Using leverage of knowledge to grow wealth
In this another series of my leverage hubs, I wish to show you how you can use the leverage of knowledge to grow your wealth. It starts with discussion on using the leverage of knowledge to help you save and invest and by using other leverages as I have discussed in my other hubs, you may be able to grow some or even more wealth for yourself.
When you “invest,” you have a greater chance of losing your money than when you “save.” The money you invest in securities, mutual funds, and other similar investments typically is not insured. You could lose your “principal”—the amount you’ve invested. But you also have the opportunity to earn more money.
Knowledge is key
There is no guarantee you will make more money investing. Investment is more of a personal choice a person takes. To larger corporations, investment is their lifeblood.
Many people wish to become rich but don’t commit to educating themselves. In PNG universities, topics on investment are rarely thought. Which university in PNG teaches its students to invest in paper assets like stocks, bonds, mutual funds etc…which university teaches its students how to create wealth using properties? None at all.
Where do you find the knowledge needed to grow your wealth? Obviously, you made an investment when you bought this book. And there are million other books life this that you can buy and study. Attend business and investment seminars and most important find a mentor. Someone who has been successful in investment option you decide to follow.
Millionaire Robert Kiyosaki on wealth creation
In my seminars, may people ask me about basic types of investment products they can invest in. Here are common investment products you can look at. The rule of thumb is “Don’t invest until you know how you money will return to you”. That means do you own research on the product you wish to invest in.
Many people blindly buy investment options they don’t fully understand how the returns on investment are generated. If you don’t know the dynamics of real estate business, then you don’t invest in it until you understand how real estate industry. Similar can be said of paper assets such as stocks, bonds and mutual funds.
A few days ago, a friend of mine approached me and asked me “Bro, I saw this great advertisement about Forex trading on Facebook and I want to try. Give me some tips”. My reply to him was short and sharp. “Do you know how they make money?”. My friend replied no. So I told him not to try until he understood how he can make money trading Forex.
Let me warn you that if you think you can be smart by note educating yourself on the investment product you are buying, prepare to lose more.
Savings or income from business
Residential and commercial real estate
Stock market - May also include other paper assets like mutual funds and bonds
What are the options to choose from?
Once people realize that they must invest for their future, they care often faced with bewildering array of options and often quit often many would not know what option is the best for them. Some often rushed off make quick decisions and later regret. Some stand on the river side pondering what to do until the sunsets.
It is at this point that the leverage of knowledge plays a vital role in determining who succeeds financially and who fails. Obvioulsy, if you are committed to your financial education, and stick to you wealth building strategy, you will certainly grow you wealth, no matter how small or big it is.
If you look carefully at all possible investment options, you find that they all boil down to three options: Cash, Shares and property. They may be disguised as managed funds, or superannuation or even some other fancy names. Don’t be fooled. It’s cash, shares or property.
Where does your income come from?
Having the knowledge to differentiate these options and to device effective strategies to grow wealth using any of these options is what we call Financial Intelligence. Robert Kiyosaki said it well when he said “Financial intelligence is how fast you turn your earned income into passive and portfolio income”. Passive income comes from properties and portfolio income comes from paper assets like shares. Earned income comes from your wages or a business you own but work for it.
Billionaire Warren Buffet on wealth creation
Pathway to wealth
All that has been described earlier can be summed up in this diagram. The most important decision you take when you embark on your journey of wealth creation is to decide whether you do it yourself or pay others to do it for you.
Doing it yourself obviously requires more time and effort from you but you are the only one left to enjoy all the benefits or the returns on your investment. In contrast, if you pay others to do it for you which is the easiest way out, then you face the risk of getting scraps from the fund managers. Who in most cases are commissioned agents of bigger finance companies who don’t care if you become wealthy or not. All they want is you buy the investment product they sell you so they earn fat bonuses.
Hope your found this hub useful. If you did, please live a comment below and do share it with friends you care lot about.
© 2013 Ian D Hetri