Someone’s sitting in the shade today because someone planted a tree a long time ago.
–Warren Buffett
Dear friends,
The cat is out of the bag. The phrase “money does not buy happiness” is about as useful today as a bank note from Pluto.
Nobody actually believes this statement anymore. And why should they? When you look around, are the poor people truly happier than the rich? Do you FEEL happiness radiating from people struggling to pay rent, gas, and basic necessities? I do not.
In fact, some of the happiest people I have ever met share one common trait: They do not worry about money. They don’t fret about not having enough money, and they don’t worry about losing it.
Most of all they do not hate money.
I have often wondered why people act like they detest money, proceed to not obtain it, and then get angry at those who do. People who hate money will never get it, but the irony is that most of them secretly want what money can buy.
Money is neither good nor evil. It is a tool for achieving freedom.
Make no mistake about it. When you do not have to worry about making healthy food choices, working to pay rent, and wasting time on non-fulfilling tasks, your sense of freedom is increased.
Those who think that they are morally superior to the rich will never get rich. Instead of constructing wings with dollar bills, they would rather stay in greenback prisons and walk the green mile of poverty. I have nothing against the poor, but I do not like the mindset of poverty. At Truth and Strength, the mindset is, and will always be one of FREEDOM and ABUNDANCE.
Below I will give you five rock solid tips that anybody can use to become wealthy and stay that way- Forever.
Number One: Invest in assets, not liabilities.
I repeat: Assets, not liabilities. The difference between the two is quite simple, and it has to do with what happens after you have purchased them. Assets will enrich you, whereas liabilities will continue to drain your wallet. It is that simple.
Think back when you played Monopoly for the first time. Remember what it felt like to buy that first hotel or utility piece, knowing that it will grow your stack of cash? This is the feeling you should pursue with each purchase.
Think hard before any expenditure, whether it be goods, real estate, or other investments. Realize that while traditional investments like houses and stocks are often good assets, they are not fool-proof. If you bought a property with mortgage from a bank, that is a temporary liability and risk.
Always ask: “Is this purchase going to make me wealthy in the long run?”
Start checking this off before every investment of money, time, and resource. This way you will be less prone to doing stupid things like buying the latest phone or the shiniest new toy.
Now don’t get me wrong. You WILL need to purchase liabilities at some point. Unless you were handed your money up front, you may need to take on liabilities to gain more assets in the long run. An obvious example is borrowing money to invest so that the returns are greater than the amount borrowed. This is called leverage. Just be warned that should your purchase not become an asset, i.e. backfires, the consequences are magnified.
What you deem necessary is up to you, which brings me to…
Number Two: Know your Risk Aversion and Time Horizon.
These are terms born out of traditional investing, but really apply to everything in life. Their essence can be summed up in three simple words:
“Know thy self.”
These two concepts determine how and when you should invest. I will use an analogy here. Imagine you were sitting at poker table with a bunch of chips. These are your life savings, your energy, and your time.
Poker, like investing, is a game of luck and skill. Your risk aversion is how loose you play. It is the degree of uncertainty that you are willing to stomach. How you manage risk is shown by how many chips you are willing to bet at once.
In real life, this risk translates to loans, time investments, and purchases made on credit. Other examples include investing in sectors that are highly volatile or speculative. Only you know what your risk aversion is, and no one else.
I have personal friends who have taken out lines of credit from banks to invest in the stock market. They are betting on the returns outweighing the interest (i.e liabilities). I would never do this because I am firmly against risking what I do not own. There is no one right approach, but I will offer you a saying:
Trust your foresight, invest with insight, accept the hindsight, and sleep well tonight.
Continuing with our analogy, your time horizon is how long you have to sit at the poker table. Once the clock runs out, you must cash out (i.e convert your assets into currency). This sounds simple, but is actually complex and unique to each person. Retiring in ten years and need cash? That is a horizon. Planning for a family and house? Well, you are going to need cash so that is a horizon. The horizon translates to how many ups and downs you can endure before you need to “cash out”. If your investments are tied to the market, then you do not want your clock to run out while the market is down, i.e during a recession.
As an added bit of info, here is the definition of recession from Investopedia, a great site. Generally a recession happens cyclically. In the history of the stock market, every 1 in 8 years have been during a recession. We are about ten years out from the last one, and based on this one factor there is a good chance that one will happen in the next five years.
Then again maybe not. Just like waiting for Earthquakes, one simply cannot tell when the next big one will hit.
But should it come, do not be afraid.
Number Three: Develop a strategy to navigate market downturn.
Whether the market experiences a slight correction, a recession, or a full on depression, be prepared to not only survive it, but thrive during the chaos.
As the famous investor Warren Buffett states: “Buy when there is blood on the streets.” I will give you an example. During the recession in 2009, prices across the board were decreased due to fear and poverty. People were forced to sell their assets at a loss to cover their liabilities. For others, their time horizon had simply run out. The result was that everything, from stocks to houses to cars, were sold at a MASSIVE discount compared to their historic values.
In the city of Richmond, Canada, one of my childhood friend’s father made several real estate purchases while the prices were low. As the recession rescinded and housing became expensive once more (boosted by Chinese investments from overseas), he became wealthy. Today he is a millionaire simply from making a handful of calculated purchases at the correct time.
