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What Are Investable Assets?

Investable assets are a key part of your financial picture. We explain why they’re important and how you can calculate them here.

Determining your net worth is a common method to know how valuable or wealthy you are. However, it doesn’t always tell the whole story. Also of paramount importance are your investable assets, which are liquid or near-liquid assets that allow you to easily deploy your funds as needed.

Whether you want to begin investing or if you’re looking to work with a financial advisor, your investable assets are very important. For instance, some firms set minimum limits you must meet before working with them. In this article, we’ll further explain what investable assets are, why they’re crucial, and how you can manage them.

Understanding Investable Assets

Investable assets refer to a combination of liquid assets and near-liquid assets, which can be easily invested at any time. Non-liquid assets do not count toward this sum. These include properties, collectibles, and vehicles.

Liquid assets generally refer to cash. This can, however, take on many forms. Here are the most common examples of highly liquid securities:

  • Cash
  • Checking and savings accounts
  • Certificates of deposit (CDs)

As mentioned, investable assets may also be those that are near liquid. In other words, assets that you can easily liquidate and use the resulting funds to invest count toward this category. These are common instances you may encounter:

Investable Assets vs. Net Worth

Your net worth is another important indicator of how wealthy or valuable you are. However, this number is made up of both your liquid and non-liquid assets less any debt. For example, any properties you own would factor into your net worth, but not into your investable assets.

Net worth is important for measuring your economic position, as well as your total overall value. It’s also crucial for individuals during the estate planning process, as well as during probate.

Why Investable Assets Are Important

Investable assets are a critical piece of your finances. They make up what you have at a given time to invest. Additionally, how much you have indicates, both to you and to financial advisors, how much you’re able to put toward growing your portfolio.

Commonly, advisors and their firms set account minimums that you must meet before they take you on as a client. Being aware of your investable funds will help you know if you’re able to hire a professional for portfolio management or advisory. You’ll also be able to communicate more easily with your advisor, as you’ll have a greater understanding of your finances.

Your investable assets may also come into play when you’re trying to borrow money for a house, car, or other type of loan. Lenders use the amount to determine how likely you are to make payments on time. If you don’t have much cash on hand, are in debt, or your net worth is mostly made up of illiquid assets, it may be hard to receive a loan.

How to Calculate Investable Assets

Your net investable assets are made up of the sum of your liquid and non-liquid assets, minus any debt you have. The former includes cash and other securities like stocks, bonds, and mutual funds. For the former, be sure to include expenses like credit card debt and car loans, while leaving off your mortgage.

The example below can help you visualize your calculation:

Cash (including checking and savings)$92,500
Mutual funds$86,195
Roth IRA$36,805
ExpensesAmount Owed
Credit card debt$0
Car loan$25,750

Difference: $235,002

Managing Your Investable Assets

Because your investable assets are a vital part of your finances, it’s important that you properly manage them. The first step is to always be aware of how much you have on hand so that you can invest more effectively. Then, it becomes a matter of deploying your funds in a way that works for you.

While you may want to take a DIY approach to investing, it may be beneficial to hire a financial advisor. They can help you determine where you should allocate your funds, as well as achieve a fully diversified portfolio to balance risk and reward. To find a finance expert, we recommend using this free matching tool, which can connect you with up to three vetted professionals in your area.

How to Grow Your Investable Assets

Growing your investable assets takes a combination of earning, saving, and investing. The more you’re able to put your money to work, the easier it is for you to take advantage of compound interest and build your overall value in the long term. This is especially crucial if you plan to retire early. Here are ways you can build what you have:

  • Max out retirement accounts. Consistently saving and investing within your 401(k), Roth IRA, and other accounts will allow you to utilize compound interest and your returns to grow your wealth. Additionally, these types of accounts commonly come with tax advantages you can use once you withdraw funds.
  • Keep cash in savings. While you should generally be investing often, it’s always prudent to keep funds in your savings account, especially for emergencies.
  • Diversify your portfolio. Diversification is important for lessening risk as you invest. Also, be sure to periodically monitor and rebalance your portfolio as needed.
  • Work with a financial advisor. Investing can be easier said than done. Working with an expert can help you avoid crucial mistakes and build a portfolio that aligns with your goals, risk tolerance, and time horizon.

Frequently Asked Questions

Are funds in my 401(k) considered investable assets?

Because you can liquidate your 401(k), you can include it in your investable assets calculation. Other retirement accounts, such as Roth and traditional IRAs, are also part of this near-liquid asset category. You may also count funds in any trusts you own toward this sum.

Is my house an investable asset?

No, your house isn’t an investable asset because it isn’t liquid. For an asset to count toward this category, it must already be liquid or easy to liquidate.

How is net worth different than investable assets?

Your net worth represents your overall economic value and position, including both liquid and non-liquid assets in the calculation. On the other hand, your investable assets indicate how much you have to either invest or liquidate right now. For this reason, near-liquid assets, such as stocks, bonds, and mutual funds, factor into the total alongside cash.