Unless you were born with a silver spoon in your mouth, it wasn’t easy to get to where you’re at financially and professionally. You had to work at it. Like many in your position, you got to where you’re at because you invested in yourself. First, you invested in your education by doing well in school. Then, you found a good job out of school and invested in your career by putting in the time to rise through the ranks, but here is why you’re reading this article today. At some point, you realized you didn’t want to work for somebody else anymore. You wanted to work for yourself. So you started your own business or you started investing your money to grow it. Maybe now you want to truly grow your wealth, either for yourself or your posterity, because you realize there’s a difference between being rich and being wealthy. Being rich means having the income to support a decent lifestyle but it doesn’t mean not having to worry about money. If your source of income suddenly stop because of the economy or job loss, you’d no longer be able to support that lifestyle. That’s where being wealthy diverges from being rich. It means that no matter what happens with the economy, you don’t have to adjust your lifestyle. Being wealthy means never having to worry about money because the money is always working for you.
Maybe you’re already wealthy. But, we could all stand to accumulate more wealth to pass on to posterity or to contribute to charitable causes dear to our hearts. So, no matter what stage you’re in, these simple steps will help you to grow your wealth. You’ll think to yourself, it can’t be that simple. But, from my research of the ultra wealthy, it does seem to come down to some very simple steps. In other words, there’s no thousand word Holy Grail of investing that will key your wealth building. But, I didn’t say it would be easy, only that the steps were simple, which could conveniently be summarized in the following diagram.
So, building wealth comes down to three simple steps: 1) make money, 2) save money and 3) invest it wisely. Steps 1 and 2 are self-explanatory so I wanted to concentrate on step 3 and dispel a common misconception about investing while I’m at it.
A common misconception about investing wisely is the overhyped concept of diversification. There is such a thing as over-diversification. Mark Cuban said, “Diversification is for idiots.” Andrew Carnegie said, “put all your eggs in one basket and then watch that basket.”
Does that mean Mark Cuban or Andrew Carnegie were invested in only venture? No, Mark Cuban wouldn’t be on Shark Tank if he were only invested in one venture. Their point is, get good at a few things instead of overreaching on several things. If you want to create real wealth learn as much as you can about a space and go all in.
As for the actual types of investments that constitute wise investments, there’s a reason businesses, passive investments, active investments and real estate all made the list according to the chart. It’s because all four classes of investments offer income distribution streams that can be reinvested to multiply wealth. “To create wealth, you must make investments that will create dependable streams of income flows, independent of your main source of income. I use rental income from apartments and partnerships in other companies to throw off passive flows of income. I continue to pay attention to each of these flows to make them stronger. This is not diversification — it’s fortification of wealth.” <em>Cardone, Grant </em>“8 Money Mistakes to Avoid on Your Way to Being Wealthy,” <a href=”https://www.entrepreneur.com/article/236298″>entrepreneur.com</a>. The key to wise investments is the cash flow element. Only from investments such as businesses, real estate and active and passive investments that offer periodic distributions can you generate cash to reinvest to grown wealth.
Here at Four Peaks Capital Partners we’ve concentrated on the real estate segment and the subsegment of mobile home parks at generating wealth. We’ve heeded the advice of Andrew Carnegie and put our eggs in one basket and watched it grow. Through our experience and by continually improving operational efficiency, we’ve been able to continually reduce expenses while increasing revenue to generate even more cash for reinvestment. By following the simple steps for creating wealth, we’ve been able to create and grow wealth as an organization and will continue to do so moving forward.