Three Secrets of Wealth Creation in an Age of Inflation

How Growing Wealth (Really) Works — And What It’s Really About

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Thanks Umair :) I have increased income by asking for a little more, cut costs dramatically by being happy with and enjoying what I have, home cooking mostly and buying great clothes at charity shops for a few euros :) All you have mentioned works so far, I just need to trust in my investments long term to keep up with inflation….I don’t mess with them as I don’t really know what I am doing so they are pretty safe :) Keep writing these articles as for me at least they are very helpful.

So. There you are, you’ve followed my rules. You’ve raised your income a bit, you’ve cut your costs as much as you can and still have a life, and so finally, you’re investing a bit. But…now what? How do you stop yourself from biting your nails all the time? How do you trust the process? And what is the process, anyways? Is all this just about getting rich? Nope. It’s about something much, much deeper than that, and that’s where the trust and confidence to do this well comes from.

First of all — great. I’m overjoyed to hear this. Really! You’re on the right track. And I’m delighted that in general you guys liked this topic. Let’s talk about it some more, beginning with the almost implicit question above. Trusting yourself. How do you even begin to get something this complex right? The secret is: it’s not as hard as you think, as it’s made out to be.

Of course, the caveat — and we’re going to return to this in future posts — is that, no, it’s no possible for everybody. Many people are just too exploited. Underpaid, overworked, stressed, distressed. To build much wealth. This smarts for Americans in particular, because their society is founded on money, money, money, and it’s all that matters in it. But if you do have a bit can you save and invest?

The paradox is this. As we’re going to discuss — building wealth isn’t about getting rich. It’s much more about building character. I know, I know, that sounds hokey, and maybe you doubt me. That’s OK. Let’s just discuss it like old friends.

Here are three secrets of building wealth. First we’re going to discuss the mechanics of it. Then, we’re going to discuss what really matters, which is the personal journey of transformation and change that needs to happen for the consequence — which is building wealth — to really happen.

Like I said, there you are, biting your nails. You’re checking this new thing called “your portfolio” five, ten, twenty times a day. You’re resisting the urge…the goddamned burning impulse…to mess with it. To fiddle with it. To tinker with it. Some stock, fund, bond, suddenly swings down, and you panic. Time to sell? What do I do?

Let me lay it all out for you.

Secret number one. Invest like an investor.

What does that mean? It means: not like a speculator. Not like a day trader. Not like a hedge fund. Like an investor. Someone who’s in it for the long — hold on, we’ll come back to that. First, let me tell you the dirty secrets that finance doesn’t want you to know.

The lion’s share of returns in markets come from just a handful of things. So in a stock market, the vast, vast majority of returns — 70% plus, sometimes more than 90% — come from just 3–5 stocks. Think about what that means. Doesn’t it reveal…a lot? It means that your main job is just…finding a small basket of the right assets…and then not messing with a good thing.

Not fiddling. Not tinkering. Not touching a thing. Just sitting back and watching it all grow. Like a garden, if you will. You can’t build a garden by replanting something every day, can you?

Now. Those 3–5 — let’s call them…hyperwinners — change. But not often. Maybe every decade or so, maybe every couple of decades. And it’s pretty obvious to figure out who they are. During the heyday of industrialization, they were companies like GE, big conglomerates. During the heyday of financialization, they were banks and insurance companies and real estate organizations. And today? Take a look around. Where do we spend most of our time? On screens. A pretty obvious set of candidates arises.