Do What the Rich Do: Step 4.1 - Become an Investor

·         “Investing is not a get-rich-quick drama. Investment is a plan, often a dull and almost mechanical process of getting rich.”

The Seven Rules of Investing

·         Rule 1: Know what kind of income you have to work with.

o   Whether Earned, Portfolio, or Passive Income.
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·         Rule 2: Convert earned income into portfolio income or passive income as efficiently as possible.

o   Not only put your money to work for you but also the chances that your fund will grow.
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·         Rule 3: Purchase securities with positive return.

o   Obviously, securities are bought to serve as assets. While no investment is risk-free, the educated investor will more often than not buy securities that provide a good return on investment.
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·         Rule 4: Become your own best asset—instead of your own liability.

o   A good investor buys undervalued securities in a bear market or lucrative real estate in foreclosure. A bad investor locks in losses on a stock by panicking in a market slump. An educated investor is emotionally neutral when making investment decisions.

·         Rule 5: Be prepared for anything; don’t try to predict what will happen or when.

o   Investing is a skill, not a science. Professional investors know they cannot control the real estate or stock market, let alone the global economy. Instead, they train themselves to be financially intelligent, to think confidently and creatively when opportunities or problems arise.
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·         Rule 6: Learn to trust that, when a good deal presents itself, the funding will be close behind.

o   Sophisticated investors know a moneymaking deal when they see one, and nothing generates financial backing like the prospect of success. The opposite also holds true: If respected investors are all rejecting a deal, an investor should heed the red flag.
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·         Rule 7: Know how to evaluate risk and reward.

o   There is risk in every investment, but risk is a relative term. Since risk is often directly proportional to reward, anyone who hopes to become wealthy must be able to invest more aggressively than someone who’s content to be secure. The more financially educated you are, the less risk you’re taking.

·         “Investing is less risky than being an employee. Skilled investors are in control of their investment; employees are under control of their employers.”

·         “Investing isn't risky; not being in control is risky.”

Because investing is about risk control, before you set out on this exciting adventure you should absorb the Ten Investor Controls. Many people find investing risky because they aren’t in control.

1. Control over yourself

2. Control over income/expense and asset/liability ratios

3. Control over the management of your investments

4. Control over your taxes

5. Control over when you buy and sell

6. Control over brokerage transactions

7. Control over the entity, timing, and characteristics of your investments

8. Control over the terms and conditions of agreements

9. Control over access to information

10. Control over philanthropy