If there was one question that people would pay a million bucks to have the answer to, it would be – How do I get rich? The answer is really obvious – if you have a million to spare then why waste it on a foolish question.
Invest it and over the years you’ll surely get your millions.
But that’s not the answer they are looking for. Surely there has got to be something more to it — some deep insights, some invaluable pearls of wisdom, some magic!
Not really. It’s often just simple common sense. Like Robert Kiyosaki’s best selling book Rich Dad, Poor Dad that should be made the Bible of the financial world. Here are four points from there on how you can do it:
1. The value of learning
Go back to your earliest memory. When you wanted to ride a bike on your street, the first thing you had to do was learn how to ride. Or when you wanted to pass your Maths exam, you had to learn your tables. Then why is it that when we want to make money, do we not understand that we have to learn good investing?
Instead we tend to just pick up the phone, speak to our stockbroker, buy a stock and start dreaming of becoming rich. That’s exactly what rich investors don’t do.
Instead, they ‘learn’ to ‘invest’. They learn all there is to know about the art of investing in stocks. All about the stocks they wish to buy and only then do they take the plunge. Above all, they keep practicing what they have learnt. They keep sharpening their saw. This single factor of learning before hand separates the rich investors from the poor investors,
2. Shop at a discount
Another bit of common sense — What do you do when your neighborhood super market announces a SALE? You flock into the stores and buy up every little item and build up at home piles of grocery, soaps, etc. But when stock markets reduce the prices of shares and announce a ‘crash’ every investor rushes in to ‘sell’ and runs away from the market.
Again, conversely, when Super Markets raise their prices, customers shy away and refrain from buying till the next ‘sale’; but when Stock Markets announce rising prices, every investor rushes in to ‘buy’.
This is not the way rich investors behave. They follow the same principle of buying at the super market. They buy stocks only when the stock markets crash. Ask Warren Buffet!
3. Define asset
If you own it, it’s an asset. If you owe it, it’s not. The rich never keep their wealth in the form of liquid money in a bank account. They always keep acquiring assets while the poor acquire liabilities, which they mistakenly believe are their assets.
A house bought on a loan is not an asset, it’s a liability. The same goes for paying for groceries through credit card. So you need to learn the difference.
In life what is important is not how much money you ‘make’ but how much of that money you succeed in ‘keeping’ and ‘multiplying’.
The rich know how to keep it because they know how to invest it. Money well invested is money well kept. Good investing is often more rewarding than good earning.
4. Make real money
Real money is made when you ‘buy’ an asset and not when you sell that asset is yet another gem from the author. Be careful of the price you pay when investing in an asset.
Don’t rush into buying any investment at any price. Wait till the prices come down the way. The ‘price’ of the asset when you buy is the sole determinant of your profit on that asset when sold. If you buy that asset cheap, your profit on sale is obviously larger.
All these four seems rather straightforward now that you think about it. We known all this instinctively and we only have to apply it to the stock markets — it’s really common sense.
The only problem is that common sense isn’t really all that common.
~ Kanu Doshi