“Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success” Robert Kiyosaki
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In order to build wealth, you have to do things a little bit different than most. A common problem with individuals is listening to the wrong crowd. Just think about this for a second.
When you feel sick, who do you take advice from? You go to the doctor. Of course. You pay for his/her expertise and you go on your way. As a result, you get prescribed some medicine that will make you feel better.
If you want to buy jewels for your special one, you go to the jewelry, pay for the advice and end up with a product you feel great about. Everyone is happy.
Then, when it comes to creating or building wealth, most individuals listen to friends and family (which are not wealthy) and take that advice. At the end of the year, you take a look at your account and guess what. You are sad.
Why does this vicious cycle happen again and again?
Well, you didn’t get the advice from someone that has done what you want to do or get. Every individual that has expertise in a certain area, is going to charge you for what they know. Don’t be afraid of making a small investment today in exchange for a better tomorrow. That is my first advice for you when it comes to investing or anything you want to do in life.
When it comes to investing, there are common mistakes that you should avoid. Let’s discuss this first.
1. Unrealistic Expectations
Advertisements are for the most part a disservice to the financial industry, and more often than not, end up costing the new and/or uneducated investors a lot of money. Making claims on how a small $1,000 investment can give you returns of $7,000 to $10,000.
When you educate yourself, you can see the red flags quickly. Sadly, new investors, all they see is the “returns”. All the “money” they could make. But if you set your greed to aside for a second and use your brain, this claims to make a 700% to 1,000% return.
This could be only true if you hold an investment for years and if it’s a good investment. Not all investments grow at the same rate and offer the same results.
What should you expect? More closely to the average return of the S&P 500 of 7%.
Are there other ways of making this returns bigger? Yes, but again, you have to educate yourself.
In reality, a $1,000 investment will yield around $70 in profits in one year; if all you want to do is set it and forget it and not put any work behind it.
2. The need for a Methodology
If you don’t have a clear and concise methodology to look at the markets, you will not be consistent as an investor. This will set you back many times.
Before you start throwing money after investments with crazy expectations, take the weekend and write down a defined plan. You can be a day trader, swing trader, options trader, forex, or an income investor, concentrating on dividend-paying stocks that produce cash flow.
Need an example? Ok. Personally, I swing trade options and use my profits to buy dividend-paying stocks that produce more cash flow for me and my family. There is more to it than just this but you get the idea. I make money doing one thing and then it is like putting it in a safe with a nice yield. Not your bank’s yield which sucks. Keep in mind, not all dividend-paying stocks are equal, find the ones that tend to grow their dividend payout over the years.
Can you do this? Absolutely yes; with the right education. Invest in yourself!
3. Discipline
Lack of discipline is a fatal flaw of 99% of new investors. They take a few good trades and believe they can take it to the next level and make it big. Next thing you know, they burnt their account to the ground.
You need a formula in order to be a successful trader. Once you define what works for you, follow it religiously and have the discipline to follow it. Only then, you can become a successful trader with a consistent and proven methodology and the discipline to follow it.
4. Patience
Most of you have heard the saying, “Rome was not built in one day, but it was built every day”. I don’t know who the author is and I don’t feel like doing a Google search right now, but the idea is simple and it comes back to our #1 point, expectations.
Here is what patience brings. If you had bought the S&P 500 at the bottom of 2009, your returns on your account would have been 300% because that is how much the index is up ever since. I bet you, not many traders are up 300% on their account because we all lack patience.
What else?
Lastly, do not be afraid of market pullbacks or sell-offs. The smart investors see this as a gift and an opportunity because they know this is where the real money is made.
You can buy great companies at great discounts, like going to the store and hitting the clearance aisle.
Two quick examples:
1. In 2009 you could have bought Tesla for about $45-$50 a share. If you made an investment of $1,000, let’s say 20 shares at $50, you would be a very happy person today. This week, Tesla hit $420 a share. Your $1,000 investment would be worth $8,400 today.
Obviously, this is an example of set it and forget it. You could have bought more shares over the years. But, I don’t want to complicate the easy example we have.
2. The same year, Intel was trading for about $20 a share. Intel trades for about $60 a share right now in December 2019. Could have a nice $3,000 increase not accounting for dividends which would have yielded even more for you. That is the power of dividends.
Conclusion
You can really start creating and building wealth in this up and coming year which will be here in 7 days. First, educate yourself on what you want to do in order to create and build wealth. It could be in the financial markets, real estate, starting your own business or any other form that you are passionate about. Whatever you decide, education is key.
Seek advice from people who did or is doing what you want to do. Join groups with people that have the same goal as you. Like-minded people are more beneficial than people that do not understand what is it that you are trying to achieve. And, be disciplined and have the patience to follow your plan.
Merry Christmas and Happy New Year!
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