Ever wished you were a millionaire?
When I was young, I wanted to be a millionaire. I read every book about millionaires I could find. (You may have heard about me reading Think and Grow Rich when I was 10 years old). It’s true.
Soon, I could see a pattern of things, steps, millionaires did in common to create their wealth.
One thing stood out to me as the most crucial of all: the RATE you compound money at.
Looking at compounding rates made me realize, if I wanted to become a millionaire, an 8% or 10% average annual return would take about 30 to 40 years to make my dream happen!
By then I’d be too old to enjoy it and I’d be out of time…
That clarity – and the fact that’s NOT what I wanted – led me on a different path that would change my life.
The stock market got my attention when it went up about 30% in one year.
Hmmm, what if there was a way to get that rate of return again and again?
I happened to pick up a book and start reading about buying individual stocks.
The irony is, I worked in the investment industry and it was my job to represent professional money management – the ones who were earning 8 to 10% annually!
Having small investors buy individual stocks was like heresy in my industry – they warned against investing in stocks by yourself at all costs! They said it was “too risky”, like it was a bomb that would explode.
That’s probably why I was so scared, literally terrified, to buy my first stock. I was SURE I was probably going to lose all my money.
But something else happened. My stock began to go up. So did the next one.
I kept following my book and buying more stocks and it kept getting better and better. It wasn’t long before the stock market became an all out mania. Stocks were jumping $5, $10, $25 dollars in a day.
And my compounding went through the roof. The portfolio grew so fast I started tracking the increase every day on a piece of notepaper.
I felt a huge sense of accomplishment and frankly, surprise, when it crossed $1 million. When it doubled the next year to $2 million, I was in utter shock. I was 39 years old.
Bubbles are like that. They can rise exponentially. Kind of like real estate in 2007 did too.
Going through this experience, changed the way I looked at investing.
It made me want to learn more about investing in bubbles. It turns out, they are not a once-in-a-lifetime phenomenon. They happen all the time throughout history.
It starts as a little known trend and then goes mainstream and soon everyone wants to invest in it.
Think back to stocks in the late 1920’s, then steel and railroads, then cars, trucks, planes and oil, commercial real estate, communications, computers, internet, residential real estate, alternative energy, smartphones and online business.
Lots of fortunes were made in these areas – at the right time.
It’s not over. There’s more to be made…and research is showing me we are early in another bubble that will be tremendous and a second one that is underway that no one is expecting.
So if you are looking to create more wealth 1) be aware of your rate of compounding, 2) look ahead with your investments and not in the rear-view mirror, and 3) search for technologies that will create massive positive shifts.
In the next blogpost, I’ll share more with you about how wealth building is different from how we’ve been taught and how to build wealth now.