Generational wealth is usually wealth that is created in 20-25 years. I have good news and bad news for you.
Let's start with the good: you can create generational wealth in the stock market in 5 years. That is millions and even billions.
The bad news is: most people lack the discipline to do what it takes to create this wealth.
So, How do you do it?
It's simple, you learn: the more you learn, the more you earn.
To shed positive light on the situation, you can learn fast: the process is simple.
1. Identify how you learn
2. Study relentlessly
3. Focus on doing 1 thing well
You do not need tons of IQ to do well in the stock market. What you need is emotional stability and a steady
temperement. You can create massive wealth if you have the emotional aspects under control. To make big money, you just need to
be able to stick to your decisions and to be disciplined in taking action towards them. Focusing on finding a gem is the key and this
can take time. It takes months-years to find gems. They are a rarity, but once you've found one, you can put yourself in a
position to accumulate massive wealth in the stock market.
How do you find gems?
You search through thousands of stocks until you find the FAT pitch. The gem. The rarity. Findning a gem:
What do you need to know?
1. Capitalize on fear
2. Be patient
3. Never speculate
4. Focus
5. Look where others don't look
6. Model successful investors
7. Read a ton of annual reports
Back to creating generational wealth: to do this: buy something cheap that is of high value long term and hold it.
There is no secret, well there is one and that is: the secret is that there is no secret. It's patience, discipline and constantly
learning as much as possible.
To make big money, you have to be in the right place but timing does not matter as much as you think. It's about finding something
that is selling at a discount and is under priced.
Typically, a good stock is something that was once hot and has since gone cold. There are a lot of these, but that is not everything.
You have to be able to look for stocks that are actually good businesses. A good business is something that has a durable
competitive advantage. If you can find something selling cheap that has a competitive advantage, you make money.
There are plenty of businesses with competitive advantages and that alone does not mean the stock is good. You have to be
able to buy it at an attractive price relative to the markets averages.
What is the hard part about this process?
The difficulty lies within your ability to not judge a stock by it's cover. Most people judge stocks by past performance and think this
is the key or something. It really isn't. Stocks that have performed poorly in the past can actually have more positive futures.
In fact, stocks with poor pasts can take off and make you very rich. You have to be able to identify the stocks future.
You should look to discount the cash flows of the business and predict what they will be like in the future. If you pull this off and look
through enough stocks. You make big money.
Back to generational wealth:
Just because you buy a stock at an attractive price and it has a competitive advantage doesn't mean you'll get rich. It does increase
your chances though. The key is to focus on patience in the process. You don't have to swing for every pitch that comes your way. In fact
the more stocks you say no to, brings you closer to finding stocks that are truly gems. You will need discipline and patience for this
to happen and that will lead to creating generational wealth.
The speculator:
I think it's going to go up.
I think this stock has potential.
I think, I think and I think.
That will kill your long term returns.
You need certainty in investing. Finding certainty in an uncertain world is the key to creating massive wealth.
The more certain you are about the future performance of the stock, the more money you make: that is if you are right.
It's easier to be right than wrong actually, because the signs of a good stocks are simple:
E.g
- A durable competitive advantage.
- Cheap price.
- Integrity in management.
- A focused approach to business.
- A simple business model.
- A long term vision.
- A business that is not easy to replicate.
Some examples of good businesses and stocks:
1. Coca cola
2. Tesla
3. Amazon
4. Apple
5. Google
As you can probably tell, these are good businesses and decent stocks. The reason I say decent stocks is because of their price.
The price of good business is driven up by the popularity of the stock. These are popular stocks but this does not mean that they
will make you rich. They can grow your wealth but we are talking about generational wealth and creating it quickly.
To conclude: attractive price, good business and a long term approach. Apply discipline and patience in your process of analyzing stocks, there
is no rush to finding good stocks.
Much love and respect,
Jagdip
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