Start by reading "Rich Dad, Poor Dad", "The Millionaire next Door" and "How to Pick Stocks Like Warren Buffet". Remember this: NO MATTER HOW MUCH MONEY YOU EARN YOU CAN BLOW IT FASTER THAN YOU EARN IT - Just ask MC Hammer he went from a net worth of $30,000,000 to nothing and working retail selling telephones.
HOW WELL YOU DO IN LIFE FINANCIALLY IS MAINLY DETERMINED BY HOW WELL YOU SAVE AND INVEST MONEY.
Some people will tell you to invest in shares. The trouble with that advice is they either don't tell what companies to invest in or spin you the same old group of companies in the top 50 largest companies. BHP, banks etc.
This is my list of stocks that I actually invest in now:
The problem is that most people are really crap investors! The recent property boom has made the hack investor who can think of nothing better than residential real estate look like a genius. Times change, property is not always good.
PROPERTY MARKET NOW SLOW
If you bought property in 1998 and sold it in 2003 congratulations you would have ridden the interest rate and liquidity driven property boom. Good for you! But if you bought investment property in late 2003 then it could be 10 years before you just get your money back. Property was selling at record low yields - properties were selling at a net yield as low as 1½%. Obviously not a good return on investment and the market momentum had to run out of steam.
When yields get this low then profits can only be made on the "greater fool theory". It goes "I pay more than the investment is worth now in the hope of selling it to a greater fool later." The Dot.com boom is a good examples of the greater fool theory.
The old axiom about "You can't lose on property" is going to be well and truly shattered over the next few years with foreclosures, rising interest rates and slow moving property prices.
PROPERTY DEVELOPMENT - A ROAD TO WEALTH
TV shows on "How to be a Property Developer" are usually just bull. All people do in those shows is dress up old houses with mixed success.
There are more people in the BRW 200 Rich list who got there from Property Development that any other path. The big trick for making money out of property is subdividing it. Taking a house block and putting 5 townhouses on it or a block of apartments on it.
Many people have gone bankrupt doing property developments because they didn't know the building industry well enough. The building industry is a rough trade with plenty of rough operators. So learn about the building industry before you gamble your own money on it.
How is this for an idea? Get an apprenticeship or go to TAFE or University and learn about the industry. Work in the building industry while you study hard to get your builders license. Move from working as a builder for other developers to doing the development with your own money. Simply you are learning while other people risk their money.
Do this right and you could retire as a multi-millionaire in your early 30's.
OTHER INVESTMENTS
With interest rates rising shares and other markets are going to perform poorly too.
I would leave money in physical gold (1kg bars NOT jewellery!) until the next recession. (When I first wrote this in June2003 gold was US$385 per oz. and today February 2008 it is US$900 per oz. Who got it right? There is still much more upside to gold. Let me forecast US$2500 per oz by 2012!). For a but more leverage (with higher risk) you might want to invest in Gold stocks now. See link above for share I hold.
THE GOOD OIL
If you don't understand a word of what I am saying just print out this stuff and take it to a good accountant or investment adviser who works for a major bank. Tell him "I want to do this. Can you help me do it?"
If it is any help, here is a link to the gold stocks I invest in now: MARK'S GOLD STOCKS (click on the words) I especially like Citigold - ASX code CTO.
Buying $2,000 worth of share is not going to make you rich. If it goes 10 times its value than you have $20,000. But if you buy $100,000 worth and get it right then you could have $1,000,000. That would change your lifestyle. It is all about risk v. return.
Check with successful friends or family for referrals to good investment advisers, stockbrokers and accountants. Too much of the investment advice industry came out of the life insurance sales industry. Look for a stockbroker and investment adviser with a relevant degree, industry qualifications, at least 5 years experience and a successful track record of their own investments. They all have a register of their own investments that they must keep by law. If they won't show it to you go elsewhere. If they are not successful investors or have no assets then maybe these facts are telling you something...?
Please note that your success as an investor is highly related to how well you do your research, you financial education and your experience.
The light at the end of the tunnel the politicians are telling us about is not an economic recovery but the headlight of an oncoming train. The USA economy, and thus the world economy, is heading for a nasty train wreck with lots of inflation. (I made this forecast in 2003.)
The CPI figures have been so manipulated that they are just a fantasy. Anyone running a car, buying a house and shopping at a supermarket will confirm this. The real inflation rate is running at least 7%.
For the details of the "train wreck" have a look at an article by Dr David Evans at: http://www.citigold.com/whyinvestingoldnow.html
SPOTTING THE PRETEND RICH
How do you know if a person is rich? You don't get to see an audited set of accounts of his/her net wealth very often. Be suspicious, be very suspicious the pretend rich are everywhere.
The apartment he/she is living in could be rented, their BMW is on lease, their clothes bought on credit cards, their furniture, large screen TV and surround sound Hi Fi bought on 2 years "interest free" store credit terms. (You should read the fine print on "interest free" terms - nothing is free!) Their designer label bed could have been bought second hand at an auction. This person would have all the outward appearances of being wealthy and yet have a net worth of less than nothing.
This person could is totally reliant on their cash flow just to keep their head above water and could be bankrupt in a few months if they lost their job. As the clothes go out of style they may need more credit to replace them. It is funny that the things people do to appear rich is actually making them poor - see the next section.
I know so many younger girls that get sucked in by pretend rich. The BS they speak about how much money they make, famous people they know and staying at the Paris Hilton on one of their world trips (What they don't tell you is that it was for just one night the rest of their time was in a low budget Youth Hostel).
Pretend rich have a high opening balance on their credit cards and real rich pay them off in full every month.
You can pick pretend rich by asking him/her questions like: How to get an increase on a credit card limit? The pretend rich will know all about scamming increases from credit card companies and be proud to tell you what they know; the real rich will tell you why credit cards are bad.
Want to know if they own the place? Ask a neighbour who owns a similar sized property in the same block what the rates and/or occupancy fees are and if there have been any 'special levies' then, see if your friend has any idea.
HOW TO GET POOR AND STAY POOR
(I was forced at gun point to add the last 4 items by friends, each of whom had horror stories of financial ruin.)
Credit cards are toxic to your financial health! You might need 1 credit card to pay phone bills and things on-line. The limit should be no more than your fortnight's pay and you should pay it off fully every month. Never increase the limit beyond your pay rises. If you don't pay it off in full each month cancel it as you are not responsible enough to have a credit card. Credit cards have interest rates of up to 35% and other fees like annual account fees, over balance fees and late payment fees. Interest free days and low rate introductory periods are just to get you sucked in.
Poor people turn their cash into trash. Designer label clothes, electronic goods and furniture are trash because this stuff is almost worthless the moment you walk out of the store. If it was really worth something it would have good resale value. The richest man I know is worth over $100M and he wears the same type of $80 Casio watch I do. It is accurate and waterproof, what more do you need? Cars depreciate and are expensive to run.
Rich people turn their cash into income yielding investments.
In my mind, rich means I own my home outright and I have enough money invested in income yielding investments so I can live a comfortable lifestyle without having to work.
If you make mistakes investing learn from them. Share trading sux. Invest like Warren Buffet, buy good stock with increasing earnings and hold it for the long, long term.
Please note I am not an investment adviser and no long hold a proper authority to provide investment advice. Please seek advice appropriate to your specific circumstances from a qualified and licensed advisor. Advice here is of a general nature and may not be appropriate to your circumstances.
I value your feedback. Please send me your comments to: info@digitalharmony.com.au
Copyright © 2003, 2007, 2008 Mark Ellis