tailieunhanh - Lecture Personal financial planning – Chapter 8: Nonfinancial investments

Lecture Personal financial planning – Chapter 8: Nonfinancial investments. The household can be separated into financial and nonfinancial investments. Nonfinancial investments are the real and human-related assets that contribute importantly to your household portfolio. | Lecture Personal financial planning Chapter 8 Nonfinancial investments Chapter 8 Nonfinancial Investments 1 Chapter Goals Make better choices by recognizing that household assets and investment planning is broader than believed. Differentiate a typical household cost from a capital expenditure. Become more effective in decision making by employing TPM the household s all-asset approach. Benefit from linking household outlays on durable goods with business capital expenditures. 2 Chapter Goals cont. Apply the methods of calculating returns on capital expenditures. Establish the advantages of owning a home. Determine whether to buy or lease a home or car. Utilize the knowledge that your salary is often your largest household asset. 3 Defining and Detailing Nonfinancial Assets Financial assets Assets in which ownership is represented and traded solely through pieces of paper. Fully marketable assets Assets that can be sold currently in a public forum for fair value at low transaction costs. Nonfinancial assets All the other assets that the household possesses. Nonfinancial assets include real assets human- related assets and other assets. 4 Defining and Detailing Nonfinancial Assets cont. Real assets Nonfinancial assets that you can see or touch that have market value. Sometimes real assets are called tangible assets physical assets or hard assets. Real assets can be separated into real estate and durable goods. Aside from their physical features real assets differ from financial ones in that real assets generally decline in value over time with the exception being the home which if maintained properly can appreciate at least for a relatively long time. Real assets are generally used in the household currently while financial assets may be reserved for 5 future use. Defining and Detailing Nonfinancial Assets cont. Human-related assets Assets that derive their value from particular people. In personal finance we are principally concerned with assets in this category