One of the main reasons why entrepreneurs fail is that they invest in businesses that do not bring them returns on investment. This is one of the main reasons why you need to read this book, What The Rich Invest In That The Poor Do Not. Beginning entrepreneurs often find it hard to come up with the right source of income to start their business.
There are many different methods that the wealthy use to invest their money. They have different strategies for all sorts of investments. One thing to know is that even if you are rich, you should not only keep your money in the bank so it can grow. You have to use your money to generate more money.
Real Estate
For more than 200 years, investing in real estate has been the most popular investment for millionaires to keep their money. During all these years, real estate investments have been the primary way millionaires have had of making and keeping their wealth. The trend started with buying a primary home and then other residences, usually for tenants. After buying some personal real estate, then they have started buying commercial real estate like office buildings, hotels, stadiums, bridges and more.
Millionaires often have large real estate portfolios. Once they have established themselves as a buyer in the real estate market, real estate agents start bringing them deals and they find it easy to obtain financing. Large investors have many millions tied up in real estate. Real estate is not an investment to depend on for cash, but it is a lucrative investment in the long run and a tried and true investment for millionaires because they like passive income and find that real estate provides it.
Stocks and Stock Funds
Some millionaires are all about simplicity. They invest in index funds and dividend-paying stocks. They like the passive income from equity securities just like they like the passive rental income that real estate provides. They simply don’t want to use their time managing investments.
Ultra-rich investors may hold a controlling interest in one or more major companies. But, many millionaires hold a portfolio of only a few equity securities. Many may hold index funds since they earn decent returns and you don’t have to spend time managing them. They also have low management fees and excellent diversification. Millionaires also like dividend-paying stocks for the passive income they provide. Of course, they are also interested in capital appreciation but, for some, that’s less of a concern than generating current income.
Private Equity and Hedge Funds
Unless you are a multimillionaire, you may not participate in a hedge fund or buy into a private equity fund. Public equity is well known since its shares trade on stock exchanges. One of its advantages is its liquidity. You can readily liquidate your public equity or shares of stock. Private equity funds, on the other hand, generally gets their investments from large organizations like universities or pension funds. Investors of private equity funds have to be accredited investors with a certain net worth, usually at least $250,000. Accredited investors can be individuals as well as organizations, but they are defined by regulations. In other areas, private equity funds do not have to conform to as many regulations as public equity does. Some of the ultra-rich, if they are accredited investors, do invest in private equity.
Hedge funds are not the same as private equity. Hedge funds use pooled funds and pursue several strategies to earn outsized returns for their investors. Hedge funds invest in whatever fund managers think will earn the highest short-term profits possible.
Commodities
Commodities, like gold, silver, mineral rights or cattle, to name a few, are also stores of value for millionaires. But they require storage and have a level of complexity that many millionaires simply don’t want to deal with.
Alternative Investments
Some millionaires, along with the ultra-rich, keep a portion of their money in other alternative investments like such tangible assets as fine art, expensive musical instruments or rare books. Also, there are millionaires and the ultra-rich that have investments in intellectual property rights such as the rights to songs or movies. These can be very lucrative investments.
Cryptocurrency
It is estimated that there are around 100,000 cryptocurrency millionaires out there with the majority holding Bitcoin. To try to make your fortune in cryptocurrency, you have to be willing to take on some risk and many millionaires don’t have an appetite for risk. You can take a small portion of a millionaire’s wealth and invest in one of the different cryptocurrencies. Plenty of people have become millionaires this way. Some have lost their money. More and more, cryptocurrency is becoming accepted as a legitimate investment that deserves a look when trying to accumulate wealth.
Take Advantage of Time — Not Timing
No one can predict what the stock market will do tomorrow. The wealthy know this and make no attempt to moonlight as day traders.
“Time is more important to investment success than timing,” said Peter Lazaroff, a certified financial planner for Plancorp, LLC. “Most of the population believes that timing the market’s moves is the key to growing rich through the stock market. The wealthy, however, understand that time and compound returns are the most important factors in growing wealth.”
Though it might seem counterintuitive, getting rich requires investors to adopt an unsexy buy-and-hold strategy, ride out market fluctuations and ignore speculation.
Invest In Writing
The difference between having an idea and putting it on paper is often what separates the uber-successful from average folks. If you equate success with wealth, it might be time to start writing down your goals, both large and small, in order to become rich.
Thomas Corley, author of “Rich Habits: The Daily Success Habits of Wealthy Individuals,” noted that 67% of the wealthy people he surveyed wrote down their goals, while 81% kept a to-do list. If your goal is to become a multimillionaire, write it down — along with an action plan for making it happen.
See: The 16 Craziest Things These Billionaires Spend Their Money on
Invest In Understand Value Over Cost
“The wealthy person has three best friends: her attorney, her accountant and her advisor,” said Justin J. Kumar, a senior portfolio manager at Arlington Capital Management. “The wealthy tend to use the law and tax code to their advantage when figuring out how to maximize their wealth, especially over multiple generations, and they are not afraid to spend money up front for counsel to get these answers.”
Eat Out Less
People who are concerned with saving money often skip the daily latte. The rich enjoy small splurges whenever they want and instead look at saving from a broader perspective.
