Wasting assets are properties and investments that have a limited life. Often, a wasted asset is a resource that is intended for use until there is nothing left. During the life of productive usage, assets of this type produce revenue, but eventually reach a state where the worth of the asset begins to wane.
Natural resources that are acquired as investments are excellent examples of wasting assets. Timber is one type of wasting asset that can be harvested and refined for particular uses. In some instances, the timber is used in the construction of a home, where it reaches a pinnacle of worth then slowly begins to depreciate. With some applications of timber, the depletion comes more rapidly, such as in the production of wooden toothpicks. Discarded after one use, the timber that is converted and used for this purpose reaches the high point of value at the time of sale, then provides less and less return as the used products are crushed and recycled into other products. Eventually, the fiber cannot be recycled any further and the wasting asset is considered to be out of the money, or no longer able to produce even a diminished revenue.
Natural gas, oil, and coal are all considered to be investments that fit the profile for a wasting asset. A wasting asset of this type is sometimes referred to as a consumed asset, since once it is used, there are few or no ways to recycle the product for the generation of additional revenue. Essentially, any product that is derived from a mine would qualify as a wasting asset, since at some point in the future, the minerals will cease to have a high amount of value and will be depreciated until there is no return at all.
Often, a wasting asset is well worth the initial investment. For example, an investor may choose to harvest huge amounts of timber at a relatively competitive price, then resell the material at an excellent profit. The buyer in turn may use the timber to create a wide range of products, which are manufactured at a profit. However, once the consumer has assumed ownership of the manufactured items, the process of depreciation will begin and the once profitable material will cease to generate revenue.
