Whether it’s stocks, crypto, real estate, house flipping, wholesaling, building businesses or something else, there are so many ways to invest in this day and age. If you want to build long-term wealth, however, it is important to pick an investment strategy that supports your goal. Too often, people lose focus and choose investments filled with exciting stories that overemphasize a few big wins and overlook the performance metrics that many professional investors rely on. Even losses become war stories to be shared with pride. This is fine if it is play money, but if you are focused on achieving financial freedom and building wealth through your investments, you may want to select a steady and more boring investment strategy.
Boring is good. Embrace boredom. Pretty much all investments can produce a profit, from crypto to real estate and stocks to collectibles. No matter which investment strategy you choose, the key is to select one that consistently appreciates and generates income – especially passive income. Simply because your neighbor has achieved financial freedom using the stock market doesn’t mean that the same strategy will fit you. To help, I have highlighted three critical success factors to consider when selecting a wealth-building strategy that is best for you.
In order to implement any investment strategy, you will need to dedicate some time. This is time taken away from family, friends, sports and hobbies. Not all wealth-building strategies take the same amount of time to get off the ground. For instance, turnkey rentals, as the name suggests, take less time to begin generating passive income than rentals that require cosmetic or even major renovations. Other investments may require more time and are not always capable of generating passive income – think forex, commodities and stock options. Consider the time you have to initially implement your strategy and how much time you want to spend managing your choices when the investments are up and running.
By capability, I’m referring to the knowledge and skills you currently possess as well as those that you can leverage through partnership and mentorship. For instance, I do not invest in medical buildings because I am not familiar with the industry, its needs and requirements, or the demand. However, if you have that capability, this could be a great field to get into because it requires specialized knowledge. Another way to add this capability could be to partner with someone who knows about your industry of interest.
Financial literacy is one skill often overlooked. Some investment strategies require a high level of financial literacy. If you are not comfortable with the financial skills required, start with a simpler strategy that you fully understand. Take stock options, for example. Stock options require a substantial understanding of the stock market and the implementation of various tactics to generate a profit. Some of these tactics are simple, but others are very complex. Consider what you have time to learn and what may be out of a comfortable realm for you. The financial skills required for investments can vary greatly depending on your strategy.
How much money can you invest? Don’t forget retirement plans, friends, family members, banks and other investors. Still not enough? People don’t realize that there are investment strategies that don’t need any money to get started. One such strategy is called wholesaling and consists of finding the right opportunities, getting them under contract and then reassigning the property to investors. In situations like this, there’s no capital required upfront. There’s just the matter of signing a document and then assigning that document to an investor. While this does require a bit of time, it is a good way to accumulate funds for future investments.
Successful wealth-building strategies demand a focus on capital preservation and appreciation over a longer investment horizon than other strategies. While some investors consider five to 10 years to be a long-term investment, my focus is 25 years or more. My investment portfolio is positioned such that not only is my future secured, but so is the future of my descendants. Your strategy may look different, and it may or may not include real estate. Whatever you choose, keep these three factors in mind as you work toward building wealth your way.