The world is grateful for Albert Einstein and his formulation of a simple, but brilliant algebraic equation that encapsulated the relationship between energy and mass
But he also had some very useful day to day advice, “insanity is doing things the same way and expecting a different result”
It’s not rocket science!
If you want to determine your own future income and wealth you need to be proactive now and invest to increase your productive capacity, create a larger ‘pie’ and raise the level in your own circular flow!
Investing comes in many forms, but it always involves choice and prioritization and often ‘delaying gratification’.
It may be as simple as buying a book about efficient organization which may reap benefits within days.
Or, it may be a longer-term plan, like being a poor student studying for a degree for years while only working part time or undertaking additional qualifications while working full time and missing out on lots of current family time now.
Or, it may involve putting some money aside (saving) and investing in shares or property.
The first strategies are designed to increase your earning capacity. The second is designed to diversify and add to your income (rent & dividends) but to also add to your wealth. Wealth accumulation is the result of capital gain over time by investing in growth assets.
If the investment in earning capacity is directed to greater wealth accumulation over time it serves both purposes, but once again, the decision to save and not to ‘live to your income’ is a deliberate decision and choice.
A simplified example of building a business for the future is shown below:
Assume you desire a passive income of $2000 pw in retirement
- Acquire a portfolio of $2M
- Long term hold – allow for movements around the trend
- DOUBLES to $4,000,000 (based on historical averages)
- SELL DOWN half to pay debt
$2,000,000 at 5% rent yield = $2000pw!
(* costs of ownership need to be allowed for)
That’s the theory! But what it relies on is the capital growth component.
Capital growth cannot be guaranteed.
Ethical, compliant, educated investment professionals should not and cannot offer you certainty.
Capital growth predictions can only be made on the ‘balance of evidence’.
What can be offered in all honesty is “Above Average Opportunities”