Are you wondering where wealth building opportunities are today? How to get ahead and really make your money grow?
When I was first investing, I had a burning desire to find something to invest in to create wealth.
I started investing in real estate foreclosures because there was potential. The S & L crisis had caused a lot of homes to go back to the bank and they were selling them at auction. Our group of investors would bid on a house and buy it if we could get it for about 60 cents on the dollar. This allowed us to have enough room to fix it up, pay a real estate commission, and make a decent profit.
At first, there were only a few investors at the auctions bidding on homes. After a while, more people started bidding and soon there were crowds of people bidding on the homes. Instead of paying 60 cents, they were paying 90 cents on the dollar!
I knew there was no way we or they could pay that much and make a profit.
The crowd showed me it was the “peak” of that investment. It was time to move on because we couldn’t compound at double digit rates anymore.
(More about how to identify good investments in a minute).
In my last post, you learned that building your wealth is all about the compounding rate. The higher the rate you can compound, the sooner you will be wealthy.
The most important wealth building step is to invest in a “money engine” (a money engine is an investment that will grow your money) and then to compound at a high rate. The higher the rate, the faster you build wealth.
For example, if you started with $10,000 and could compound at 100% annually, you’d be a millionaire in just over 7 years. Whereas at a 1% rate in a savings account, it will take you 72 years just to double your money.
Compounding is at the very heart of wealth building. I had to learn that myself (and in my last email I told you the story of how I did that). If you missed the blog post, you can read it HERE.
One way I learned to get a higher compounding rate is to invest where the next economic bubbles are forming.
If you can identify in advance where the next bubble is forming, it can certainly help your wealth building because generally a bubble is where a lot of wealth is accumulating.
Bubbles form when “everybody” sees the opportunity and decides it is “THE” investment.
It becomes the obvious place to invest.
I remember when I counted over 20 cranes building new condos in my city in 2007. It seemed to me the “crowd” was investing in one place, and it was close to the peak of the bubble.
At bubble peaks, the crowd is looking in the rear-view mirror. All they see is the returns that have already happened and decide they need to invest now!
When the crowd thinks this way and jumps in, look out below!
Traditional investing teaches us to look in the past – what I call the rear-view mirror. You are supposed to look at past track records to determine the best investments in the future.
It even happens when you talk to a financial advisor about investing in mutual funds.
You are told a mutual fund rated 5-stars by Morningstar is supposed to be the best performing fund. However, the reality is according to a study done by Vanguard, 5-star funds performed the worst over the next three years and 1, 2, or 3 star rated funds performed the best!
What’s my point? What wealthy people have in common is…
They are looking FORWARD, not in the rear-view mirror!
Looking in the past will not build the wealth you are looking for. You need to look and see opportunities differently than how you’ve been taught.
Would you like to know where the next wealth building trends will be? I’ll share that with you HERE.