This is the strategy that has allowed me to build my wealth very fast.
Every year, I have been leveraging my account to about 50% of my assets.
The bank has been charging me interest of about 4%.
I have invested the money to buy more stocks, take a look at my rate of return below
That means that I have been making a nice return on money that’s not even mine.
Imagine that you borrow 1 million dollars at 4%
Let’s say that the long term rate of return of the stock market is 8%.
There we go. You make $80,000, you pay $40,000 interest to the bank (or another lender) and you get to keep a nice, free $40,000 for just doing a few clicks on your computer.
Of course, banks don’t just lend one million dollars to people, so you have to find some capital of your own to put as collateral, or borrow from friends and family, as most entrepreneurs do.
In business, the most important asset you could have is trust.
If you earn people’s trust, the sky is the limit.
There are thousands of people who have millions of dollars sitting in checking accounts and savings accounts earning less than 1%. If somehow you could get some of those people to lend you some of that money and you invest it, there you go, there is your key to wealth.
Here are some returns of the S&P 500, my favorite investment.
As you can see, there is some risk involved, the market sometimes has negative returns, but in the long run, the returns have always been positive. I think the reward is worth the risk.
An added bonus, money from capital gains is taxed at a much lower rate than the money you earned as labor income.
There you go. The only thing you need is the courage to borrow the money, but that’s what every entrepreneur has to have: courage.
Good luck.
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