What is a store of value asset?

 

What is a store of value asset?

1. Meaning:

When an acquired asset retains its value over time, such an asset is called a store of value asset. Such assets do not deteriorate in value. So, depreciation for such assets is nil and thus not calculated.

Store of value assets has perpetual shelf lives. Gold, silver, precious metals, currency, interest-bearing assets (bonds), real estate, and fine art, that maintain their value without depreciating, are some of the examples of the store of value assets.

2. Why depreciation is nil in the case of the store of value assets?

Depreciation is the systematic allocation of the depreciable amount over the useful life of the asset. To calculate depreciation, the cost of the asset should be divided by the useful life. Since the useful life of the store of value asset is perpetual, the cost divided by the useful life would yield zero value.

3. How store of value assets are similar to safe-haven assets?

a)    Store of value assets are most appealing to risk-averse investors as these assets have a history of maintaining their value over time.

b)    Speculative assets provide higher returns, at the same time, they are highly volatile and often come up with increased risk. Store of value, on the other hand, has low risk and lower volatility while producing lower returns.

c)     Store of value assets are synonymously used as safe-haven assets as they have a lot of features in common.

4. Conclusion

The store of value is something that tends to maintain or increase its value over time. The law of demand-supply applies here. The store of value less risk, less volatility, and in turn provide lower returns.