Can't Decide WHAT To Invest In? Watch This Video

Summary

The 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

• 💰 Investing can be categorized into cash flow producing assets and non-cash flow investments.
• 🏠 Rental properties and dividend-paying stocks are examples of cash flow investments.
• 🔄 Cash flow investing is a long-term strategy that requires consistent buying of assets over time.
• 🚀 Quick profit seeking through investments like flipping real estate or stocks is a different approach from cash flow investing.
• 📈 The general rule of thumb for cash flow return on investment is between 2 to 7%.
• 🔄 Reinvesting cash flow back into the system can lead to wealth accumulation over time.
• 🤔 Becoming wealthy from cash flow investing takes time, commitment, and consistent investment.
• 🏢 Real estate typically requires more money, time, and risk compared to investing in the stock market.
• 📊 Active investing involves researching and selecting individual stocks, while passive investing involves broad market exposure through funds like ETFs.
• 🌐 Passive investing can be achieved by setting up a system to regularly invest in the market without active management.
• 🎯 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

00:00

💼 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.

05:00

🤓 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.

Keywords

💡Investing

Investing refers to the act of allocating money into various assets with the expectation of generating a profit or earning returns over time. In the context of the video, investing is discussed as a means to build wealth, either through cash flow producing assets or by buying and selling assets for a profit. The speaker differentiates between passive and active investing strategies, emphasizing the importance of understanding one's investment approach and the types of assets being invested in, such as stocks, real estate, and dividend-paying companies.

💡Cash Flow

Cash flow refers to the regular, periodic income generated by an investment. In the video, it is described as a long-term strategy where investors consistently purchase cash flow-producing assets to build a significant stream of income over time. The speaker explains that cash flow investing is not a get-rich-quick scheme but requires patience, commitment, and consistent reinvestment of the generated cash flow to grow wealth.

💡Passive Investing

Passive investing is an investment strategy where an investor buys assets and holds them for a long period without frequently buying or selling. The goal is to earn returns with minimal effort and management. In the video, passive investing is recommended for the majority of Americans, emphasizing the use of funds like ETFs and index funds that provide exposure to a broad market without the need for individual stock analysis.

💡Active Investing

Active investing involves actively selecting and managing investments with the aim of outperforming the market. This strategy requires continuous analysis, decision-making, and potentially higher risk-taking. The video contrasts active investing with passive investing, highlighting that it is more suitable for individuals who have the knowledge, time, and interest to research and actively manage their investments.

💡Dividends

Dividends are payments made by a company to its shareholders, typically on a quarterly basis. These payments are a portion of the company's profits distributed to shareholders as a reward for their investment. In the video, dividends are cited as an example of a cash flow investment where shareholders receive regular payments for simply owning the stock, without the need to sell it.

💡Real Estate

Real estate refers to land along with any buildings or other structures on it, which can be used for residential, commercial, or industrial purposes. In the video, real estate is discussed as an investment option that can either be passive, such as rental properties producing cash flow, or active, such as flipping properties for a profit. The speaker also mentions alternative ways to invest in real estate, like through online funds, which can offer exposure to the property market with less risk and resources compared to owning physical properties.

💡Stock Market

The stock market is a public marketplace where shares of publicly traded companies are bought and sold. It is a platform for companies to raise capital and for investors to potentially earn returns on their investments. In the video, the stock market is presented as an alternative investment avenue to real estate, where one can invest actively by picking individual stocks or passively by investing in broad market funds.

💡ETFs (Exchange Traded Funds)

ETFs, or Exchange Traded Funds, are investment funds and exchange-traded products that hold a collection of stocks, bonds, or other assets and are traded on stock exchanges, similar to individual stocks. They offer diversification and exposure to various market segments or sectors. In the video, ETFs are recommended as a passive investment option that allows investors to gain exposure to a broad range of assets with a single purchase, reducing the risk associated with investing in individual companies.

💡Risk Management

Risk management is the process of identifying, assessing, and prioritizing risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events. In the context of the video, risk management is implied when discussing the different investment strategies and the importance of understanding the level of risk associated with each type of investment, such as the potential for loss in active trading versus the more stable, diversified risk of passive investing.

💡Wealth Building

Wealth building is the process of accumulating assets and increasing one's net worth over time. In the video, wealth building is the ultimate goal of investing, whether through the purchase of cash flow-producing assets or through active trading strategies. The speaker emphasizes that wealth building is a long-term endeavor that requires consistent investment, reinvestment of returns, and strategic financial planning.

💡Financial Analysis

Financial analysis is the process of reviewing and evaluating financial data to make informed decisions about investments. It involves examining financial statements, understanding cash flow, profits, and the overall financial health of a company. In the video, financial analysis is crucial for active investors who seek to invest in individual companies, as it helps them determine the value and potential of their investment choices.

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