- The Pareto principle does not apply to finance
- Start from scratch
- The 90/10 rule of money
- How to avoid being average
- The power of the investor
- Wealth accumulation - and how it is financed
- Invest like a rich man
- My rich father's answer
- Build a successful company
- Buy, hold and pray
- More than buy, hold and pray: 6 tips for investors
- The 5 types of investors
- Know the tax laws
- Top books on the subject
- Read text as PDF
- Advice on success, goal achievement or marketing
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The Pareto principle does not apply to finance
Have you ever heard of the 80/20 rule? What is meant is that with 20% of the funds we use (Energy or resources) achieve 80% of the results. With the remaining 80%, only 20% "more" results are achieved. The Italian economist Vilfredo Pareto gained this insight in 1897, which is why it became known as the Pareto principle. So you should now ask yourself: With which 20% of your effort do you generate the desired 80% of your success? And could you even improve on this success? My wealthy father was a firm believer in the 80/20 rule in many areas of life.
When it came to money, however, he believed in the 90/10 rule. It hadn't escaped his notice that 10% of the People Owned 90% of the total assets. He researched that in Hollywood, 10% of the actors skim 90% of the fees. He also saw that 90% of profits in the sports business go to 10% of athletes and in the music industry to 10% of musicians. He believes the same 90/10 rule applies to investing, which is why his advice to investors is: "Be better than average." The Wall Street Journal recently published one Articleswho confirmed my rich father in everything: It said that 90% of all corporate stocks in the United States are held by only 10% of the population. How did some of the 10% investors make 90% of their assets and how can you do that too?
Start from scratch
My story begins in 1973. Less than a year later, I would return from Vietnam and be released from the Marine Corps. To put it plainly, in less than a year I wouldn't have a job, money or assets to fall back on. So I was at a point in my life that many of you will know: I had to start from scratch. All I had in 1973 was the dream of becoming very rich at some point.
I resolved to become an investor and benefit from the same investments as the truly wealthy in the country. Not many people are familiar with such investments. You don't read about them in the financial journals and they are not sold by investment advisors. But I want to tell you the story of a rich man who used pictures and diagrams to teach a young man, me, how to get around in the World of the big money finds her way. I call him my rich father.
The 90/10 rule of money
My rich father thought a lot about the 80/20 rule of the Italian economist Vilfredo Pareto, also known as the Pareto principle. In wealth matters, however, he was convinced of the 90/10 rule that 10% of people earn 90% of the money.
What worries me is that more and more families are counting on their investments to be in the Future will feed. The Problem is that while more and more people are investing, very few of them have what it takes to do so Reset feature. What will happen to all these new investors when the market crashes? Savings are protected against total loss by the state, investments are not. When I asked my rich father, "What advice do you have for a young hopeful investor?" he replied, "Be better than average." Sounds simple, doesn't it?
How to avoid being average
Even in the tender Age I became interested in investing when I was 12 years old. Up until then I was mostly into baseball and football Head, but no investments. As a child, you naturally have little interest in money, except perhaps for pocket money. However, I realized relatively early on that you can achieve a lot with investments. I remember a scene: I was walking along the beach with my best friend Mike and his father, the man I now call my rich father. My rich father showed us boys a piece of land he had just bought. Despite my young age, I realized that my rich father had bought one of the most valuable properties in our city. I knew very well that oceanfront lots with a sandy beach in front of the house were more valuable than those without beach access. My first thought was, "How can Mike's father afford such an expensive piece of land?"
I stood there with the waves lapping my feet and I looked at a man who was the same age as my own father, but unlike him just one of the tallest Shops had done in his life. Impressed, I wondered how he could afford such a property. I knew that my own father made a lot more money than he did because he had a high-paying government job. But I also knew that my father would never be able to afford to buy real estate by the sea. So how could Mike's father afford this piece of land if my father couldn't? Of course, I didn't know at the time that my future as an investor was just beginning at that moment, because for the first time I guessed which one Effect the little word "invest" can unfold.
