Tuesday, July 11, 2006

Modern Fable

There was this old man who upon retiring offered his two sons two options. The first was the ownership of a newsstand. The second was a flashy new expensive sportscar.

The older son took the flashy new expensive sportscar. By mid morning, he got a bunch of pretty girlfriends and he was the talk of the town. By the end of the week, he had also accumulated a dozen speeding fines. By the end of the month, the cost of running the car had run into a thousand dollars. By the year's end, he was heavily in debt due to repairs, fuel costs, insurance bills, speeding fine tickets, bloody parking tickets.

The 2nd son took the newsstand. It was quite a profitable operation. Everyday, he churned over a net profit of $200. He added a fax service, a lottery service and pretty soon he was making $400 a day. By the end of the year, he had made enough money to buy a flashy expensive sportscar. But he didn't. He bought an investment property with his earnings.

His older brother couldn't understand it. You're rich. Why don't you buy diamonds, get a hot girlfriend, get an expensive car, you idiot.

His brother replied- they are liabilities- you need to pay money to keep them- they just aren't worth it and are often more trouble than they are worth.

The moral of the story is- an asset is something which gives you a positive interest.

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