1. There is no “right” or “wrong” (“better” or “worse”) when it comes to asset classes or investing options...it just depends what you enjoy and what fits into your investing strategy.
2. Wealth building is learning to buy assets intelligently.
Wealth building is about making purchases and adding to the asset column of your balance sheet.
3. There are four primary classes of assets.
You can expand the asset column of your balance sheet by adding any of these types of assets: businesses, real estate, commodities, and paper assets.
4. Business is about taxes and leadership.
When you think about starting or buying a business, you can take advantage of tax laws. A business requires leadership. In business you’ll be using other people’s energy, other people’s education, other people’s experience, other people’s effort, and other people’s everything!
5. Real estate is about other people’s money.
The three most important things you can gain in your real estate education are: learning how to find and select the right partners, learning about creative financing, and learning about management. One of the great advantages of real estate is that it uses debt as a lever.
6. Commodities are about hedging.
Commodities are those basic items that people want or need, such as corn, soybeans, pork bellies, oil, precious metals, lumber, and cotton. These items tend to retain their value because there is typically a strong demand for them, even when a currency fails.
7. Paper assets can be effective for all levels of investors.
Most paper assets are liquid, which means they can be quickly and easily converted to cash. Paper assets are traditionally very agile and can be used to make money, no matter if the markets go up, down, or sideways. Paper assets also allow scalability, meaning that a person can begin with a very small investment. Some paper assets also allow for leverage without the use of debt.
To strengthen your understanding of these concepts, consider teaching them in your own words to a friend or family member. Good luck!
Introducing the 4 Pillars of Investing
Let me introduce you to the 4 Pillars of Investing. As a student you will find that everything you will ever learn about making money with stocks will fit into one of these four pillars.
In Chapter Two we described wealth building as learning to buy or create assets intelligently. We also saw that the asset classes include business, real estate, commodities, and paper assets such as stocks and options. We learned that each asset class has its own language and nuances.
So how do you learn to buy these things intelligently? How do you make sound decisions when an opportunity presents itself? The answer is in learning the 4 Pillars of Investing. These pillars contain vital information for every type of investor in any asset class, and they are vital whether you are investing for capital gains or cash flow.
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