We’re taught in life that the harder we work, the better off we’ll be. “The grind” people call it. We’re told that the amount of time we work will always correlate with our income. And therein lies the problem. Don’t get me wrong. Hard work is necessary in life. But time spent and pay received does not correlate as a perfect ratio.
Most people never wrap their heads around the idea of passive income. “Sounds lazy.” someone may retort at a dinner party. But true investors know the value of passive income. In fact, without passive income, you can’t amass wealth.
Wealth typically does not come from a 9-5. Only 8.6% of people get wealthy through wages and salaries. The most common way to create wealth is from investing (50% of wealthy people get wealthy this way). It’s the primary path I’m taking to get rich. Care to follow?
Who Is and Who Isn’t an Investor
Most commonly, people refer to investors as anyone who invests in the stock market. But that’s crazy. 55% of Americans own stocks. To call 55% of Americans ‘investors’ is akin to calling anyone with a potted plant a farmer.
The stock market soars and dives. It’s not a reliable source of passive income. A real investor looks for healthy streams of consistent income. We’re talking about more than dividends here.
Where Investors Place Their Money
Investors place money in areas which can create a reliable cash flow each month (often passive). They buy income producing assets. The most popular way to invest by this definition is to invest in real estate.
Investors can buy a commercial, industrial or residential property and rent it to others for a net profit each month. Furthermore, the property itself will likely increase in value over time. Many of the well-off people I know dabble in real estate.
Investors also invest in businesses. Earlier I said time and income don’t always correlate. The perfect example of that is with a business that sells a product. The product gets created. Then it’s sold over and over again with few residual costs relative to that initial push. Thus, income can be created month after month – even passively if you outsource the work.
Warren Buffett is the greatest investor of our lifetime – perhaps the greatest investor that has ever lived. He’s worth about $67 billion. If you’ve never been to the Annual Berkshire Hathaway Shareholders Meeting you really should go. It’s an incredible experience. I’ve been several times.
Buffett believes investing takes time: “Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.” Proper investing requires a long-term mindset.
Keep in mind that Warren Buffett is an investor because he buys entire companies and brings them into his company – Berkshire Hathaway. Warren Buffett doesn’t merely invest in a 401(k) or day trade. He understands better than anyone that a successful investor takes the time necessary to make large, consistent profits.
Invest in Yourself
“The most important investment you can make is in yourself.” – Warren Buffett
Do your homework and begin investing. Keep coming back to this blog as we’ll keep dishing out helpful advice for you to devour on your path to riches.