Commentary
When considering investments, whether in time or money, the first question I ask myself is: What am I investing in?
Is it a business like Microsoft or a financial asset such as gold, Bitcoin, or art?
This distinction is crucial in how I approach wealth building.
Investing in a business is fundamentally different from investing in other financial assets.
A business is dynamic, with a purpose to sell products or services at a profit. It adapts to its environment, driven by motivation and intent. Cash flow sustains it, customer satisfaction drives its evolution, and profit measures its health.
Investment vs. Speculation
Buying stocks or corporate bonds means investing in ongoing businesses, while assets like gold, cryptocurrencies, or art are more speculative in nature, dependent on public perception of value.
Wealth building, to me, involves prioritizing predictable outcomes through investments that are well-understood and controllable.
Knowledge and control are key factors in determining the success of financial decisions.
I prefer investments offering both income and appreciation, ones I understand and can influence to some extent.
While I engage in speculation, I aim to maintain a balance with investments, leaning towards the latter for stability.
Assets like gold and art, with a history of value appreciation, are considered safer speculations compared to others like cryptocurrencies.
My portfolios reflect a mix of income-producing businesses, real estate, stocks, bonds, and speculative assets like art and gold, each with varying levels of knowledge, control, income, and appreciation.
I placed these items at the bottom because they do not involve businesses, do not generate profits, do not provide income, and their potential appreciation is beyond my control.
Indeed…
I understand why many individuals are enthusiastic about the rapid technological advancements that are opening up new opportunities for making money, such as cryptocurrencies and NFTs. Fortunes have always been made by speculating on future trends.
However, it is not my inclination to invest my time and money in that manner. My approach to building wealth can be summed up in a simple phrase: “A bird in the hand is worth two in the bush.”
My strategy is not aimed at getting extremely rich quickly. Instead, it offers the advantage of a high level of relative security, allowing you to practically ensure that your wealth will continue to grow year after year.
