If you want to invest like the rich and wealth, be sure to learn to invest in the 5 main asset classes.
00:00 intro to asset classes
Before we continue, it is important to know why this is called the 5 main asset classes, and not all asset classes, the reason is rather simple, because there are multiple asset classes that one can invest in, but since so many people invest in these 5, these are the ones that I will discuss in my video with you.
01:21 asset class #1: equity
The first asset class that will surely make you rich, if you know what you are doing, is equity. Equity can been seen as stocks, shares in whatever you put your money in, to grow value over time. Or in other words, it grows equity over time.
For example, when you use 100 dollars to invest in a certain stock, you have purchased that piece of paper for 100 dollars. When you wait several weeks, months, years. That same piece of paper could have changed in value, how? Because the company that issued those shares, might have grown over time in value as well, and their shares have grown in equity over time. And the moment you sell the share that you own… That’s how you make money, through the equity growth of the company.
This is why this asset class is called equity, since you make money through equity growth.
04:20 asset class #2: bonds
Now, when people think about stocks, bonds is something that is very closely related. And that is true.. But then again, it is not. Why? Well, bonds are a loan. Issued by governments or corporations. And in the end, you can buy into a loan, and get the interest rate they give to that loan. Like a local government trying to get loan from investors for an infrastructural project for example. In the end, it could take the government for example 10 years to pay you back, and with the interest rate included. And that’s it. There is no equity growth whatsoever in this, therefore bonds is a separated asset class. Now my opinion is that bonds are nice that they exist, but is certainly not something I like to invest in, right now. As I see no reason why I should :)
07:40 asset class #3: cash
Now, cash is also an asset class, and you might be thinking how?!?!? Yes, cash and cash equivalents are an asset class by itself. Cash itself will not make you rich, as cash itself is just dead… It doesn’t do anything, nothing at all.. When you leave money in an old sock.. It doesn’t grow value over time, it actually even depreciates in value over time (through inflation). So cash itself is useless. But without cash, you can’t buy anything. And therefore we need it. There is a reason why corporations always have something like 5% of cash reserves laying around, just to be able to purchase machinery or pay their employees. If you want to have cash laying around, because you know you will spend it within a year time. Leave the money in easy places that you can access to, without paying a huge fine or losing it, when putting it in stocks.
10:20 asset class #4: real estate
The asset class that I love most, as it is tangible, it grows in equity over time, and you can make an income out of it as well. And you can apply opm on it, to achieve it… There are so many pros to it, and this is the asset class you want to be in, if you want to become rich! It’s the way to create passive income!
13:22 asset class #5: alternatives
And there is an asset class called alternatives, check out the video for the details ;)