We’re living in exciting times. More money is created every day. Trillions of dollars are now circulating in the economy that has never been there before. Our job is to make sure that we catch some of it, because if we do not, someone else will.
More millionaires are made now than ever before. I’m confident that there will be a consequence for the reckless creation of money by the central banks. But you know what? I think there will be an equal opportunity for you to build wealth.
Wealth is never destroyed, it’s transferred. Your goal should be to end up on the receiving end of the transaction.
“My Mistake Was That I Didn’t Want To Spend Money”
Last night, I listened to a speech by Grant Cardone who has written The 10x Rule among many other great books. He talked about his early years and the mistakes he did. One of the mistakes he mentioned was that he didn’t want to spend money. That’s what kept him small for so long.
Being bombarded with information about how bad the economy is and how we need to save to survive, I found his speech liberating. He’s is not in a scarcity mindset, and perhaps that’s the reason why his businesses are booming.
Robert Kiyosaki who has written the book Rich Dad Poor Dad has a similar approach to today’s economy. He says that savers are losers, and he points to the fact that the increase in money supply decreases the value of the currency.
Quick Background About Monetary Policies
In 1933, the U.S. abandoned the gold standard to deal with the deflation after the great depression. The gold standard meant that you could exchange dollars for gold.
After that came the Bretton Woods system. The countries that belonged to IMF would have their currency tied to the U.S. dollar. The U.S. promised that the countries that had their currency tied to the U.S. dollar could exchange it for a certain amount of gold.
But, in 1971, Nixon had to remove the gold claim, and that’s the last change in monetary policies. Now the currencies are not backed by a commodity like gold or silver.
Why Do I Bring This Up?
I think the information above might help you to make the right decision on how to build wealth in today’s economy. A small disclaimer: I’m not a financial advisor, so my purpose is not to advise you on where to spend your money.
But what I can do is offer you some information and ideas that might be useful for you. Last year I dived deep into studying the world economy.
I read books like Guide to Investing in Gold and Silver from Mike Maloney who has researched this topic for a long time. He found out that every fiat currency has failed, eventually. He takes examples from ancient Rome to Weimar Germany (marks).
What Does This All Mean?
Have you looked at the interest you get on your money when you put them in a savings account? Not much to celebrate, is it? Compare it to 40 years ago and you’ll see the trend.
Combine that fact with the increased debt of nations and the increased amount of money in circulation. Now we have the answer to why Mr. Kioyasaki said that savers are losers.
Mutual Funds vs. Index Funds
Okay, so inflation is lowering the value of our currencies. But what do we do instead of saving? Do we let the bank tell us where to place our money? No, and I keep telling a close one not to do for the reasons I will mention.
Somehow, she still trusts the brokers with her money. It’s like the authority of a person that works in a bank outweighs reasons and fact. It never occurs that they are salespersons. Their job is not to recommend the best investment on the market. They get paid to sell services of the bank.
96% of actively managed mutual funds do not outperform the market if you were to look over 15 years. So, isn’t it better to invest in an index fund instead of a mutual fund?
It has to be a reason to why Warren Buffett suggests that the average American should invest in index funds. Nevertheless, wouldn’t it make more sense to put more trust in a fiduciary than a broker?
Building Wealth through Businesses
There’s a reason to why people like Marc Cuban wants to be on the TV show Shark Tank. Yes, there’s good publicity, but they are investing in small companies even before they get on the show. I believe that building a business is the fastest way to wealth. Here are the advantages:
- You’re in control (at least most of the times).
- You can leverage other people.
- You can use other people’s expertise and money if your idea is good (angel investor).
Is it risk involved? Yes, but still, it’s an idea worth considering.
Real Estate Investing
This idea might be good or bad for you. It depends on many factors–one of them being your location. I got this idea after reading the book, Real Estate Riches by Dolf De Roos.
He’s a man that has never had a job. Not because he couldn’t get one. No, he has a Ph.D. in engineering. He just never needed one because of his success with real estate investing.
Like starting a business, you can affect the return of this type of investment. You can paint the house, fix the floors, etc. Compare that to buying stocks in Apple. Yes… you might be able to affect the rise of the stock by purchasing an iPhone, but come on!
The great thing is that everyone needs a place to live. Therefore, real estate’s will never go out of style.
We’ve now gone through some interesting ideas for building wealth. These are proven ideas that have helped other people to build wealth. Here are some other things that I’ve learned to keep a look out for when investing:
- Any changes in the political arena. Are certain businesses being punished or rewarded by taxes or regulations?
- A shift in taste. Are the people growing up now, more inclined to read on an electronic device than the older generation?
- Changes that can be seen by looking at stats. Is this city losing or gaining citizens?
The most important thing that I hear being repeated over and over again is: what does the market want? We can sell ice to the people of the North Pole, or we can sell water to tourists in Egypt.