Can't Decide WHAT To Invest In? Watch This Video
Summary
TLDRThe transcript discusses various investment strategies, emphasizing the importance of understanding whether to invest in cash flow producing assets or not, and the choice between passive and active investing. It highlights that cash flow investing is a long-term strategy requiring consistent investment to build wealth, while passive investing through ETFs or index funds can be a less time-consuming and risky approach. The speaker suggests that most Americans should consider passive investing, but acknowledges the appeal and potential rewards of active investing for those willing to put in the effort to research and analyze potential investments.
Takeaways
- đ° Investing can be categorized into cash flow producing assets and non-cash flow investments.
- đ Rental properties and dividend-paying stocks are examples of cash flow investments.
- đ Cash flow investing is a long-term strategy that requires consistent buying of assets over time.
- đ Quick profit seeking through investments like flipping real estate or stocks is a different approach from cash flow investing.
- đ The general rule of thumb for cash flow return on investment is between 2 to 7%.
- đ Reinvesting cash flow back into the system can lead to wealth accumulation over time.
- đ€ Becoming wealthy from cash flow investing takes time, commitment, and consistent investment.
- đą Real estate typically requires more money, time, and risk compared to investing in the stock market.
- đ Active investing involves researching and selecting individual stocks, while passive investing involves broad market exposure through funds like ETFs.
- đ Passive investing can be achieved by setting up a system to regularly invest in the market without active management.
- đŻ For long-term success in investing, understanding the skills and risks associated with active versus passive investing is crucial.
Q & A
What are the two main categories of investments mentioned in the script?
-The two main categories of investments mentioned are cash flow producing assets and non-cash flow producing assets.
What is the difference between passive and active investment strategies?
-Passive investment involves putting money into assets that generate cash flow or into broad market indices with minimal effort and management, while active investment requires actively selecting specific investments, analyzing financials, and making decisions on buying, selling, and holding based on market analysis and individual stock performance.
What is the general rule of thumb for cash flow returns on investments?
-The general rule of thumb for cash flow returns is between 2% to 7%, meaning for every $100 invested, one can expect to receive $2 to $7 a year in cash flow.
How does reinvesting cash flow work in building wealth?
-Reinvesting cash flow means taking the cash flow generated by your investments and using it to purchase more cash flow producing assets, which over time can lead to a significant increase in wealth due to the compounding effect of investments.
What are the advantages of investing in cash flow producing assets for the long term?
-Long-term investment in cash flow producing assets allows for the building of a significant stream of cash flow over time. Although it doesn't lead to quick riches, consistent investment can result in a substantial and steady income source.
What are the risks associated with trying to find the 'next Amazon' as an active investor?
-The risk lies in the uncertainty and the potential for loss. Most people lack the knowledge and psychology to manage investments effectively, leading to a higher chance of losing money when trying to pick individual stocks that will yield high returns.
What does it mean to be a passive investor in the stock market?
-A passive investor in the stock market invests money without trying to pick individual stocks. Instead, they invest in broad market indices or ETFs, which provide exposure to a wide range of companies, leading to more stable and diversified returns over the long term.
How can an individual start investing in real estate without owning physical properties?
-Individuals can invest in real estate through funds and online platforms that offer exposure to the real estate market without the need for direct ownership of physical properties. This can be done through real estate investment trusts (REITs) or other investment funds that specialize in real estate.
What is the significance of a consistent investment strategy?
-A consistent investment strategy is crucial for long-term wealth building. By regularly investing money into cash flow producing assets or into the market, an individual can benefit from the power of compounding and gradually build up a substantial investment portfolio.
What are the key factors to consider when analyzing a company for investment?
-When analyzing a company for investment, one should consider the company's financial health, cash flow growth, profit growth, executive management quality, competitive moat, asset and liability balance, and overall business strategy.
Why is it important to understand the difference between trading and long-term investing?
-Understanding the difference is important because trading often involves short-term speculation and higher risk, whereas long-term investing focuses on steady growth and wealth accumulation over time. Long-term investing typically involves less frequent buying and selling and is more about building a diversified portfolio that can weather market fluctuations.
Outlines
đŒ Investing Strategies: Cash Flow vs. Capital Gains
This paragraph discusses two main investment strategies: cash flow investing and capital gains investing. Cash flow investments, such as dividend-paying stocks or rental properties, provide a steady income over time, whereas capital gains investments aim for a significant profit upon selling the asset. The speaker emphasizes the long-term nature of cash flow investing, which requires consistent investment and patience to build wealth. The general rule of thumb for cash flow return is between 2% to 7%. The paragraph also touches on the importance of understanding the difference between active and passive investment approaches, with a recommendation for most people to consider passive investing due to its lower risk and time commitment.
