What’s the best way to make money?
Take a big risk by starting a business, perhaps.
What about borrowing a lot of money to build a property empire?
Or, you could jack in your day job and trade in and out of stocks all day long.
All of those are legitimate ways to make money.
But are they the best way to make money?
Here’s our take…
If you want to be rich, starting a business is one way to do it.
However, not all business owners are rich. It depends on your line of business, and the potential scale of the business.
The guy who starts a local lawn mowing business probably isn’t going to get rich. But the guy who starts a local lawn mowing business and then turns it into a nationally recognised franchise can get rich (we’re thinking of Jim Penman, of Jim’s Mowing fame).
But starting a business has risks. Something like 75% of all small businesses fail within five years. So while starting a business can be lucrative if you get it right, it can be a disaster if you get it wrong.
Fortunately, that’s not the only way to make a lot of money.
Boring first, rich (potentially) later
Building a property empire and jacking in your job to become a stock day trader are two other ways to potentially make a lot of money.
But, like starting your own business, they are two ways to lose money too.
If you’ve got the experience, the knowledge, and the confidence, go for it. Who knows, you could make one heck of a success of it.
But if you don’t yet have the experience, knowledge or confidence, we suggest you look at a less risky way to build your fortune.
Here’s the boring bit — but it’s also the key to making this work.
The first step is to find a job you enjoy, and then work hard at it. If that advice is a big letdown…if it doesn’t meet your definition of getting rich, we’re sorry, but that’s just how it is.
That has to be your starting point. Why? Because in order to be a successful investor (or trader), whether it’s in stocks, property, or anything else, you need cashflow.
Sure, you can borrow money to start your path to riches. And plenty of folks have done that. But that creates a whole range of other issues. If you want to borrow from a bank, the bank will want to know you’ve got a job, at the least.
The alternative is to borrow from family and friends. If you’re lucky, they won’t charge you interest. The downside is that if your business idea doesn’t work out, you’re now in hock to your family and friends. What will that do for those relationships?
So while it may be boring, the first and best way to generate cashflow and begin building capital is to find a job you really enjoy.
And because you enjoy the work, you won’t see it as a burden or annoyance as you’re building capital for your investments. The next stage is to make the investments.
Can this really work with stocks?
This is where it gets exciting, right? You’ve held down the job. You’ve got the cashflow. You’ve built capital…now you want to make a big splash and make seven, eight, or 10 times your money.
You could do it that way.
Or, you could do what we believe is the right thing. To begin with, invest in a handful of quality stocks, and then let the magic of compounding build your wealth for you over many years.
Boring? You bet it is. Lucrative? If you have the patience and staying power, it can be.
The trouble is, if you know anything about compounding, you’ll know that it can take time, at least to begin with.
During the initial stages of compounding investment returns, the benefits can be almost imperceptible, especially as the market rises and falls, appearing to go nowhere.
But eventually, the effects of compounding kick in. It reaches a tipping point, where from that point on, the gains can begin to grow almost exponentially.
It’s an amazing thing. But it takes patience. Is it a guaranteed way to make a fortune? Heck, nothing is guaranteed in investing. And depending on when you start, that will have a big effect on when the compounding really kicks in too.
But wait a minute. Compounding? In stocks? How does that work? Isn’t compounding all about interest from bank accounts? Yes and no. Few investors realise it, but it is possible to compound your returns on stocks in almost the same way as you compound your returns on cash in the bank.
We’ll reveal details tomorrow in a special report. Look out for it.
From the Port Phillip Publishing Library
Special Report: Central banks are losing control. Their efforts to prop up asset markets are failing. We’re now entering the endgame. What will the endgame look like? What are the short and long term investment implications? And how can you navigate this period of hyper central banking intervention…and emerge from the other side with a healthy portfolio? Vern Gowdie is one of the few minds in Australia with clear answers to these questions…[more]