer. U.S. government bonds are considered the safest, offering around 5% interest post-pandemic. Bonds provide a predictable income stream and can be a stable part of an investment portfolio.

6. Professional Services

Wealthy individuals invest in professional services, such as CPAs, to optimize their finances. A good CPA can save clients significant amounts of money through tax planning and strategy. This professional insight often far outweighs the cost of their services.

7. Talent

Talent is a valuable asset that can significantly impact a company’s success. For example, top salespeople can drive substantial revenue, and skilled chefs can boost a restaurant’s business. Companies that recognize the value of their employees and invest in talent retention can see substantial returns. For individuals, enhancing one’s skills and becoming indispensable can significantly increase earning potential.

8. Personal Brand

Building a personal brand can also be a lucrative asset. Influencers and celebrities attract followers who are willing to spend money on their recommendations. High visibility and a strong personal brand can drive business opportunities and revenue. Business leaders like Elon Musk and Bill Gates use their personal brands to enhance their companies’ visibility and attract investment. Building a personal brand involves strategic effort and can significantly contribute to wealth accumulation.

Conclusion

To accumulate wealth, focus on acquiring assets that generate income and appreciate over time. Working a job is only the initial step in building wealth. Start accumulating assets now to let your money work for you. These eight assets—loan contracts, stocks, index funds, real estate, bonds, professional services, talent, and personal brand—can pave the way to financial success.