Wealth can be inherited, accumulated or won.
Before you start to obtain wealth you need to be aware of some truths:
- The economy is a closed system; there is only so much money. What makes you wealthy is having more than others. Wealth is relative not absolute. For you to get richer someone else has to get poorer.
- The process of investing is what makes the wealth for you. Not the investment. Investments will come and go. You need to have no emotional attachment to them. What to invest in is the last decision you make, not the first.
- Education is key. You need to understand the laws, economy, strategy, structures, and taxation and how business and governments operate. You need to know how to read between the lines or you need to get advice from someone who understands these areas. If you do not get the right advice you will fail.
When investing, the average investor does it backwards.
They look at investments first, not strategy.
They get advice from Sales people, not Financial Planners, Accountants or Lawyers.
They make investment decisions emotionally, not intellectually.
However, backwards investing leads to failure.
Consider the following factors before investing:
- What funds do you have available to invest?
- Will you need to borrow to invest?
- Future cash flow requirements, do you have consistent surplus cash?
- Future expected changes in your lifestyle, family kids etc.
- Superannuation. Best to get this right before looking to invest outside of super.
- Taxation issues and the best way to structure investment long-term.
- Who is going to help you and are their interest allied with yours.
Be aware not all investment advice is equal.
The Professional: The key is in the word professional. Professional means they are qualified, and that you pay for the advice. Many professionals will provide good general free advice in an effort to secure you as a client or simply as a word of mouth marketing exercise. I do this all of the time.
The Salesperson: Free advice from a salesperson is a different story. It does not mean that the advice is wrong, just that is weighed in favour of the investment they are trying to sell.
The Internet: One of the most common phases I hear is “I have done my research”. News flash, Google is NOT research. Assume everything you read on the Internet is an advertisement trying to sell you something this includes editorials.
Invest the profitable way:
- Seek professional advice.
- Have a strategy based on your personal circumstances.
- Make decisions intellectually.
Follow these 3-steps and you’ll find investing an enjoyable and financially rewarding process.