đ€ The Active vs. Passive Investor
This paragraph delves into the characteristics and activities of active versus passive investors. Active investors, like Warren Buffett, spend significant time researching and analyzing companies, their financials, and market trends. This approach requires a deep understanding and commitment. Passive investing, on the other hand, involves investing in the overall market growth through mechanisms like ETFs or index funds, which spread risk across many companies. The speaker suggests that most people should opt for passive investing due to its simplicity and the historical growth of the stock market. The key to success in passive investing is regular, consistent contributions to the market, which can be automated to minimize effort and maximize long-term returns.
Mindmap
Keywords
đĄInvesting
đĄCash Flow
đĄPassive Investing
đĄActive Investing
đĄDividends
đĄReal Estate
đĄStock Market
đĄETFs (Exchange Traded Funds)
đĄRisk Management
đĄWealth Building
đĄFinancial Analysis
Highlights
Investing money can be categorized into cash flow producing assets and non-cash flow investments.
Investments can be made passively or actively, affecting the strategy and involvement required.
Cash flow investments are long-term strategies that require consistent buying of assets over time.
Real wealth is built gradually through cash flow investing, not instantly.
The general rule of thumb for cash flow is between 2 to 7%, depending on the investment type.
Reinvesting cash flow is a powerful strategy for wealth accumulation.
Real estate and stocks are common investment avenues, each with their own risks and rewards.
Active investing involves deep analysis and a higher level of engagement with the market.
Passive investing is recommended for most Americans, as it requires less time and expertise.
ETFs and index funds provide exposure to a broad market without the need to pick individual stocks.
Investing in the stock market is akin to investing in the growth of America.
Diversification through funds reduces the impact of individual company failures on overall investment.
The key to passive investing success is consistent, regular contributions to chosen funds.
Warren Buffett exemplifies the active investor, dedicating significant time to research and analysis.
Investing in individual companies requires a deep understanding of financials and market dynamics.
Long-term investing is emphasized over trading for sustainable wealth creation.
There is a guide available for learning about generating passive income.
Transcripts
where do you actually invest your money
how do you invest your money and there's
a couple different categories of things
that you want to pay attention to number
one is are you going to be investing
your money into cash flow producing
assets number two are you investing your
money passively or actively some
Investments like your rental properties
like stocks that pay out dividends pay
out cash flow other Investments don't
like you can go and invest in real
estate and hope to flip it in 6 months
to three years or five years or whatever
and make a huge profit same in the stock
market you can go out and buy stocks
with the goal of trying to sell the
stock for a huge profit in the future or
you can buy stocks that are going to pay
you for doing nothing except owning the
stock this is called a dividend a
dividend is when a company is going to
pay you every three months generally
every quarter and they're going to give
you a check or deposit this money
directly into your stock brokerage
account for doing nothing except owning
the stock now what you have to
understand about cash flow investing is
you're not going to get rich by
investing your money into cash flow
especially in the short term cash flow
investing is a long-term game where
you're going to have to constantly keep
buying more of these cash flow producing
assets and do this for a long enough
period of time that way now you can
build a significant stream of cash flow
but it's not going to happen today it's
not going to happen next year it's not
going to happen the year after that but
you're going to have to stay consistent
if that's what you want cash flow
investing to build real wealth takes
time and it takes commitment and it
takes you consistently putting more
dollars into it a lot of people think
that oh if I buy some cash flow I'm
going to be rich you don't get rich by
buying cash flow you have to make the
money first and then you use this money
to generate cash flow you got to get
rich and then you use this money to buy
the cash flow when you put enough riches
into these cash FL producing assets
you're going to get more cash flow back
the general rule of thumble what you're
going to see from Real Estate to stocks
is somewhere between two to 7% cash flow
that is kind of your your general range
sometimes a little bit less potentially
sometimes more but generally $2 to $7
wor the cash flow which means for every
$100 you invest you're going to get $2
to $7 a year in cash flow again it's not
going to seem like a lot of money but
now when you change that up to investing
$100 a week every week over 10 years now
you can start to see where the cash flow
starts to grow because then when you get
that cash flow you can also reinvest
that cash flow to earn more cash flow so
now you're slapping $100 every week to
buy more cash flow and then when you get
that cash flow check instead of taking
that and using it to go out and buy
something nice you take that money and
you use it to buy more cash flow that
way every 3 months you're buying more
cash flow because you're just throwing
more money into this machine that's
printing you cash that is how you build
wealth by Investing For Cash Flow the
alternative is well now you're not
Investing For Cash Flow you are buying
something for say $100 and you want this
to go up to
$200 again that's okay it's just an
alternative way to get paid
and this is where now you have to be
able to analyze your Investments you
have to know how to invest your money
and you have to know the different
