What Investors Should be Aware of as Their Net Worth Grows
Today I want to talk about what I think investors need to be aware of and transition as their net worth grows and portfolio grows.
There’s no question that when you start out as an investor, it’s really important that you recognise there’s an element of hustle. You’ve got to get out there, you’ve got to trawl, you’ve got to talk to people, you’ve got to find the diamonds in the rough, you’ve got to find the exceptional deals.
Of course, in modern society, we have these amazing things called buyers agents which can certainly shortcut things, and there are consultancies, too.
There are tons of people who can support us on our wealth creation journey, but I think that sometimes we forget that there’s a purpose behind wealth-building. And obviously, that purpose is to create impact and enjoy the benefits of having wealth and money.
But the problem that I see is, we get caught in this thinking that we’ve got to keep hustling in order to grow the wealth. We’ve got to be the person who does the deals, finds the deals, and who makes the deals work.
Difference Between Active and Passive Investing
I want to start by describing the difference between active and passive investing.
You can be an amazingly successful investor as an active investor, and what that actually means is that you have to:
- find those deals yourself,
- make sure you run the numbers properly,
- spend the sweat equity making the deal work,
- run it from start to finish,
- find the tradies, consultants, and advisors who are going to help you put that deal together, and
- deal with the tenants and toilets.
There’s nothing wrong with that strategy or approach. What I’m suggesting to you, though, is at some point you need to be aware of why you’re doing those deals in the first place.
If you have the idea that you’re creating wealth in order to at some point convert it into a passive income, you have to:
- decide when that point of time is,
- decide what that capital base needs to be, and then
- start to transition into what I call “passive investing.”
What is a Passive Income Investing Strategy?
Passive investing is almost the polar opposite of everything I’ve just described. It’s about aligning with those people who can supply you with opportunities to find deals so that you can participate in deals at the highest level.
But you don’t have to find their deals. You don’t have to run the numbers. You don’t have to put the sweat equity in to make those deals work. You don’t have to manage projects day-to-day. You certainly don’t have to go out and find the trades and the other consultants required to make the deal work. Most of all, and you guys will have heard me say this over and over, you don’t have to deal with those tenants and toilets.
When you can start to hold investments, you are in the highest level of power:
- you control the deal,
- you have direct control over the asset,
- you are aligned with people who have a really narrow, deep focus on a specific asset class and strategy. They have a proven track record and you know, like and trust them,
- you have high confidence about what the downside projection on that deal is, and
- you know what the multiple exit strategies are.
All you do is see that money dropping into your account like clockwork. That is my definition of passive investing.
Now the thing that I said earlier, which I just really want to drive home, is that passive investing or the passive income investing strategy is not for everyone. Not because not everybody wants it, but you have to recognise what stage of the journey you are in.
If you are a successful business owner with a relatively high net worth and you are really looking to put that parallel independent stream of income in place, then the passive income investing strategy is definitely one to transition to.
Now, what does that mean? It means that it’s probably not a fit for those of you who are still building capital, who are earlier in your wealth creation journey.
The exception to that, and I have talked about this before, is perhaps those people who are basically operating cash cows with their business and have the ability to recognise that if they allocate dividends towards this passive investing income stream, they can actually achieve financial freedom much sooner. It’s probably not for beginners, but it definitely is for those with capital.
True Wealth Building is About Creating a Passive Investment
True wealth building is about creating a passive investment that does not require your sweat equity.
As you elevate yourself to a more educated, knowledgeable investor, what you’re looking for is how to leverage off the skills of other people.
The best example of this in the business world is someone like Richard Branson. He’s started businesses from the ground up, gone through a baptism of fire to make them work, and he has been really successful.
But he’s now in a situation, and has been for probably two or three decades, where he can have someone pitch him an idea and he’s all about, “How do I find the who.” There’s no shortage of great ideas. What he’s looking for are the people who can bring that opportunity to life.
I think it’s really important that we start to think the same way about our investing. At some point, more knowledge isn’t necessarily going to get us a bigger result. So until you learn to pair that with building relationships with people who can deliver you a pipeline of epic deal flow – that’s when you can start to really grow that passive income investing strategy.
Final Thoughts
I want to conclude by saying it’s really important that you demand that your money, assets and capital work for you, not the other way around.
So depending on where you are in your journey, at least start to think about drawing a line in the sand and saying, “Well, at this point in my wealth journey, I’m ready to start including some of the passive income investing strategies,” particularly in the alternative space, to help you transition away from being an active investor.
If you are interested in understanding more about the specific strategies that make up successful passive income, I suggest you go back and have a look at a couple of my other podcasts where I go into greater detail on what those strategies are.
The world of alternative is incredibly exciting. It does require a shift in mindset, but if that’s something that you’re interested in, please reach out.
I’ve got a ton of free resources to help people understand that this transition from active to passive investing can actually be as easy as clicking your fingers.
If you’re a business owner feeling frustrated that despite doing everything right in the property investing playbook and you’re no closer to financial freedom, then head over to www.inkosiwealth.com to learn more about how you can use alternative investments to catapult your investing income and blend strategies to shave decades off your timeline to financial freedom.
If you’re interested in understanding how to create wealth through alternative strategies, please check out my programs, where I help you catapult your investment income and blend strategies to shave decades off your timeline to financial freedom.
Or, you’re welcome to get in touch today, book a call with me, and I would be happy to talk you through it – no obligation!
