Everything that has value is an asset. The value of an asset is the present value of anticipated future cash flows. To Adam’s point, some assets have more risk to the anticipated cash flow stream than others. The risk is captured in the discount factor used in the present value calculation. This applies to stocks, bonds, real estate, baseball cards, etc. Assets with anticipated regular income streams are easier to value. Assets with only an initial outflow(purchase price) and final inflow (sale price) like baseball cards, memorabilia, etc are harder to value. You can look at historical price trends, growth in the population of collectors, etc, but at the end of the day you are betting that someone who looks just like you will at some point in the future pay more than you did for the item. The smaller the pool of possible buyers should imply a higher discount factor to be used in discounting the anticipated future sale price back to the present. Whether you consider something an investment, a collectible, or a friend you can talk to in a lonely moment, is immaterial to its value. Whether you call that Green Cobb you bought an investment or a collectible will be immaterial in to its’ value in X years.
|