Author Paul Sullivan and colleague Brad Klontz, a clinical psychologist with an academic appointment at Kansas State University, conducted research on the differences in spending habits of the wealthiest 1% and the wealthiest 5%. The 1% spent 30% less on eating out and saved it for retirement instead.
“And that, more than the cost of a Starbucks latte, is what, over time, separates the wealthy from everyone else on the wrong side of the thin green line,” Sullivan wrote in a column for Fortune.
Invest In Being Their Own Boss
Employees work to make their bosses rich. If you aim for true wealth, consider starting your own business. According to Forbes, nearly all of the 2,095 people on its list of 2020 billionaires made their fortunes through businesses, products or investments they or a family member had a hand in creating.
“Many middle-class workers think that starting a business is too risky,” said Robert Wilson, a financial advisor and frequent contributor to CNN, NBC and CBS. “The wealthy understand that what’s risky is allowing your time and earnings to be dictated by a boss who couldn’t care less about whether you get what you want for your life.”
Use Other People’s Money Well
To the average person, the old saw that “it takes money to make money” might sound like a tired cliche used to justify irrational spending. For the wealthy, however, it’s a golden rule. The key is leveraging other people’s money to increase your own wealth.
“Trading time for dollars is a loser’s game, especially as technology destroys many jobs that don’t require a highly skilled human being,” Wilson said. “Using money from banks or investors and hiring people to work for you is a time-tested formula for building wealth — not to mention the tax laws, which heavily favor businesses.”
Whether you’re fundraising to start a business or flipping real estate for a profit, relying on other people’s money to do the heavy lifting greatly increases the return. Of course, it’s also riskier than relying on your own funds. But as legendary investor Warren Buffett once put it: “Risk comes from not knowing what you’re doing.”More From Your Money.
A Saving Strategy
Everyone knows that saving money is an essential part of being rich, but saving is sometimes easier said than done. While the average person might put aside money here and there, wealthy people decide on a fixed amount they will save from every paycheck and put it directly into a savings account.
“Take a percentage of what you earn, no matter how little you earn or how much you earn,” Tony Robbins, a life and business strategist and author of the book “Unshakeable: Your Financial Freedom Playbook,” said in an interview with GOBankingRates. “A percentage has to be set aside that you’re going to keep for you and your family … When you get a 15% (to) 20% savings rate and you put it in a place where it’s compounding, you’re going to be financially free.”
Right Thinking
Grant Cardone, an international sales expert, best-selling author and radio show host of The Cardone Zone, said in an Entrepreneur article that “there’s no shortage of money on planet Earth, only a shortage of people who think correctly about it. To become a millionaire, you must end the poverty thinking.”
In addition to banishing fears of scarcity, you have to truly believe you’ll be rich to get rich, Cardone said. “I went from nothing — no money, just ideas and a lot of hard work — to create a net worth that probably cannot be destroyed in my lifetime. The first step was making a decision and setting a target. Every day for years, I wrote down this statement: ‘I am worth over $100 million!’”
Set a goal and focus your thinking on believing that you can achieve it.More From Your Moneyhttps://products.gobankingrates.com/pub/c8019ad5-427c-4d4f-ac82-beefb2d3e66e?targeting%5Bcategory%5D=money&targeting%5Bsubcategory%5D=wealth&targeting%5Bkeyword%5D=&targeting%5Btags%5D=&targeting%5Binternal_id%5D=1105185&targeting%5Bpagetype%5D=article&targeting%5Bpage_layout%5D=gallery&targeting%5Benv%5D=&targeting%5Btheme%5D=&resize=1&targeting[utm_campaign]=&targeting[utm_source]=&targeting[utm_medium]=&ident=0.7550161162928462_frame&targeting[rand]=b
Invest In Yourself
Successful people know that it’s worth investing time, money and energy to improve yourself. This can entail reading a self-improvement book, taking a class or learning new skills.
“I invested in sales training when I was 25,” Cardone wrote in a column for CNBC. “That made my income-producing ability skyrocket. Investing in yourself is the best investment you can make.”
Only Take a Job if There’s Potential for Growth
Even if you are not earning a large salary right away, it’s important to be at a company where you can climb the ladder.
“The rich are able to get in with the right company where there is opportunity for growth,” Cardone wrote in CNBC column. “My VP of sales Jarrod Glandt started working for me over seven years ago for $2,500 a month. He wasn’t making anything but he was in the right vehicle. He grew his skillset and was able to multiply his monthly income many times over because he knew I was looking to expand.”
Don’t Pay With Credit Cards
If you want to be wealthy, it’s important to never live above your means. One way to ensure that is to only spend money you actually have, rather than charging purchases on a credit card and getting stuck in a cycle of high interest payments.
“Cut up your credit cards,” billionaire and “Shark Tank” star Mark Cuban wrote in a personal blog post. “If you use a credit card, you don’t want to be rich…Cash is king for those wanting to get rich.”
Advice From a Shark: 20 Things Mark Cuban Says To Do With Your Money
Conclusion
Guide to Investing is a nonfiction personal finance book written over three decades ago by Robert Kiyosaki and Sharon Lechter. The book has sold more than 8.5 million copies worldwide and has been translated into 35 languages. It is notable because it promotes an investment philosophy and program that is designed to help improve and secure one’s financial status over the long term, rather than just short-term, quick monetary gain – which Kiyosaki argues will eventually lead to more stressful situations and less money in the long term.