Today you’re going to learn some investing strategies the rich use to grow their portfolios.
These 3 things are not commonly taught to the middle and working class.
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Investing Strategies Of The Working Class
If you grow up in a middle class household…
You get taught middle class mindsets when it comes to money.
Working class people never get exposed to how the rich are actually thinking about money.
You don’t learn what wealthy people are doing or how they’re thinking differently.
As you know, I was very fortunate to get mentored by millionaires and great business owners as I was building out my assets over the years.
So I want to come back and share these different investing strategies and mindsets with you here.
The Downside Of Retail Stock Investing Strategies
I want to start off by saying that I enjoy stocks.
I have retail stocks in my portfolio. S&P 500 type of stuff.
Those are cool. There’s nothing wrong with them.
But true wealth is not made in the retail type stuff you can buy from Vanguard.
Contrary to what you read about in financial advice books that are written for the middle class…
Where they tell you that you can become a millionaire by saving $5 a day and not buying coffee.
That strategy can lead to wealth when you get older.
It takes many years to acquire wealth that way.
That’s a strategy for what’s called the grey-haired, wheelchair/401k type of millionaire.
You’re not able to enjoy wealth at a younger age because it takes so long to get rich.
How The Wealthy Are Investing
Where are the rich actually putting our time, money, and resources?
We put them into something that we call:
- Controllable
- Unlimited
- Leverage
Type of assets.
1. Investing in Controllable Assets
Controllable assets are things that we can directly influence.
An example of a controllable asset would be a business that you build.
It could be a real estate investment that you make where you can improve the property.
In a business you can:
- Work on the cash flow
- Build out a marketing team
- Put out new products
You have control over that asset in terms of the return on investment that you can make.
Whereas if you buy a stock like Coca Cola…
Can you call the CEO and give him tips on how to increase profits?
Most likely not.
You have 0 control over 99.9999% of the stocks you’re going to buy on the public marketplace.
So there’s no influence you have there.
The 2nd Criteria For How Wealthy Pick Investments
The concept we talk about is: unlimited.
And we’ll use building a business as an example.
Let’s say I put in $1,000 into a business.
And let’s assume that I know what I’m doing as far as building out my business.
In theory, if you invest it the right way, there’s an infinite amount of returns you can make on that $1,000.
You could build out a brand new product with that $1,000 and end up selling it to a million people.
You could put $1,000 into ads and end up with a 50x return on there.
It’s disproportionate in terms of the amount of money you put in.
So we put our money into things that are unlimited for us.
What’s Limited About Retail Stocks?
Now, let’s compare this to our Coca Cola investment.
You do not get unlimited returns on something that’s in the S&P 500.
Those are very mature companies.
Yes, you can definitely make a profit on companies like Coca Cola.
It’s good company, especially if you’re getting a dividend.
But it’s not unlimited.
You might make 5% or 10% on a stock like Coca Cola in a bull market.
In a bear market, you’re losing money on it.
In the long term after taxes and inflation…
You’re making somewhere between 4-7% on a mature company like Coca Cola.
There’s a cap on the amount of wealth you can make with $1,000.
It’s slow and your retail stocks are limited.
Other forms of investment such as real estate or starting a business are:
- Controllable
- Unlimited
And there is 1 final part of the CUL Investing Strategy.
3. Use Leverage in Your Investing Strategy
The 3rd part of the equation is: Leverage.
You can borrow money to acquire retail stocks.
And this is what we call financial leverage.
But it’s extremely risky.
Because again, you don’t have control over that stock.
You can’t control if there’s going to be a recession.
There might be a scandal where the CEO is cooking the books on your retail investment.
So if you borrow money on margin to buy stocks in the retail market space…
You’re taking on significantly more risk than you need to.
Now you may have some insider information, but that’s illegal in the public marketplace.
Whereas if you leverage other people’s money (OPM) in a business or real estate investment…
You have direct influence over that money you put in.
You’re using financial leverage there.
And you have more control over what happens there.
You can quadruple down on things that go great.
This can dramatically increase your ROI there.
Putting All 3 Investing Strategies Together
So that’s the big difference with how the wealthy view investments.
We’re putting almost all our money, time, and energy into Controllable Unlimited Leveraged type assets.
Whereas the poor in the middle class are putting their money into these retail Vanguard type of stocks.
1 final thing here…
I do put my money into both.
- Retail stocks
- CUL assets
But the overwhelming majority of my money is put into my Controllable Unlimited Leveraged assets.
Now, why do I have Vanguard type of stocks if I just talked down on it?
As part of a larger asset portfolio…
I’m making sure that not all of my eggs are in 1 basket.
I have some diversification and a little bit of a backup plan.
It’s part of a larger portfolio strategy.
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I have 95% in these particular areas.
The rest is more of a wealth preservation, slower growth, backup plan for me.
Ok so use both.
But again, the wealthy focus on:
- Controllable
- Unlimited
- Leverage
Types of assets as part of their investment strategies.
How The Wealthy Invest Differently Than The Middle Class
So there we have it.
It’s a different entrepreneur mindset and approach to investing your time, energy, and resources.
This is what the wealthy are doing.
This is what the middle class and working class are not doing.
So shift your mindset and see if you can start bringing some of these lessons into your personal life.
If you enjoyed today’s article, check out our Strategy Samurai YouTube channel.
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My name is Steve Nixon and thank you for joining me here today.
If you’re a business owner and you enjoyed this article…
I just published a great one on the topic of business leverage that I think you’ll love.