Most of what was drilled into our heads about investing in mutual funds, CD's paying below our mortgage and diversifying is nothing but smoke and mirrors. The financial services businesses like Fidelity, Charles Schwab and financial planners are the ones creating all regarding the money. The challenge is that most people have very little financial teaching sequential to invest for retirement properly so they paw over their money to someone they HOPE shall have the right knowledge base to safely increase their wealth. The challenge is that these investment categories are HUGELY RISKY. These categories of asset classes, cardboard assets, not ever let the investor control.
Then during market crashes, all most can do is watch helplessly as their wealth gets whipped out along with their financial security. Whether you own more manage over your assets then you can be not affected as many by market crashes. For example, whether you invest in assets like real estate that make cash flow through rental income subsequent to all of your expenses are covered, if the real estate market and stock market crash you can be still in good shape. While everything is crashing you can be still receiving your rents and not ever need to sell the asset. Investing in non-paper assets i.
not mutual funds or CD's allows you to use leverage as well which increases your wealth by creating your money work harder for you. Most financial planners shall tell you that creating use of leverage increases risk. That is not always the case whether you own the right financial knowledge to manage the investment and enable security controls on your leverage use. They shall also tell you that real estate is a risky investment. The reason for that is that financial planners typically lack the financial knowledge about how to manage real estate and make it profitable.
Most financial planners place people into cardboard assets where the investor does not have manage and that is why it is hugely risky to use leverage. In real estate investments the price regarding the property should not be based on the opinion of an appraiser but on the income that it produces through rents. The price regarding the rental real estate is dependent on jobs, salaries, demographics, regional industry, and supply and demand of affordable housing. In a housing crash, the demand for rental units many times goes up, which means rents increase causing the price of your property to increase. You can manage rental real estate and which geographic parts you invest in unlike cardboard assets that let no controls.
Financial intelligence is the key to increasing your controls over your investments. It's extremely important to continue to increase your financial intelligence sequential to protect yourself. Unfortunately, financial intelligence is not taught in schools due to the fact that such a large portion regarding the population, within teachers and politicians not ever hold a very high financial IQ. When financial advisors speak that an increase in returns means an increase in risk, they can be right when speaking regarding the cardboard assets they recommend to investors that they make primary commissions on BEFORE showing performance. They can be wrong when speaking for all assets.
Financial advisors are basically salespeople. Most people invest in cardboard assets for example savings, stocks, bonds, mutual funds and index funds due to the fact that they not ever need to take responsibility and manage over their financial well being. All they need is to turn their money over to an investment advisor who hopefully does a good job. Out of sight, out of mind. If people need more control, first thing they need to do is increase their financial intelligence and hopefully increase their financial controls and leverage ratios.
Most financial advisors recommend diversification but they not ever really diversify. First they only invest your money in one asset class, cardboard assets. Second, mutual funds are already diversified investments which are invested in a pool of good and bad stocks which does not increase the price or decrease the risk regarding the investments. Professional investors DO NOT diversify. Warren Buffett place it perfectly when he said, Diversification is a protection against ignorance.
Diversification is not compulsory if an lone knows what they can be doing. So if diversification is a protection against ignorance then when you diversify whose ignorance are you protecting you from? Your ignorance and your financial advisors ignorance? Focus, not diversification, is the key to more sophisticated leverage, higher returns, and decreased risk. The spot I am trying to make is that whether you increase your financial intelligence about specific asset classes, like real estate, you can learn how to manage that you own financial security and wealth creation instead of relying on some financial advisor who probably does not have knowledge of what they can be doing. Look at the massive wealth transfer that just occurred when the market crashed while bailing out the banks i. the top 1% wealthy individuals increased their wealth while the middle class and poor decreased in wealth.
This happened due to the fact that most people not ever have the financial intelligence to protect themselves. Starting to obtain financially educated is the key to wealth creation. So get to bookstore and begin reading. Take classes on financial intelligence and ways to increase wealth. It is the key to your success and preserving your wealth such that financial predators i.
the government, financial advisors and the large mutual fund peddling businesses like Fidelity and Charles Schwab not ever take all of your wealth distant by investing it in asset classes that not ever let you any controls over those investments.
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