Understanding WHERE to build wealth is the most important question you need to know the answer to. If you know where to grow your money the fastest, you can build wealth as quickly as possible.
It’s all about compounding baby!
Conversely, if your money is in a savings account earning only 1% interest, it will take 72 years for your money to double and you’ll never build wealth.
I used to read the Forbes 400 Richest Americans list with great interest. After reading and following it for several years, I began to notice a pattern. Whatever investments were doing well at the moment was where the richest people were.
When silver and oil were hot in the ’70’s, I noticed the most of the Forbes richest people owned oil companies and mines. When the stock market took off in the ’80’s, most of the list owned public companies or were investors, when technology skyrocketed in the ’90’s, the richest were internet entrepreneurs, and when real estate took off in the 2000’s, they were real estate investors.
Just by reading that, you can see how money moves around. That’s because depending on how the economy is growing, inflation, and interest rates, money goes where it’s treated best.
When inflation is moving higher, commodities like oil, energy, precious metals, agriculture, and farmland appreciate most. When inflation and interest rates are moving lower, stocks, bonds, annuities, and other assets made of “paper” perform best.
Take a look at the chart of the stock market below. You can see years where the green areas are going up and making new highs. You can also see the brown areas are when there are no new highs made.
These are cycles and they move in about 18 to 25 year increments. Right now, we’re in a brown phase, where the stock market is out of favor. We know that’s true because the stock market had its worst performance of any decade ever in history from 2000 to 2010.
What’s performing when the stock market isn’t? Commodities. These are things that come from the ground like energy, precious metals, and agriculture.
Who says there’s no place to make money now? You just need to understand and invest in the right cycles.
Here are a few tips to consider:
- Identify what cycle we’re in (either stocks or commodities).
- Once you know the cycle, choose how and what to invest in by noticing the best performing assets.
- Hold the investment until everyone, and I mean everyone (including strangers, your neighbors,and the media), recommend you own it.
- Sell and buy the cycle that’s been out of favor for the last 20 years.
Rinse and repeat.
The best performing years are the latest years in the cycle when a bubble or peak forms – when everyone looks in the rear view mirror, sees what a great investment it’s been, and scrambles to buy it right at the top.
You can participate in building wealth like the richest billionaires are.
I’m sure their cyclical investments will start putting them on the Forbes 400 list soon.
And who knows? You might see your name there someday.