The power of the investor
Some 40 years after that walk on the beach with Mike and his father, many people ask me the same thing today Ask, which I have addressed to Mike's father since then. Also in my investment courses I hear questions like:
- "How can I invest when I have no money?" H "I have $ 10 to invest. What do you recommend, where should I invest them? «H» Do you recommend investing in real estate, funds or shares? «
- »Can I buy real estate or securities without my own capital?«
- "Don't you need money to make money with it?"
- "Isn't it very risky to invest?"
- "How do you get such a high return with such a low risk?" H "Can I invest with you?"
Wealth accumulation - and how it is financed
Gradually, people begin to understand the power of the word "invest." Many want to find out how to use them for themselves. I would like to encourage you to continue researching independently: Quite for sure you will find the answers that are right for you personally. Looking back, the most important thing my rich dad did for me was get me interested in wealth building. My curiosity flared the moment I realized that my best friend's father, who made less than my real father, at least on the payroll, was able to make investments that only the really rich could actually afford.
I understood that my rich father had a power that my biological father did not have: I wanted that power too. Lots of people have Anxiety with power and stay away from it. Others, however, fall victim to it. Instead of running away from her and chanting ideological phrases like "The rich take advantage of the poor" or "Investing is risky" or "I have no interest in getting rich," I accepted the challenge. My curiosity and desire to have this power - also known as knowledge and skills - have set me on the path of lifelong learning and inquiry.
Invest like a rich man
My intention is to give you an insight into how many of the richest self-made millionaires have made their money and you assets continue to increase. When I was 12, standing on the beach looking at my rich dad's new property, I suddenly saw a world of opportunity that was in mine Family did not exist. I realized that it wasn't money that made my rich father a successful investor. It was on the Handthat my rich father had views that were contrary to, or even contradictory to, my birth father's ways of thinking.
I was clearthat I needed to understand my wealthy father's attitude if I wanted to be as financially strong as he was. I realized that if I learned to think the way he thought, I would be rich forever. I also understood that my future wealth had nothing to do with how much money I brought with me. My rich father had just invested in one of the most expensive properties in our city without having sufficient funds. I now understood that prosperity is a setting, no amount in the bank. And it is precisely this way of thinking of wealthy investors that I want to convey to you.
My rich father's answer
On that memorable walk on the beach, I took my whole Courage together to ask Mike's dad, "How can you afford to buy that 10 acres of expensive beachfront land when my dad can't afford it?" My rich dad gave me an answer I've never forgotten. He put his arm around my shoulders and we turned and strolled back along the beach along the water. My rich father began to kindly explain the principles of his thinking to me. He described how he felt about money and investments: 'I can't afford this country either. But mine Corporate it can. ”Our walk lasted only an hour. My rich father in the middle, Mike on the right and I on his other side. It was my first investing lesson. Some time ago I held a three day investment course in Sydney, Australia.
For the first day and a half I talked about the details of starting a business. Finally, one attendee raised a hand in frustration and asked, "I came here to learn about investing. Why do you spend so much time talking about business?” I answered him, “There are two reasons for that. Reason number one is that everything we invest in is a business. If you shares buy, invest in a company. When you buy a property, such as a rental home, it is also a business. When you buy a bond, you are providing money to a company. To be a good investor, you must first be a good entrepreneur. Reason number two is that having your company acquire your investments for you is the smartest route to wealth. The worst way is to invest as a private individual. The average investor knows very little about companies and often invests as an individual. That's why I spend so much time talking about companies in an investment class.” It should always be about how to invest through a company, because that's what my rich father taught me.
Build a successful company
Think of his statement: »I also cannot afford to buy this land. But my company can do it. "In other words, the rule is:" My company buys my investments. Most people are not rich because they invest as a private person and not as an entrepreneur. «There is a reason why most of the 10% who own 90% of the shares are entrepreneurs and invest through their company. And you will understand how you can do the same. I call such people "90/10 investors". Later in the course, the questioner also realized why I was spending so much time talking about companies. The further we progressed in the course, the better the participants understood that the richest investors in the world are not participating in existing investments. Most of the 90/10 investors create their own investments. The reason we know billionaires who are still in their twenties is not because they have participated in investments. You have invested in companies and created values that millions of people want to buy.
