Build Wealth Quickly – 3 Simple Asset Allocation, Wealth-Building Strategies

April 11th, 2021 by dayat No comments »

Who doesn’t dream of marching into their boss’ office one day and resigning without caring about the financial repercussions? Well, you can only do so if you have acquired sufficient assets (wealth) through which you can generate a future income to replace your current earned income. By the way, as a rule of thumb I don’t recommend you hand in your resignation unless you have at least 1 and ideally 2 years living expenses put away in liquid assets.

Simply put, to become wealthy over time you basically need to make, save and invest money wisely. The smarter you are at doing this the faster you become wealthy. Assuming you’ve read my other articles on How to Get Rich (the making of and management of money) then you are ready to look at the 3 most common wealth building strategies of the super wealthy.

1. Investing in Paper Assets (Stocks, Bonds, Funds, Currency)

Investing in “paper assets” is a great way to start building wealth. It teaches you the principals of money management, capital, rates of returns, risk etc. You can invest in stocks, bonds, mutual funds, commodities, and foreign exchange (“Forex”). Each of these options presents various levels of risk and reward and requires thorough research before you start. You don’t necessarily have to read the Wall Street Journal daily or subscribe to Fortune magazine in order to be a good stock investor. But you should at least get trained by an expert or have access to wholly independent financial advice from an experienced investor.

To help you get started, a basic overview of the paper assets investment landscape goes like this: There are 2 types of investments; ownership investments in which you own part of the asset (a stock is a good example) and loan investments in which you lend money to someone and they pay you interest (a bond is a good example). In many cases, you are looking for growth investments and those are ownership-type investments. (Bonds rarely provide a way to make you wealthy. Rather, they are a way to protect your wealth once you have it). Warren Buffett is a great example of someone who created massive wealth through investing in paper assets.

2. Investing in Real Estate

Real estate is another great way to build wealth. With real estate, you typically buy a property and then make money through selling it eventually for a much higher value than its purchase price and/or becoming a landlord and letting the property. One of the advantages of real estate investing is using the principle of leverage (i.e. a mortgage) to buy an asset that you otherwise couldn’t afford. Leverage isn’t commonly available in paper assets investing (although you can buy on margin but this can be risky if you don’t know what you’re doing!).

Real estate investing can be focused on either residential, commercial or land. Wealth building through real estate involves buying and selling a property – sometimes referred to as “flipping” or “trading” and often involves “rehabbing” a property (i.e. fixing it up)- to give the fastest and best rate of return.. However, landlording is a more standard approach that requires more time to build wealth, generating a small income in the meantime from the rental income after subtracting all expenses. Want to know how to build wealth quickly with real estate? Consider buying a distressed property using leverage, fixing it up, and selling it again quickly. However, watch for market fluctuations in supply and demand and availability of capital in order to use this strategy effectively. Donald Trump is a great example of someone who created massive wealth through real estate investing.

3. Starting, or Owning a Business

Starting, or owning a business is another common wealth-building strategy. Starting a business doesn’t always make you really wealthy right away. It takes time and energy to build the income of a business and its capital value, but it can make you wealthy over time if managed effectively. Therefore, if you have previous experience of running a business it can sometime makes more sense to buy an existing business and simply run it better. Want to know how to build wealth starting or owning a business? Find something that you love to do and that solves the needs of a target market. Then sell that product or service through relentless marketing and sales. Create efficient systems to sell more, more often. And work towards growing the value of your business by making it less dependent on you so that you can eventually sell it to a new owner. Bill Gates is a great example of someone who created serious wealth by starting a business.

Whatever way you chose to start building wealth, always remember those words from the mouth of antihero Gordon Gecko in the movie Wall Street…”Money never sleeps pal”. Different asset class values will shift in time (daily/monthly/annually) and according to market cycles. It’s also a good idea to scrutinize your assets and then take steps to re-balance your portfolio periodically. You also need to match risk to what stage you are in life. So, want to know how to build wealth quickly? It’s simple: Take your hard-earned money, save as much as you can as you go and then choose a strategy (from above) and consistently, month by month, year by year, apply yourself to these wealth building strategies.

