5 Ways to Get Rich From Investing
By Dale Gillham | Published 03 April 2018
There are five ways you can build wealth and get rich from investing, which ranges from investing in property to borrowing to invest in business or investments. I will go through all five in no real order of importance. You may decide to do one or more of these at any time during your life.
#1: Getting into business
Often considered the fastest way to creating wealth, is to build your own business. But it is also the one with the highest amount of risk.
Today, young people are bombarded with books and videos on becoming the next millionaire from running an online business to building the next big app. But building a successful business is not as easy as it is made out to be.
Running a business means you will have to be willing take risks, work hard and at times be lucky. Ninety per cent of businesses fail in the first few years because often those with an entrepreneurial spirit realise that it is not as simple as it may appear.
That said, being in business for yourself can be quite rewarding not only financially but in many other ways.
#2: Borrowing to invest
When building an investment portfolio, timing is a critical factor. You see the rich do not follow the herd. Becoming wealthy through investing is about doing what the majority do not do. The herd attempt to follow the wealthy but they often get it wrong.
In my experience, those who are not wealthy often move their money into the market just before the peak and take out of it after the crash. They also tend to borrow the most just before the peak, as they looking to get rich quick, only to find they lose as the market falls away.
The fastest way to make big money is to borrow it and put it into good solid investments. It just makes sense given there is more to compound and the interest is tax deductible.
The problem with borrowing to invest is that the majority want to make a million but only have a few thousand to start with, so they leverage or borrow way outside what they should. In reality, they take extreme risks and end up losing.
Smart use of borrowing to invest is generally the quickest and surest way to gain wealth for those who are educated in how to do it - but it can be a big downfall for those who don’t get the education.
#3: Investing in property
Property is always part of a plan to create wealth and most successful people will have one or more in their portfolio. While you can’t get rich quickly with property, it is great for long term wealth creation.
The rules for buying residential property really don’t change, which includes buying close to the city or major hub and close to public transport and schools.
#4: Investing in the share market
One of my catch cries is that becoming wealthy through the share market is not about how much you can make on any one investment, it is how much you do not lose over time. Think about it, if you lose 10 per cent, you only need to make back 11 per cent to break even. But if you lose 50 per cent, you need to make 100 per cent to break even.
The challenge is that so many attempt to get rich trading high risk or highly leveraged investments only to find they end up achieving the opposite of what they set out to do. Those who are successful long term are patient and open to opportunities as they present themselves.
The stock market is a great wealth creation vehicle, as it can provide you with cash flow to place into other wealth creation vehicles, such as property or a business.
#5: Budgeting and tax
Let’s face it, the rich don’t generally pay much tax, therefore, proper tax planning can be crucial to your wealth creation and getting good advice in this area is better done earlier than later.
Generally, those who follow a budget tend to be wealthy and they don’t over pay for things because they understand value. Those who are broke tend to know the price of everything but have little understanding of value.
Wealthy people know that every dollar saved and invested today will be worth more down the track. Remember, Buffett once said “someone is sitting under a tree today because some else planted a seed a long time ago."
Setting a budget and following the laws of wealth creation, means you pay yourself first by setting aside 10 per cent of your wage to put towards building wealth.
So what's happening in the market? Watch the video to find out.
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