ROI talk is for the poor

One of the most common misconceptions when it comes to investing is rapidly seeking high rates of returns.  It reeks of get rich quick which ultimately turns into go broke quick.  I know this from experience because this is how I started out investing.

Unfortunately, a lot of people who hit me up in regards to the investment club want to know what our ROI is.  I tend to stiff arm those inquiries with the default email, because the club is bigger than our ROI and I don’t need someone hopping in and hopping out because they didn’t double their money in six months. Too many people are depending on you to stay put and lock in.

 

This anti ROI statement is not a very  well received statement to make but it’s my philosophy.  The most important thing you need to do, as an early investor, is get your assets up and you do that by getting your income up.  You really do this by tapping into multiple streams of income so you always have a check hitting. After you do that you can put your big money into some solid picks which protect your principal and provide a healthy return on healthy money.

Real money chases safe returns not exponential ones

Healthy money chases healthy returns not abnormal ones. Big ballers are more concerned with getting their money back than they are with getting a 20% ROI. In fact, if you start spouting off crazy high returns, a real investor, a true accredited investor, gets worried because that means you are taking on higher risk than necessary and putting their principal at risk.

So ROI talk in the first email is a sure tell that you are a novice and lack the cash reserves to be a strong disciplined investor. Nothing wrong with that, just know your role and slide into how we do things.  Long term it makes sense. The person you become when committing to a process is more valuable than the quick money you make getting lucky on something you knew nothing about.

Big money investors v big money ballers

Based on my experience I have found that there are two types of people. There are people who use wealth to live a lifestyle and then there are people who use wealth to create a lifestyle.  Here is what I mean by that. You can give a consumer 2 million dollars and they will buy a new car, a new house, new clothes and take trips. If you give that to someone else (the creator), they will put that $2 million to work in something conservative that pays 10% and they will live out of the $200,000 per year that it yields them. All this happens while they still hold on to the 2 million that the big baller wasted on stuff.

“When  you have big money you don’t need crypto returns to make money.  A solid 12% will suffice.” – Me  

I lied though, there is a third person. That person is the person that puts that money up for a quick flip. We see this in the rappers and entertainers who take their millions and starts a record label or a clothing company.  They want to take that 2 million and turn it into four million so they can consume at an even higher level.

The key is that consumption will kill you.  This is why ROI chasers scare me. They are looking for big money quick so they can blow big money quick on the things that make them look like big money.  No thanks, that shouldn’t be what the game is about.

The game should be about impenetrable wealth.  Wealth that cant be destroyed. Wealth that opens up doors.  We need that nest egg, we need that capital, we don’t need a bigger paycheck.

Chase income not exponential returns

The second most common question I get asked, after the ROI question is, “how can I flip this money real quick?”.  Well the answer is, go back to work.  Quick flips are the wave bro.  Cashflow is.

If you have a grand and you make 20% and it takes you two weeks to get that 20% you just made $200. You could have made that in one day by going to work. This is not an efficient use of time.  Lets just say that you made 100% on your grand and it took you three months.  You basically waited three months to make 1,000, that’s less than minimum wage.  That’s not how you do it. Small money yields small money. You have to get your paper up.

Here is another example: If you get a bonus and you are looking for a flip you are doing it wrong. Don’t look for the flip, go back out there and get more paper.  That 1k that you were trying to flip just got doubled when you brought in another 1k check. that is a 100% return and you got it in less than three months as opposed to sitting around with you baby money gambling trying to double it.

The keys

So the key is that you need to 1) increase your working income 2) create more flows in addition to that income (ideally via consulting or in something that lets you use the same skills from number 1 at a higher level for market rate not wage rate) 3) remember not to abandon that first strong flow of income 4) stash money and make it permanent until you have at least $10,000 and can make a move that will yield you healthy money without gambling.

That is the formula.  You can’t skip steps and think that investing in crypto, micro cap or penny stocks will help you avoid working hard.  You can’t skip steps and expect a windfall gambled on the right deal will let you skip steps.  This isn’t get rich quick this is get rich for sure.  What you have to do is do all of those things and when you get windfalls do step four, stash it, make it permanent and get back to work.  Money begets money and having money stashed attracts more money to stash.

The key takeaway here is that in the early years you have to work your face off and establish flows.  You can’t get around that.  But after you get that nugget and put it to work you then get a silent partner called cash flow and capital gains and that helps you ramp up what you are doing as an additional flow.  Remember that the average millionaire has seven flows of income.  NEVER depend on one of anything, for anything.

If you have any questions or comments don’t hesitate to email me and ask.  If you want to join the club email as well.  I can be reached at info@capitaltodd.com

Be great, invest well,

Todd Millionaire

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