Remember, building wealth doesn’t happen overnight. But with education, time, diligence, research and hard work, you can go from wondering how to build wealth to actually becoming wealthy and enjoying your millions! Mastering wealth building will ensure that money you earn isn’t flitted away carelessly and that you get to secure your financial inde

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Wealth Building – Danger! Don’t Try Re-Building Your Wealth Till You Read These 4 Steps First!

March 11th, 2021 by dayat No comments »

Many of my friends and colleagues have taken a serious hit since the financial and property market meltdown in 2008. Indeed, much of what people worked for all their lives has vanished as their asset values fell off a cliff. Some have even lost their businesses and others are grappling with serious negative equity and massive debt attached to their real estate. But even as everyone wrestles with these financial challenges, they’re finding new opportunities…and these opportunities are not under their mattresses!

There is always opportunity in crisis. On a personal level this is a great time for re-assessing your life goals and values. From a wealth building perspective, apart from snapping up distressed assets at bargain-basement prices, possibly the true financial opportunity is something less obvious. Perhaps it’s the opportunity we have to realign our thinking regarding wealth and how we build it. Here’s an outline of 4 steps you could take in order to start rebuilding your wealth.

Re-Building Wealth Step #1: Re-assess Your Portfolio

Chances are your investments are in totally different shape to where they were before the financial crisis. If you were an active investor, some of your stocks or real estate values may have taken a serious hit. At this point, it is your call whether to hope they will someday rebound or cut your losses. If the yields are holding up on your real estate it may be worthwhile to ‘trade out’ of negative equity if positive cash-flow is still being generated. If any of your investments have produced capital gains, cashing in now could be a good idea and provide some capital for better investments. Re-assessing your portfolio is a great first step in rebuilding wealth.

Re-Building Wealth Step #2: Re-balance Your Portfolio

Whether you were actively investing or more passively sitting on your assets, the financial crisis has probably taken your portfolio out of alignment. Balanced asset allocation is critical to long-term investment performance and wealth building. Taking your risk tolerance and investment horizon into account will help work out what asset allocation works for you. Just because certain stocks might be performing well at the moment doesn’t mean you should go chasing stocks and switch your cash out of bonds if bonds is where you need to be at right now.

Re-Building Wealth Step #3: Rethink Your Wealth Building Strategy

In addition to seeking out high-performing assets, a fundamental rethink on how you build your wealth may be required. It may mean employing wealth building strategies that were put off during boom times. Perhaps becoming financially literate should be a key objective right now. Rather than placing all your chips on high-performing stocks or property maybe you need to earn your right to invest and build up a solid foundation of cash or cash-equivalents (e.g. money market accounts, certificates of deposit etc) and bonds first. It’s recommended that at least 10% of your investment portfolio should be in cash or cash-equivalents at all times. This ensures you remain liquid so that a. You have funds to handle any financial circumstances ahead and b. You have funds to readily avail of possible investment opportunities. I think that many of us were guilty of some fundamental wealth building blunder by being over invested in real estate and stocks without first having a solid base of cash, cash equivalents and bonds. Now is the time to re-adjust this imbalance.

Re-Building Wealth Step #4: Focus on Growing Your Wealth

So, you’re keeping winning investments or cash them in, weeding out the losers from your portfolio and realigning your asset allocation. What next? Well, now it’s time to focus on increasing your returns and growing your investment portfolio. Whilst paying down debt, especially what I call ‘bad debt’, is hugely important, equally so is re-building your wealth with sound and advantageous use of ‘good debt’. Focusing on building wealth is critical so that the focus isn’t on debt reduction only. Apart from hunting down real estate or other business opportunities in your state or country you really must think and act globally. You simply can’t afford to rely on any one economy so don’t be afraid to seek out opportunities in foreign territories and emerging markets. Diversification by both asset type (stock, real estate, bonds etc) and geography has never been more appropriate.

So, rather than ever waiting for markets to change you can take charge of your own financial bailout and re-build your wealth. Re-assess and re-balance your portfolio. Rethink your wealth building strategy and then focus on gro