Modern Wealth Principles
If you want to grow your wealth, you can confidently borrow from my expertise, even if your current principal seems small. Now, I’m not a guru of hustle culture, and I’m not writing today to push the latest altcoin in the cryptocurrency space. If that news makes you happy, you’ve probably found your ideal article on personal finance.
Whether you’re near retirement age or just now starting your marketplace journey, you can benefit from the wealth management expertise I share today.
Be Engaged With Your Wealth
I recommend taking an active interest in growing and managing your assets. After all, wealth doesn’t build itself.
Certainly, you can work with an experienced, ethical wealth manager, but stay involved. Now, don’t hover. There’s no need to be your financial expert’s shadow. Just pay attention to your portfolio’s health, and keep your eyes open for opportunities that align with your wealth goals and personal values.
As a result of being an engaged investor, you’ll reduce the potential for what I call negative portfolio surprises. Those aren’t fun. We should all try to avoid them.
Building Wealth Requires Patience
If you are new to growing your wealth, I urge you to strengthen your personal facility for patience. We may feel the pull to seek fast avenues for wealth expansion, but I want you to resist that attraction.
Very likely, you know a senior citizen with substantial wealth. All of their financial needs are met. You have a better chance of eventually being like that person if you build your wealth patiently.
Surely, you can get rich quickly, and building wealth slowly sounds more difficult than getting lucky and making a killing. In fact, patiently building your wealth is the easier proposition.
Risk Is an Element of Every Investment
My friend, if someone ever approaches you with an investment opportunity that they claim presents no risk to you, I want you to run the other way. Even building wealth slowly and patiently involves some risk. Of course, day-trading comes with substantially more.
As you become more engaged with your wealth, you need to clearly understand your personal risk tolerance. My risk tolerance is informed by the fact that I’m more interested in my family’s needs being met tomorrow than in taking extreme chances today.
You Can’t Hop on a Boat You Already Missed
Like me, you probably didn’t get in on Amazon in 1997 and hold your shares for 25 years. If you had, you would have turned four figures into seven. Still, that watercraft left the dock, and the waters are infested with hungry sharks.
It may still be worthwhile to buy Amazon or another popular stock. Just don’t buy it because the stock made its early investors insanely rich over time. That opportunity is gone. Look for others.
Don’t Habitually Chase Big Windfalls
Since wealth accumulates slowly, do not repeatedly seek big paydays, even if you are extremely comfortable with high-risk scenarios.
You have surely heard of Warren Buffett. He didn’t become a billionaire overnight. Instead, he was consistent and patient. His example should inspire us.
A windfall may come, but consider it a side benefit to your patient investing style. Alternatively, if you chase windfalls with each investment you make, you may soon find yourself with nothing left to invest.
Trading Is Simply Not Investing
At dinner parties, I often hear trading and investing used synonymously, and it’s understandable. Commercials for online trading platforms routinely conflate the terms. Using those two words interchangeably serves the goals of brands that promote trading platforms, but it doesn’t serve you.
Trading is not investing. It’s gambling. You are as likely to reap consistent rewards trading as you are walking into a casino and pumping your retirement account into a slot machine.
As someone who has been your friend for no less than two minutes, I dearly hope you will never waste your time with trading platforms. They encourage the opposite of long-term, patient investing.
Cryptocurrency Is for Speculating, Not Serious Investing
Routinely, we see financial news coverage of Bitcoin and other cryptocurrencies. Crypto is a trading-friendly asset class, which means it is not built for long-term investors.
Importantly, the early days of Bitcoin are long gone. If you happened to buy 1,000 Bitcoins in April 2011 and hold them for exactly 10 years, you practiced long-term investing with crypto. At that time in 2011, each Bitcoin cost a dollar.
A decade later, on April 14, 2021, one Bitcoin’s price was $64,800. Let’s round down for convenience and say you decided to sell when the price hit $60,000. In this hypothetical scenario, your $1,000 invested in Bitcoin turned into $60 million. Congratulations, hypothetically!
Unfortunately, the period when you could invest a little in crypto, wait a decade and gain a fortune will surely never return. Like Amazon, we shouldn’t buy Bitcoin now solely because it made its early adopters insanely rich.
Additionally, I urge you to be cautious with cryptocurrency. It is a very risky niche. You don’t have to bother with crypto just because your neighbor claims they made a profit on an altcoin. Also, if someone pitches you an altcoin, please be cautious. I would call altcoins unpredictable, but most of them rather predictably plummet like there is no bottom.
If you want to use a small percentage of your portfolio’s value for speculating in crypto, I think that’s fine. From your cutting-edge risk, you might get lucky.
If You Experience a Windfall, Invest It
Suppose you get wildly lucky from crypto, receive an inheritance or gain some other windfall. Please don’t live the high life for the next six months and wonder where all your money went. Anyone can make that foolish mistake.
Instead, I hope you’ll be wise. Invest!
If you have any debts, pay those, and invest your remaining capital. Alternatively, if you are debt-free, invest 90% of your surprise gains.
