The entrepreneur was being interviewed after a long life. He had made it through the Great Depression and was looking back. As he warmly reflected, he straightened up and with a twinkle in his eye told the world the secret of his success.
“It was really quite simple. I bought an apple for five cents, spent the evening polishing it, and sold it the next day for 10 cents. With this I bought two apples, spend the evening polishing them and sold them for 20 cents. And so it went until I had amassed $1.60.
It was then my wife’s father died and left us $1 million.”
Sudden wealth is certainly one way to make it. And the lottery is another.
But in reality most of us will need to rely on the principles of growing your wealth slowly.
It may not be sexy and exciting to talk about but over time there are certain principles that will work:
- Living beneath your means
- Consistently saving
- Responsibly using credit
- Protecting your assets, life and income with appropriate insurance
- Investing in a broad, diversified mix of assets
Of course there are lots of specifics that need to be tailored for each individual and to reflect what’s going on in the world around us. From year to year specific investments may need to be changed just as you might change the drapes or the color of your house. But the overall process of building and preserving wealth depends on the foundation you build. And like your house, you want that foundation to be solid.
Over the next several posts I’ll continue to explore the most common mistakes that investors make and how you can avoid them.