If you think this is too risky, consider this. The market has always, despite setbacks, moved upwards in the time frame of decades. If you have a time horizon of decades (ages 20-40), right now is when you should prepare. If you like buying consumer goods on sale, you should LOVE to buy assets on sale. And trust me, when the time comes, there will be sellers.
This is the golden rule: NEVER sell during a downturn unless you have to. ALWAYS buy or hold.
Know your time horizon. If you think that a downturn is imminent and that your clock may run out in the middle of it, then simply cash out beforehand or convert your investments to safer options (i.e things that do not depreciate as quickly during a recession, like bonds and gold).
On the other hand, if you have just sat down at the poker table, then hold long. Always try to save extra money to create a “war chest” in preparation for buying the steep discounts that will end up rocketing you to wealth.
The same concept applies to people. Invest positivity in those who are at their lowest, and you will have gained their respect for a lifetime. One great friend equals one great asset, whereas an enemy may end up costing you dearly in the long run. Do not run with the herd, instead think about the reality and know what real danger looks like.
Number Four: Realize that time is your most precious asset.
Successful people have short attention spans. This is unpleasant for daily conversation but extremely effective in business and achievement. The reason is simple. The average age of a healthy human being today is about eight decades. This means that the vast majority of people in modern western society will live between seventy to ninety years. Having a million or billion dollars will not significantly change that.
A wasted day is a wasted day for anyone regardless of their wealth. If you stole a thousand dollars from a successful businessman, he would be annoyed but not too upset. However, if you locked him up for a day, it would be much more devastating. I am not saying that one person’s time is worth more than another’s. What I am saying is that money can be made up, whereas time wasted cannot be bought back.
Look at your own life. How are you using your time? Are you working towards your goals, building meaningful relationships, and living true to your values? If not, consider your clock.
Trade your time for assets, not liabilities. There is subjectivity involved, because what I deem as a liability may turn out to be your greatest asset. There is no secret formula. The only consultant who can tell you the worth of your pursuit is your heart.
Consult it often, and do not be afraid to commit. Which brings me to my final piece of advice.
Number Five: Focus wins in the end.
Warren Buffet once said “Diversification is a guard against ignorance.” In other words, diversification is an option only if you are not sure of the right path. This applies to every investment in life, from relationships, to stocks, to your own self development.
Your life-span allows you to become the master of many, but only if you dedicate enough time to each pursuit with the intent of becoming the master of one. The jack of all trades makes for interesting conversation, whereas the master of a few makes the big bucks because only he can. Focus- Laser like focus– is what creates success.
In the realm of traditional investing, that means doing the necessary due diligence to understand perhaps only one sector, a group of companies, or even just one company. It means knowing exactly what you are putting your hard earned resources into, down to the last detail. It means staying consistent with your investment strategy and maintaining your main holdings against the temptation to funnel cash into others.
For specific strategies, here are two great resources:
- The Canadian Couch Potato website outlines a great way to invest in index funds to steadily grow your cash. It is a fantastic and FREE website that I recommend to all who are interested in stocks and index investing.
- Another great resource is the book “The Millionaire Teacher”. It gives concrete, practical, and easy to use investment strategies for becoming seriously wealthy. What I especially enjoyed about the book are the stories of self-made millionaires and the detailed explanations of how their incremental investments created monumental wealth.
With that being said, having the right strategy is only the start. Nothing will work unless you employ discipline and focus.
Bonus Tip: Create a Safe Haven of Fixed, Physical Assets.
Remember what I said about your time being the greatest asset? It is only so because it is fixed. You can not buy more time, and the government cannot PRINT more time. Cash is great, but in volatile times it is prone to losing its value (which technically is zero if the country’s central bank prints cash without physical proof of value, like the Federal Reserve of America and the Bank of Canada). Currency is current: It’s value, and thus purchasing power, is dependent on people’s confidence in it.
Think back to the monopoly analogy. If one of your friends offered you a real OH HENRY bar for 1000 dollars of monopoly money, would you have made that trade? Most likely you would have. Why? Because the OH HENRY bar had more intrinsic value than a sheet of paper worthless outside of a board game. Extrapolate that to real life. During each period of massive inflation (i.e the end days of Rome, pre-Hitler Germany, and modern day Greece), paper/digital currency lost the public trust, and thus its ability to purchase actual goods. Cash was king, until it wasn’t. Just like most monarchs in history, the fall from grace is and will be fast and bloody.
Which brings me to this tip. Consider a safe haven of fixed assets, i.e assets whose values are always desirable and always fixed to an extent. These things can be in the form of gold, silver or platinum (because we cannot mine asteroids yet). Or they could be lifelong friendships and partners. Or if you were preparing for the worst-case scenario, a collection of antibiotics, non-perishable food rations, guns, and ammunition. What ever it is, consider developing a safety net. As we enter volatile times, having a safe haven not only ensures you do not feel the full brunt of the economic collapse, but also allows you the room to take risks knowing that you have a fail safe in place to protect you if your investments go sour.
That is all folks.
Remember. Your life’s portfolio consists of more than dollars and papers. The principles you develop, the relationships you build, and the legacies that you leave are all fruits of your investment.
Make your deposit in the form of effort, time, and money on a regular basis. The world is your bank, and it is open every day.
Until next time.
Your friend,
-Tie
If you enjoyed this article, you may also like:
Leave a Reply