Can wealth be built without risks?
Is it possible to build wealth without risk? Or, is it impossible without some risk? If it takes risk, what risks are the best and most efficient way to increase ones personal economic value? (For example, stocks, bonds, investments, etc., etc.)
Tags: economic value, investments, Risk, stocks bonds
The way to get rich is to invest on that you are correct, however doing it without risk isn’t easy BUT despite the unemployment rates and so on 92% of the nation is STILL employed and making at least some money. You’re probably asking yourself so what right? Well fair enough, but the answer to your question according to Warren Buffet the greatest investor and richest man in the world is to buy GOOD BUSINESS that actually have smart management and are efficient with a moat making them hard to compete with i.e. a competitive edge. It is true that if you are buying stocks with the intention of a quick in and out to make a quick buck you will probably lose, HOWEVER if you buy good businesses that have excellent management, products, and are hard to compete with YOU CAN’T LOSE IN THE LONG RUN. IF you own a truly good business then why would you ever sell it? Warren Buffet has had some stocks like Coke for YEARS and they still keep paying him dividends because He owns businesses that are truly good businesses. A few things to remember are 1. Just because a business makes more money than another business doesn’t mean it is better. If one company has 100 million dollars in assets and is able to make 1 billion net income off them then all things being equal they would be a BETTER investment than a company that has 2 billion in assets and makes 2 billion dollars net income a year. Do you see why? One company is way more efficient. Another thing to remember is that stock prices are ONLY determined by supply and demand and NOT the real value of the company, however over long periods stocks DO go to their REAL intrinsic value. Intrinsic value is what something is actually worth. The last thing to remember is some of the greatest companies to invest in are actually the SMALLER companies or small cap companies. Warren Buffet started with small cap companies because they have great potential and many times are MORE efficient than their bigger counterparts. For instance look at Bank Of America which was a HUGE company now trading for less than 10 dollars. They became big and inefficient however some of the smaller cap banks are doing FINE and paying big dividends to happy shareholders. To learn which companies are the best most efficient small cap companies you WILL have to know many of the fundamental ratios in business like Return on equity and return on assets, and you will also have to know how to read a balance sheet, income statement, and cash flow statement.
Hope this helps
Peace
Our world is built on the concept of risk. The more you risk, the more (Possibly) you make.
Until this year, I would have said the risk-free way to build wealth was by saving money with the bank, and accepting the piddley amount of interest they give you. Now we see that even that safe risk free way to earn money has risk.
Now saving is a long, slow, painful way to increase your value. I recommend you read Rich Dad, Poor Dad. In the book he talks about the four different ways of earning money and increasing your personal worth and goes over the benefits and drawback in great detail.
The most efficient way to increase your personal economic value to create your own business, one that with time can be run without you there. The most efficient way to increase your wealth is to arrange to have it happen without you doing anything yes?
Another way to increase your value is to wisely invest in business’s or companies that will grow for you. The problem with investing in them, instead of building your own is that the returns are so much left. Should you choose to follow this path, this is a time of great opportunity.
What company’s that survive this depression will see a rapid increase in their value. Rival company’s will have disappeared, creating new opportunity, and renewed investor confidence will send stock value’s soaring.
So in my opinion the most efficient way to increase your economic wealth is to build a business that can be run without you. Lacking the resources to do that for now, the stock market is a excellent opportunity, provided you choose to invest in the company’s that survive, but buy when their prices are low.
the risks you are most knowledgeable about.
risk is a continuum from having your investments become worthless overnight to having them increase a thousand fold, risk is simply a distribution of all possible outcomes
Let’s see I remember a popular books and speaker who wrote "wealth without risk" by Charles J. Givens.
And there was quite a bit of risk that he got himself into with the law and via civil litigation.
http://invest-faq.com/articles/warn-givens.html
I guess it depend on what you mean by "wealth?"
To a teen, $100 is wealth.
To a college student, $2000 is wealth.
To an adult (varies), $100,000 to $20+ million is wealth.
The last one would not likely be achieved without taking any risk. The greater the risk, the greater chance for rewarded, but also the greater chance for failure.
Calculated risk, timing, seizing opportunities when they are here increase your odds.
"…Most efficient way to increase ones personal economic value?"
I’d start with a good education.
No. Risk is usually correlated to return.