Investing is a powerful tool for generating wealth. It is a tool that gives you access to wealth beyond your daily work and opens up a world of possibilities. Investing has historically been seen as something only possible for the super-wealthy. In reality, investing is open to anyone with any amount of capital and specific real world education to get started.
There are different ways to invest, with the most common investments being the stock market (of which a lot of Americans invest in directly or through retirement accounts); other financial securities like bonds, ETFs (exchange-traded funds), or mutual funds; real estate investments; and emerging markets like cryptocurrencies and NFTs (non-fungible tokens).
There is no doubt that investing can be a great tool, but there is also risk involved. So, why do you want to invest?
As mentioned, there is risk associated with investing. It’s always possible that you could lose money, so approaching investments with knowledge and wisdom is important. It is equally important to determine your why behind investing.
Your “why” might be any of the following motivations:
There are more reasons for investing than this, and the important things is to determine what your motivations are. Knowing your “why” is a powerful motivator to invest and make the right decisions to achieve your goals. It will give you direction so that you don’t just invest at random or in the next hot thing without doing your due diligence.
The purpose of investing is simple: to build wealth. The reality is that money is worth less over time due to factors like inflation. A bundle of groceries is more expensive now than in the past, which means that the $50 that bought groceries in 1980 will buy you significantly less in the 2020s. The truth is, if you’re not investing, you are losing money through inflation.
Investing is buying certain assets like stocks, bonds, real estate, or others, and then selling them at a later point in time after they have increased in value. Some assets will appreciate better than others, but most will increase in value over time. If you carefully choose where to invest, you will increase your overall wealth.
For many people investing can be a major hurdle when they start looking at calculations, percentages, property analysis or technical analysis. Getting lost in numbers can bring its nervousness to the surface. But learning and knowing how money and investing works can bring a sense of security. Growing your money can give you the option to do the things you need and want that are important to you. Sure, money can give you a certain luxury and it can also be used to help others. Either way, you need to understand why this is important to you now and for the future.
Building wealth can be put into three areas for you. You have earned income where you trade your time for money, passive income where assets provide money and portfolio where your money provides money. Of course, spending less and saving more will help maintain your money but its not really going to create wealth.
Investing is going to take time and learning from experience is a great way to fast track your own success. With time and consistency, you’re primed for great things.
So, what’s an investment? An investment is something you buy today; with the hope it will be worth more in the future. For example, you purchase real estate in a great location. Years later, hopefully it will be worth more. You could purchase stock in a company with the hope they generate goods that increase the value of the company shares. There is one major investment most people don’t consider and that’s themselves. You are the greatest investment on the planet, no one cares more about you than you. When you made the time to read this and seriously consider making an investment in yourself to learn and have the opportunity to be better is a major step forward. We are here to help you along your personal journey of investing.
Time is money. Always remember that because you need to budget your time and money on timelines. What is your plan moving forward? Below are three levels of how money is used over time.
Short term money: This is money used in your everyday life. You have a mortgage, rent, food and various items that you need. This level of money is used as cash or checking account. Make a plan to also set aside money for unexpected expense, car repair, medical and ideally this could be a few months’ worth of expenses saved.
Mid term money: This money is for years of your life. Purchase of a vehicle, schooling or major home improvements. This could also be used for investing but understanding your timeline will help make that decision for how this will be used.
Long term money: This money is used for buying a home or retirement. If you were to invest with this money it may have an opportunity to grow and rebound from market shifts. When planning for retirement, many investors choose to have an IRA or 401(k) in place to manage those funds and assets. You’ll want to manage this with as many resources and tools available to you.
Depending on how you invest, it has the potential to replace your day job’s income. For example, active investors in real estate are often able to earn revenue to live from or, some stocks will issue dividends which also provide a revenue stream from investments.
Most investments, however, are meant to be held over longer periods of time. The value comes after they are sold. This means that there is future value to investments, but most people still need an income to live on in the meantime. A goal to focus on is creating cashflow from your investments and allow that to build wealth.
If you are working while investing, it’s important to keep an accurate record of your finances. Consider how much you earn each month and how much you can spare to put into your investments. You may also need to consider the tax implications of your decisions to invest and how it overlaps with your earned income. Having asset protection is going to be important as you maintain various investments. Protect what you have worked so a hard for during your investing journey.
As mentioned, there are some tax implications to investing. This is just one way in which a professional can help you out with investing. Utilizing other people who have experience in investing is important to ensure you are doing the right thing and can navigate the challenges that may come up.
In order to achieve your goals, you will need to work with others. People who know this business or can help you build yours, people who can help direct you to buyers for your properties or provide financial assistance, etc. We’ll talk about power team members often in our club and community because it’s so important to utilize the help of others. As an investor, you’ll learn how to leverage your money, but you will also need to learn how to leverage your time. Careful selection of qualified people who can assist you in growing your business can help you manage your time and energy more effectively. Leveraging your team members’ knowledge can also help you avoid making mistakes.
The other thing to do is continue to learn and educate yourself. Investing can be very complex, but it is not out of reach for someone who is willing to learn, grow, and get educated about how to invest. Investing is an amazing tool for building wealth. Knowing your “why” and committing to continual learning and education is a great place to start on your investing journey.
Big picture takeaway points
Self-reflection questions to think more about the content
Legacy’s Building Wealth Club offers you the financial education needed to pursue your goals. Let our education and experience lead the way!