Almost every day I hear people say, "I have an idea for a new product that will make millions." Unfortunately, most of these creative ones become ideas never implemented. 90/10 investors have turned their ideas into multimillion and even multibillion dollar companies that other people are putting their money into. That's why my rich dad spent so much time teaching me how to build companies and how to evaluate them before investing in them. So if you have an idea that you think could make you rich or maybe even help you join the 90/10 investor club, then you should think about starting a business.
Buy, hold and pray
Over the years, my rich father found that investing meant something different for everyone. Today I often hear things like:
- “I just bought 500 shares of XYZ for $ 5 a share; the price rose to $ 15 and I sold it. I made $ 5000 in less than a week. ”
- "My husband and I buy old houses, renovate them and sell them at a profit."
- »I trade commodity futures (futures).«
- "I have over a million dollars in my investment account."
- "As safe as money in the bank."
- "I have a broad portfolio."
- "I invest long-term."
My rich father would say, "Investing means different things to everyone." The above statements spiegelWhilst this reflects different investment products and investment processes, my rich father took a different approach. He said, 'Most people aren't investors. They are speculators or gamblers. Many act on the 'buy, hold and pray'Strategy. Most investors live in the hope that the market will hold its level and in fear that the market may crash. A true investor makes money whether prices are rising or falling. He definitely deserves it, whether he wins or loses. The average investor doesn't know how to do this, and that's why most investors remain average. You belong to the 90% who only make 10% of the money.«
More than buy, hold and pray: 6 tips for investors
Investing meant more to my rich dad than buying, holding, and then praying. His Opinions one should always remember:
- The 10 points an investor needs to control to reduce risk and increase return. My rich father said, “Investing is not risky. Having no control is risky. ”
- My rich father's five-phase plan, which led me to invest large sums out of destitution. Phase I of the plan was to prepare myself mentally to act as an investor. This is a simple but very important phase for anyone who wants to invest with confidence.
- The tax laws that have to interest different investors in different ways. In the book CASHFLOW Quadrant I dealt with the four different groups of people who operate economically. They are: E stands for Employee, S for Self-Employed or Small Business, B for Business Owner and I for Investor.
- Why and how a true investor will make money, whether prices go up or down.
- The difference between fundamental investing and technical investing. #
- How To Make Much More Than The $ 200 Minimum Income To Access The Rich's Investment Opportunities. My rich father said to me: “Money is only a matter of opinion. How can you be rich if you think $ 000 is a lot of money? If you want to be a rich investor, you can only see the $ 200, the minimum qualification as an accredited investor, as a drop in the bucket. «
The 5 types of investors
We also distinguish five types of top-level investors. In the CASHFLOW Quadrant, I address the five levels of investors. You should meet the skill requirements and Vocational Training for each of these types of investors. I divide the top two levels of investors (professional and capitalist) into five types of investors:
- the accredited investor
- the qualified investor
- the financially educated investor
- the insider investor
- the ultimate investor
Know the tax laws
My rich father encouraged me to invest from the B quadrant because the tax laws there favor investing. My rich father always emphasized, “The tax laws aren't fair. They were made by the rich for the rich. If you want to be rich, you have to use the same tax laws as the rich.« One reason that 10% of people hold most of their wealth check, is that only that 10% know what tax laws to use.
In 1943 the United States government closed most of the tax loopholes for white-collar workers. In 1986 it eliminated the tax loopholes for sole proprietorships in the S-Quadrant, from which freelancers such as doctors, lawyers, accountants, engineers and architects had previously benefited. In other words: Another reason that 10% of investors make 90% of the money is that only 10% of all investors know how to invest based on the different quadrants in such a way that one can take advantage of the respective tax advantages. The average investor often only invests out of one quadrant.
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