As I talk to individuals across the country and around the world – both in-person and online – about their financial goals, I’m surprised to find that most people want the same thing:
They want to not have to worry about money.
They don’t want to have to wonder how they’ll put food on the table if they can’t physically show up for work the next day.
They’re just not sure how they’ll get there with just their 401(k)s or IRA’s. To them, their retirement plans will only have enough funds to get them through retirement – if that. Forget about taking off for Hawaii, spoiling the grandkids, or taking a month off from work for a humanitarian trip in Bolivia.
What about the stock market they ask me? They tell me how since March, the stock market’s been on a tear. Could they achieve financial freedom through the stock market?
I respond with questions of my own:
Can the stock market provide you with consistent, periodic cash flow?
Are you confident that any of your stock investments will give you a positive return?
Is there anything stopping your investment from going to zero if the company you’re investing in goes belly up?
After I ask them those questions, it’s clear to them that stocks don’t offer any of those benefits that I listed. I then follow up with sobering facts about the current state of the stock market:
That its been flooded with millions of newbie Millennial investors picking up stocks right and left.
The stock market is overvalued – WAY OVERVALUED.
Multiple experts are warning investors to stay away.
It’s too volatile and due for a correction.
Stumped, they turn to me for advice . . .
How do I create a simple and easy way to receive a positive return on investment?
Seek Investments With Intrinsic Value
What’s An Investment With Intrinsic Value Any Why Should I Invest In Them?
Assets with intrinsic value have an underlying value independent of its price. Making money on the stock market is like gambling, you’re gambling on the price going up instead of going down so you can sell it at a profit. As the current state of the market shows, a stock’s price can have absolutely nothing to do with economic reality.
Assets with intrinsic value, on the other hand, don’t rely on the price of the asset on the market to make the owner of the asset money. Like the goose that lays golden eggs, it produces something of value that creates income for the owner. It has value independent of what someone else is willing to pay for it.
A business has an intrinsic value from the goods or services it sells. Real estate generates rents. A dairy farm puts out dairy products. Mineral and energy rights generate income from extracting and selling coal, oil, natural gas, etc.
Passive investments in assets with intrinsic value generate income. The more streams of passive income you can generate with these assets, the closer you’ll get to replace the income from your job.
But I can’t buy an apartment building or start a business in a location or in an industry I don’t know anything about…
That’s a common obstacle for investors wanting to invest in assets with intrinsic value. It’s not like buying a $20 stock. It takes capital, experience, expertise, and infrastructure.
What’s an investor to do?
If you want to be one of those individuals with the financial freedom that you seek – the kind of freedom that allows you to not work if you don’t want to – look to the investment habits of these individuals.
Many of these ultra-high-net-worth individuals (UHNWIs) may have initially made their money from running their own business or from a high paying job, but it’s not something they’re continuing to do.
If there’s something these UHNWIs all have in common, it’s that they prefer passive investing over active investing. It would take too much time, effort, and concentrated capital to invest in a diverse number of investments and industries.
Instead, they would rather leverage their capital to passively invest across many assets instead of one or two that are going to take up all their time and efforts – not to mention the brainpower it will take to gain the knowledge and expertise to competently invest actively in these assets.
Why reinvent the wheel? Why invest in something someone else already has expertise in?
The investing philosophy of UNHWIs is that they’re more than happy riding the coattails of others if that means they can invest in multiple assets across a variety of asset classes and geographic locations.
When entrusting their money with others, UHNWIs ask two basic questions of the investment sponsors:
Have they done this before? What’s their track record? How much experience do they have in this asset class?
Who’s on the team? One person can’t do everything, so who’s filling the gaps? Is there enough and qualified human capital to operate the entire venture?
If you want to create a simple and easy way to receive a positive return on investment, don’t leave your finances to chance. Don’t invest in speculative assets.
Look to income-generating assets with intrinsic value. With cash flow, you can reinvest in more income-generating assets until eventually, you have enough income streams to replace your wages.
Finally, don’t be too proud to leverage the knowledge and experience of trusted experts. If they’ve already been successful with a particular asset class, chances are they’ll continue to have success. Just make sure they have a good track record and a good team surrounding them.
Remember… it’s a marathon, not a sprint.
Don’t expect to make all your wealth in one day, but if you want to create simple and easy ways to generate positive returns, think long-term and think about assets that will reward you today as well as in the future when they’re sold.