Sure, I know you’ll probably splurge on something. We’re all human. Just keep the splurge urge tamed, and lean into your long-term investments. Your future self will be grateful.
Wealth Offers You Options, so Take Them
There’s a lot of herd-following in investing. As our new friendship quickly evolves, I feel I can tell you a secret. Friend, when you invest, you don’t have to do what everyone else does.
Go your own way.
Tomorrow Is Unpredictable
You are an adult human who lives on Earth, so I know I’m not dispensing enlightenment when I tell you the future is unknown. Still, we must honor that fact when we strategize for wealth growth.
Tomorrow’s unpredictability is why I concur with the sage advice you have surely received. Diversify your investment portfolio.
What does a diversified investment portfolio look like? It features
- Multiple, unrelated asset classes
- The power to counteract market volatility
- More potential for your capital to accumulate and compound
Your Wealth Is Worth Protecting
Regarding diversification, I like gold IRAs. If you have an individual retirement account, you can’t assume that it automatically lets you invest in gold. You specifically need a gold IRA.
With one, you can
- Invest in gold
- Invest in other precious metals
- Enjoy tax advantages
- Protect your retirement savings via an asset class that typically moves opposite of stock trends
- Curb inflation’s impact on your portfolio
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Financially, Your Home Is a Liability, Not an Investment
Your local mortgage banker dislikes what I’m saying right now. That’s okay. I’m writing this for you.
My friend, stop believing that your house is a financial investment. If it’s your primary residence, your home is a liability.
This info might spark confusion, but I can explain. If I bought stocks with a cash advance from a credit card, you’d call me a fool, right? With interest and fees, it would be hard to call that type of stock purchase an investment. Yet, mortgage bankers describe homeowning as investing.
Frankly, investments should not feature long lists of upkeep expenses. Homeowners must pay property taxes and various maintenance costs. Of course, you also have to pay interest if you mortgage your home.
We hear grand tales of resale value that might make you think I’m wrong. Still, those stories never include facts about inflation and the many costs the happy seller paid while they owned the home.
Certainly, you can build equity by owning a home, but that equity will always be trapped in your primary shelter until you move to a cheaper housing market or become a renter.
I agree that a home is an emotional investment. Buying one gives you control over your living-space decisions. That’s why I own rather than rent.
Just remember, the home where you live is not part of your investment portfolio.
DRIP Your Way to Wealth
As you go your own way, I urge you to invest in stocks that pay dividends. Now, these payments to each shareholder are nice, especially if you hold a substantial amount of shares, but I don’t want you to spend your dividends. Instead, you can reinvest them.
Conveniently, several hundred public companies let you easily reinvest through specialized dividend reinvestment plans. Commonly called a DRIP, any dividend reinvestment plan will automatically roll your dividend payment toward the purchase of more company shares.
With time and patience, a DRIP’s compounding effects can create a fortune, especially if you continue infusing new capital for further shares.
The ideal DRIP strategy is many DRIPs across diverse sectors. After you build your principal for a couple of decades, you can turn off your DRIP and support yourself with your future dividend income.
Hold Court With a Different Set of Aristocrats
Importantly, companies can reduce their dividends. I don’t like that. You shouldn’t like it, and your portfolio won’t like it.
Luckily, I know a way around this problem. You just need to introduce yourself to a group of aristocrats. Specifically, you want to meet the Dividend Aristocrats. Set by S&P Dow Jones Indices, the Dividend Aristocrats is a list of major companies that have continuously increased their dividends for the past 25 years.
We all know the past does not predict the future, but Dividend Aristocrats tend to remain on the list, which means their dividends continue to increase. In the long run, you can expect to see your wealth grow if you participate in DRIPs with a diverse selection of Dividend Aristocrats.
Forgive Yourself for Your Financial Mistakes
No matter your age or current wealth status, I am certain that your road ahead will be smoother if you forgive yourself for past financial mistakes. I have seen friends and acquaintances struggle to grow their wealth because they could not let go of the past.
This does not sound like financial advice, but it definitely is. Forgive yourself. As a result, you will enjoy the conditions to properly manage your wealth and finances.
When You Make Financial Decisions, Center Yourself in the Moment
Our society programs a scarcity mindset into us. If you can internalize a sense of abundance, you will enhance your quality of life. Once you establish that abundance mindset, your relationship with your personal finances will improve, and you’ll have an easier time patiently building and managing your wealth.
To spark a sense of abundance within yourself, focus on living in the current moment. I do it with two as-needed reminders. The past is gone. The future does not exist.
Put another way, there is only now. So, when you make a financial decision, don’t make it with regret about your past or worry about your future. Just make an informed decision.
There’s Always Something to Learn
Today, I’ve tried to give you an excellent introduction to growing your wealth. I hope I have inspired you to invest patiently and wisely, and I urge you to keep seeking knowledge.
The investment space is exciting, and it will keep evolving along with tech. Likewise, you should continue your personal wealth evolution.