[REVEALED] The Top 4 Assets That Will Make YOU Rich
When I was younger, my rich dad said to me, “The rich get richer partly because they invest differently than others. They invest in investments that are not offered to the poor and the middle class. Most importantly, however, they have a different educational background. If you have an education, you will always have plenty of money.”
You have many choices when it comes to deciding which asset class to invest in, each asset has pros and cons and requires different levels of time, effort and education. That’s why most people invest in paper assets or the stock market.
What Is An Asset?
Rich dad had a way of putting things in very simplistic terms. His definition of an asset is still one that I use today:
“An asset, whether you’re working or not, is something that puts money in your pocket.”
There are four different asset classes you can invest:
- Paper assets
- Real Estate
It Starts With A Plan
To be a rich investor, you must have a plan, be focused, and play to win. An average investor does not have a plan, invests in hot tips, and chases the hot investment products of the day. It’s okay to invest on a hot tip now and then, but please do not delude yourself that one hot tip will make you rich forever.
My rich dad had a list of what he called the five D’s that were required to become very rich, especially when you start with nothing. They are:
Most people focus on the last two, data and dollars. Many people go to school and think that the education or data they gain there will get them the dollars.
Alternatively, if they don’t have a formal education, they say, “I can’t be rich because I don’t have a college education,” or “It takes money to make money,” or “If I work harder and make more money, then I’ll be rich.” In other words, many people use the lack of education or the lack of money as their excuse for not becoming rich investors.
Rich dad concluded his lesson on the five D’s by saying, “In reality, it is the focus on the first three D’s that ultimately gains you the data and dollars you need to become very, very rich.” In other words, the data and the dollars are derived from having a dream, being dedicated, and having the drive to win.
In my classes, I often find people who want more data before they begin doing anything, or think that first earning more money will make them rich. In most cases, exclusively trying to get more data or more dollars does not make a person rich. While data and dollars are important, it really takes just getting out there and doing it, especially if you are starting with nothing.
What Are The Top Four Asset Classes?
There are numerous ways to invest and build wealth. And once you increase your financial education, you’ll have a better understanding of the best investments for you. But to help you get started, here are some of the most popular asset-classes.
As I mentioned above, these are assets like stocks, bonds, mutual funds, and retirement accounts where you can invest in stock options, stock futures, and foreign exchange. Paper assets also include real estate investment trusts, or REITs, and exchange-traded funds (ETFs). Whether you are investing for capital gains or for cash flow via stock dividends, there are many, paper assets to choose from.
Paper assets are quick to get into and quick to get out of but you have no control over how the company makes money, spends money, or manages its debts and liabilities. (Unless, of course, it’s your company that is offering shares to the public.)
Commodities include metals (gold, silver, copper, etc.) food (grains, corn, coffee, and sugar) and raw materials (oil, gas, cotton, etc.). Commodities are generally capital gains or loss-type investment, and you can buy future contracts of any commodity through the future exchanges. If you are a new investor, start small and build your financial education. For example, purchase a silver coin and then watch its value increase or decrease in your daily news. Your financial IQ will go up.
Buying gold and silver coins is very easy to do. If you can buy a loaf of bread, then you can buy gold and silver. Buying other commodities has the same level of ease as paper assets.
This is an asset that people are becoming more aware of with television shows like “The Apprentice,” “Shark Tank,” and others. You can invest in your own business or someone else’s private business or company. The whole point is to generate a return back to you, the business and your investors and/or lender. Just be sure to do your due diligence and analyze the project, the partners, the financing, and the business and management team before making a business investment.
Most of the tax law, in most countries, is geared toward reducing the taxes of business owners. Almost all business expenses are deductible, meaning you deduct them against the revenue, which reduces the company’s taxable income. If you are investing in someone’s private business, the losses from the business are deductible against income from other passive business or real estate investments. Gains often are subject to the lower long-term capital-gains rates.
I saved my favorite asset class for last—I invest primarily in real estate because it fits my formula for financial freedom. Real estate investments either provide cash-flow from rental properties or capital gains from buying and selling (flipping) a property.
Tax credits are available for low-income housing, the rehabilitation of historic buildings, and certain other real estate investments. A tax credit is deducted directly from the tax you owe. You also get an annual deduction for depreciation, which is typically a percentage of the value of the property that you can write off as an expense against revenues. Finally, in some countries, the gains from the sale of real estate can be postponed indefinitely as long as the proceeds are reinvested in other real estate properties. What a bonus!
Invest In What You Love
Keep in mind that it’s not the asset class that makes a person rich or poor. For example, when a person asks, “Is real estate is a good investment?” I reply, “I don’t know. Are you a good investor?” Or if they ask, “Are stocks a good investment?” again my answer is the same, “I don’t know. Are you a good investor?”
My point is that it is never the investment or asset class that is important. Success or failure, wealth or poverty, depends solely on how smart the investor is. A smart investor will make millions in the stock market. An amateur will lose millions.
Most people are taught, “Do what you love.” Rich dad taught his son and me, “Invest in what you love.” If you love your asset class and you study, make mistakes, practice and learn, you will soon see ways of investing for infinite returns.
Editor, Rich Dad Poor Dad Daily