Today, I want share a quick thought on how to actually build wealth. In particular, I’d like to discuss the importance of PROCESS.
So, I'm constantly inundated with questions from folks asking me for the next great investment. Is it tech stocks, the S&P, a real estate deal, a biotech particular stock, making individual sector bets, crypto, etc.
This question is missing the boat on how to most effectively build your nest egg. All of these items are investment products. Some will work out, some won't. Others will skyrocket in the near-term, and plummet later and vice versa. Some investments may never pan out and will cost investors tons of money.
The key with investing is not finding the next big thing, that’s impossible to do. Rather, it’s to have a systematic process in place to build wealth over the long-term.
Good processes determine in what type of account(s) your money should be located, how every dollar you earn should be allocated amongst those accounts (i.e. asset LOCATION), how your funds should be invested, what strategies should be avoided, what cadence is appropriate for you when contributing to your accounts, and how various other aspects of your life are impacted. Examples of this include: Will you be able to retire early or not at all? Do you need more insurance to protect your family? Should you splurge on a vacation home? What's the best way to leave a legacy or give to charity? How do you ensure you can maintain your lifestyle without running out of funds in retirement? How do you grow your funds most effectively given your career trajectory?
Utilizing a process to build wealth allows investors to achieve their financial goals most effectively. Searching for the next hot investment is anyone's guess, will lead to a suboptimal usage of your funds, and lower your probability of financial success.
When reviewing your finances be sure to ask yourself: What is MY PROCESS for building wealth?