Of all of the things you own, what’s your most valuable asset?
Your home? Your vehicles? Your retirement portfolio? If you answered yes to any of the above, in most cases you’d be wrong. Human capital — your ability to earn money now and in the future — is your most valuable asset. But most people ignore this fact and get distracted. Your net worth is largely above your shoulders - in your head!
If more people started paying attention to human capital by developing it, we’d stop thinking about retirement ages and running out of money.
Of course, it’s still vitally important to know what your total wealth is composed of in terms of real estate, stocks, bonds, business equity, etc. Yet ignoring human capital is a big mistake. Younger investors have more of it and retired investors have less of it. And how you deploy it depends upon the industry you’re employing in during different stages of your life.
James Saft, writing for Reuters, has a succinct take on this topic:
What this means is that you need an integrated approach to wealth in which your human capital is the foundation and everything else is built around it.
However you look at your wealth picture, just don’t focus on one detail and ignore the rest of your holdings. It’s the whole picture that counts and Money Talks Summit is helping you do just that. “To look at the risks and rewards of stocks, bonds and other financial assets in isolation ignores the often greater assets and more important risks that investors face. Economist Gary Becker estimated that the value of human capital is at least four times that of all stocks, bonds, housing and other assets combined. That human capital, which in financial terms comprises our ability to earn income, has a different value and different risks at different points in our lives.”
[SOURCE]
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