How to Invest like the Rich
It used to be that the key to success lay in how hard you worked and in what field. With global competition and existing structures in the US, hard work just isn’t enough anymore. Many entrepreneurs understand this, and therefore take steps that build wealth in other ways, such as investing. In fact, there’s been a lot of talk on how the average person can invest properly.
However, you don’t want to be the average person. If you want to gain wealth, you need to start investing like the wealthy.
On Season 6 episode 35 of the Making Bank podcast, Salvatore Buscemi chats about how to invest like the .001% to become one of them. He delves into how the pandemic has changed the financial landscape. Now more than ever, certain people can accumulate wealth in ways that haven’t been seen before. It starts, however, with altering your perspective on investing itself.
A New Perspective
Everyone should have access to financial knowledge. Everyone should have the chance to invest, both in small and large amounts. While financial access is a great thing, it also means that well, everyone’s doing it. Therefore, you need to do something other than just investing in the stock market in order to differentiate yourself.
Salvatore says that recent trends like Airbnbs and other “side hustles” may be great ways to make passive income for the middle class, but they aren’t really the end goal. He believes that labor intensive work like buying, investing in, and managing Airbnbs doesn’t have the long-term benefits that you may think.
You don’t want to waste your time with cleaning up after tenets. Rather, you want to think big, so you can grow big.
Why the Stock Market isn’t the Goal
Traditionally, everyone in financial circles focuses on the stock market. The stock market is where the average person can make their money grow. They can make their money work for them. So, what’s the problem?
Salvatore believes that that’s not where the real money is. The stock market is a great way to grow money, but it has its limits. The day a company goes public is the best day of that company’s life. However, that opens the company up for others to invest in it, and the money to be made on investments decline. If you want to hear more about this particular concept, be sure to check out the episode.
So, if you shouldn’t rely solely on the stock market, where should you look?
Salvatore believes that the big bucks come from venture capital and private equity. Instead of running after the stock market and trying to predict it, look to the new ideas. Find the center of new concepts, the smart and hungry people, and invest in quality. When you invest in a start-up, you personally have more control over your asset and how it will perform. Additionally, you get to enjoy the company culture and be surrounded by those who have the same values as yourself. While there is a larger risk, there are also much larger rewards.
But how do you know which companies may be right for your investment?
Look to Other Investors
When looking at start-ups, it’s imperative to always know who the other investors are. Once you know who they are, do your research on them. Do they have a track record with start-ups? Is it a successful one? Have they worked with many start-ups or only a few? Are they a picky investor, but always have projects perform well?
It’s important to keep all of these things in mind when deciding where to place your money. If you don’t know who the other investors are, you should be wary. If you don’t get the best feeling from them, then maybe that project isn’t right for you.
If you’re wondering where to start, think about joining VC groups. Grow your network and in doing so, start to incorporate some VC connections. That will lead to other groups of people looking to connect.
When it comes to VC overall, be sure to do your research, trust your intuition, and grow your network.
Other than venture capital, how else can you get into the right places?
With social media, there has been a rise in showing off the wealth made by those platforms. Many people who become rich overnight due to followers, brand deals and more, find themselves with a boatload of cash and no idea how to use it. Many turn to flash buys like cars, houses, and expensive vacations to flaunt their newfound wealth. However, instead of investing in something like a car, which depreciates in value immediately, why not invest in an asset that gives back?
Salvatore chats about something he calls statement assets. These can be things like part-ownerships in sports teams, commercial real estate and more. By presenting yourself as someone with big investments as opposed to expensive cars, you attract a different kind of person. To Salvatore, showing off these statement assets draws the attention of a more sophisticated group of people. This group of people are willing and able to make partnerships, connections and more. Overall, they can elevate your network and portfolio, allowing you to enter the right circles to continue to further yourself.
While the stock market is a great way to start investing, it may not take you all the way. It’s easy to get bogged down in smaller projects that consume a lot of time and effort, such as Airbnbs. However, Salvatore believes that if you go big, you score big. Focus on the beginnings of a company, rather than when they’re public. This way, you can better ensure your asset performs well. Additionally, be sure to do your research, make connections via groups, and get creative.