Invest for Cash Flow, Focus and Specialize
The rich understand that in today's economy you cannot become wealthy by sticking your money under a mattress - or even worse, in a bank.
They know that the key to wealth is investing in cash-flowing assets.
Today, you need to know how to spend your money on assets that retain their value, provide income, adjust for inflation, and go up in value.
Rather than diversify, wise investors focus and specialize.
They get to know the investment category they invest in and how the business works better than anyone else.
For example, when investing in real estate, some people specialize in raw land and others in apartment buildings. While both are investing in real estate, they are doing so in totally different business categories.
When investing in stocks, I invest in businesses that pay a steady dividend (cash flow).
Smart investors understand that owning a business that adjusts to the ups and downs of the economy or investing in cash-flowing assets is much better than owning a diversified portfolio of stocks, bonds and mutual funds - investments that crash when the market crashes.
As Warren Buffet says, "wide diversification is only required when investors do not understand what they are doing."
In the end, diversification is a zero-sum game at best.
If you are evenly diversified, when one asset class goes down, the other goes up.
You lose money in one place and make it in another, but you don't gain any ground. You are static.
Meanwhile, inflation, marches on.
They know that the key to wealth is investing in cash-flowing assets.
Today, you need to know how to spend your money on assets that retain their value, provide income, adjust for inflation, and go up in value.
Rather than diversify, wise investors focus and specialize.
They get to know the investment category they invest in and how the business works better than anyone else.
For example, when investing in real estate, some people specialize in raw land and others in apartment buildings. While both are investing in real estate, they are doing so in totally different business categories.
When investing in stocks, I invest in businesses that pay a steady dividend (cash flow).
Smart investors understand that owning a business that adjusts to the ups and downs of the economy or investing in cash-flowing assets is much better than owning a diversified portfolio of stocks, bonds and mutual funds - investments that crash when the market crashes.
As Warren Buffet says, "wide diversification is only required when investors do not understand what they are doing."
In the end, diversification is a zero-sum game at best.
If you are evenly diversified, when one asset class goes down, the other goes up.
You lose money in one place and make it in another, but you don't gain any ground. You are static.
Meanwhile, inflation, marches on.
