Vibhor lives in the US with his wife and children. He visits India once a year to meet his parents who live here. On one such visit, he bought a plot of land to build a home. He thought he would return to India some day and settle down here. But he and his wife are tied up with their jobs and their children's education, so returning to India looks difficult and the land is unutilised.

Like Vibhor, there are many who have invested in assets like land, a second home, etc., but do not use it. They think of visiting it every weekend or so, but that rarely happens. Such assets do not earn them any gain/income as they are neither rented nor used for agricultural or non-agricultural purposes.

Some may argue that the value of such asset (land/second home) will appreciate in the future and will be useful in the case of repayment of any debt or can be sold in the future to buy a better (bigger) asset. But the fact is an asset's value does not always appreciate, and in such cases the asset can become less liquid and redundant.

If you are investing in land or a similar property, its location is an important factor, otherwise it will be difficult to generate a fair rental amount. Rather than buying a second home/vacation home in remote places or the outskirts, it would be better to buy one in the city after proper research on potential rental yield. This will ensure that you get better rental income which can be used for many purposes such as planning for your and your child's future, meeting debt obligations, holiday across the country, and so on.

[Read: Should You Invest In Real Estate After Full Budget 2019?]

Similarly, people buy expensive jewelleries, artefacts, and antiques, but rarely use it. Some even have the hobby of collecting such items without knowing whether it will find value in the future. Though such investments give the owner the pride and satisfaction in owning it, they often find it too expensive to use and too precious to sell.

Additionally, the cost of maintaining such assets is too high and, in most cases, these remain locked up. It is only brought out on those rare special occasions when some friends/relatives come over to admire it.

[Read: 4 Smart Ways To Invest in Gold]

These assets are passed on to generations, until someone does not find any worth in keeping it and finally sells it without the knowledge of its actual value. There is also a risk that the piece of jewellery/artefact you so proudly own is a counterfeit.

Perils of assets lying idle

While you may not immediately realise the actual profit or loss of investing in tangible/alternate investments such as a house, jewellery, artefacts, the opportunity cost involved is high. Meaning, if you had parked this amount in productive investment avenues, your wealth would have grown substantially over years.

These assets do not necessarily provide source of income whether regular or lump sum. The value of tangible/alternative investments is only realised when you are able to sell it at a value you find reasonable. Finding a buyer for such assets is not an easy task. Sometimes you may have to sell them at a price lower than its fair value, making the investment unproductive. Further, you may have to spend a fortune on its maintenance/up gradation before you can sell it.

The asset that generates no income is like a treasure hidden in the backyard, it provides a good feeling, but is of no practical use. - Uma Shashikant, Chairperson, Centre for Investment Education and Learning.

Importance of investing in wealth-creating avenues

The main aim of investing in assets is to generate income. If your asset fails to do so, you are deprived of the various benefits of investing in wealth-creating assets. Examples of wealth-creating assets include equities, mutual funds, provident funds, other saving schemes, etc.

Wealth-creating assets appreciate the value of your money if you follow a disciplined approach. Some of them entitle you with regular income in the form of interest, dividend, etc. This enables you to achieve your various short to long-term goals.

[Read: Are You Investing Without An Investment Objective And Goal In Mind?]

Even if you do not have a specific goal in mind, there is always an inevitable risk of inflation, which can be countered if your investment is capable of wealth building.

If you invest in land, second home, art and collectibles, and jewellery, your initial investment could run up to lakhs or crores. But if you invest in mutual funds, equities or provident funds, you can start investing with a small contribution.

Investing in equities through mutual funds is one of the best ways to grow your corpus over time. It provides you liquidity and enables diversification of your portfolio. It gives you the option to invest a small amount regularly via systematic investment plan (SIP). You can align these SIP investments to achieve your financial goals as per your risk appetite and investment horizon.

Investing in wealth creating assets rather than locking its growth potential by parking it in illiquid assets ensures your financial wellbeing.

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