places where you can invest again the
two most well-known places where you can
invest is in the stock market and into
real estate now if you want to get
started in real estate by owning
physical properties it's going to take
more money it's going to take more time
it's going to take more resources it's
going to take more risk there are
alternative ways for you to invest in
real estate by investing in funds online
I have some of these resources in the
description if you want to see some of
the companies that I work with they are
affiliate companies of mine but but it
is a way for you to get exposure to real
estate real estate generally is going to
take more work more time more risk and
more money with the stock market you
don't need as much time risk or money
because you can just throw your money
into the market and this is where you
have to decide now if you want to be an
active investor versus a passive
investor or a hybrid of both
and if you ask me the vast majority of
America 90 to 95% maybe even 98% of
Americans should be passive investors
but everybody gets attracted to the idea
of being an active investor and what
that means is when you try to put your
money in the stock market most people
think you have to find the next Amazon
or the next Google or maybe the next
apple if you want to get rich but that's
not how the vast majority of people will
get rich because when you play that game
of trying to find the next hot stock
most of the time the vast majority of
the time you're going to lose and most
people don't have the psychology to know
how to manage their Investments when to
buy when to sell and when to hold and
most people don't know how to analyze
their Investments maybe you find some
cool companies that you want to invest
in but how do you analyze the financials
how do you know if the cash flow is
growing how do you know if the profits
are growing how do you know if they're
using their cash the right way how do
you know if the executives who are
running the company are doing good
things how do you know how strong the mo
is meaning how hard it is for another
competitor to come in and take their
spot how do you know if they're using
the cash flow the right way how do you
know if they have good assets and
liabilities on their balance sheets if
that sounds interesting to you which
unless you're a money nerd that's not
going to sound very very interesting to
you you should be looking for something
that's going to appeal to the interest
and the time that you have being an
active investor is difficult this is
what Warren Buffett spends his days
doing he's an active investor he loves
researching companies he loves studying
their financials he loves studying the
products he loves studying the
executives at that company he loves
studying The Innovation he loves
studying The Branding of the company
that's what he's doing when you're
investing in the stock market you're
literally buying companies when you buy
one share of Amazon you become one of
the owners of Amazon and if you don't
want to treat it like that then you're
essentially gambling sure you can make
some money you might find a cool company
that you like before it pops off but you
might not and you might not have any way
of knowing if your company is a good
investment or not if that's something
you want to do you want to invest in
individual companies fine but just
understand the risk and the more
research you do the more you learn the
more time you spend and the more money
you spend learning how to do it the
better you're going to do but again this
is long-term investing I'm not talking
about trading I'm talking about
long-term investing if you want to
invest in individual companies
understand that that is a real skill if
you want to succeed the alternative is
being a passive investor a passive
investor is now instead of you're trying
to find the next hot Amazon or the next
hot apple now what you're doing is
you're just investing your money into
the stock market you're investing your
money into America and if America grows
and a stock market grows you make money
and now you don't really have to try to
find the best time to buy you don't have
to find the best price all you're going
to do is set up a system right now every
time you get paid you're just going to
throw money into the market and this can
be completely passive you don't have to
spend any time doing this besides
finding the right funds to invest in in
the first place then you just automate
it set it and forget it and so it's much
less time much less risk because now if
you invest in there are funds for
example that will give you exposure to
the entire stock market for example
there is an ETF an exchange traded fund
called vti it trades just like any other
stock on the stock market but when you
buy one share of vti you are in essence
buying the total stock market which
means now you're just getting exposure
to America and the stock market now you
have hundreds or thousands of companies
that you're investing in and so if one
company goes bankrupt it doesn't
bankrupt you it just gets kicked out and
now another company might come in it
gets balanced out by the losers if one
company goes really big yeah that's
going to benefit you but it's also going
to be balanced out by some of the losers
so These funds like ETFs you can also
look at index funds some mutual funds
might Al also work these funds are
giving you exposure to baskets or groups
of stocks so that way you don't have to
find the perfect company but the key to
win in this type of passive investing
game is you got to just keep throwing
money into the ETFs every week every two
weeks every month if you enjoy this
short clip from my longer videos here's
another clip that I think you love and
while you're at it if you're interested
in learning more about how to start
generating passive income our team put
together an amazing guide on how to
start generating passive income for free
all you got to do is click that button
right over there thank you for watching
and as always keep hustling
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