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  • How many years do you need to become a billionaire? Some people did it in 10 years while others

  • in 50, it highly depends on the person and the circumstances, but one person outperformed

  • everyone else. When Facebook was still an idea, Eduardo Saverin decided to invest in

  • it 15 thousand dollars. He stayed in Facebook for less than a year

  • since he had a terrible relationship with Mark Zuckerberg, but that little investment

  • and a year in Facebook turned him into a billionaireHis net worth today is over 11.3 billion dollars.

  • But not everyone gets such an opportunity. Quite often, people have to build their wealth

  • from scratch step by step. However, one of the ways you can reach your financial goals

  • faster is by investing. But the problem is that investing isn't easy, its complicated,

  • competitive and cruel and if you don't know the rules, you will probably just lose all

  • of your money that you worked so hard to earn.   So, if you want to be one of the few people

  • who actually make money by investing, master the rules first.

  • number one - hope is not a strategy

  • There are three types of companies you should invest in. One, it's a stable company, it

  • has a great product, excellent leadership, and good financial statements. So the company

  • would probably keep growing and your investment if you decide to invest in this company.

  • Secondly, its a great company, but the stock price is undervalued regardless of the reason.

  • Maybe it received some negative press recently due to some minor issues, but the stock will

  • definitely rise back to its true value.   Thirdly, the company isn't making money

  • now, let's say its a start-up, but it has great potential. It might be a brand new industry,

  • or they are developing breakthrough technology, and in the long run, they could be making

  • huge profits.

  • But to invest in such a company, you need to have a deep understanding of that industry

  • and the business overall. You can't simply choose a company based on how cool its name

  • sounds and hope that it will grow.  Can you get lucky? Maybe, but that hope

  • is not a strategy. So invest only in companies you understand.

  • 2. secondly, Time is more valuable than money

  • The problem with investing is that, if you want to earn a reasonable amount, you have

  • to invest quite a sum of money. Your thousand dollars will earn you 80 bucks at best annually,

  • assuming an 8 percent rate of return. But if you invest 1 million dollars, with the

  • same rate of return, you would be making 80 thousand dollars, which can provide you with

  • a good quality of living. But earning that million dollars is the problematic

  • part. You can't save all of your paychecks. You have to put food on the table and keep

  • a roof over your head.

  • And that's where the magic of compound interest comes into the picture. Even with as little

  • as a few thousand dollars, you can reach to millions if you take advantage out of time.

  • Let's say you just graduated from high school and you have saved 2000 dollars from the pocket

  • money you have been given in the last few years. That's a lot of money of course, but

  • not that much, you decide to invest it.  You enroll in college and get a part-time

  • job, but you decide to live frugally and invest another 200 bucks every month by saving up

  • a bit on unnecessary expenses such as Starbucks coffees.

  • At first glance, it seems like you can't save that much, and you are right. Even if

  • you increase your savings with the rate of inflation (3 percent), you will save $182,969.48

  • over the course of 40 years.  But because you have been investing it and

  • reinvesting the interest and not merely saving it, it turns to 1.6 million dollars ($1,607,320).

  • In fact, in the first 20 years, you won't cross 200K, but in the last 20 years, you

  • will earn 1.4 million dollars. whyBecause of - time.

  • Of course, no one wants to wait 40 years before they can turn millionaires, but the

  • message is, the earlier you start, the bigger the advantage you would have.

  • 3. thirdly, Buy When There's Blood in the Streets

  • Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking

  • family, once said: "the time to buy is when there's blood in the streets."

  • This rule does not only applies to the stock market but to any kind of investment. Because

  • humans are too emotional and are driven by their feelings.

  • Instead of making rational decisions that are based on data and facts, most people would

  • go with their guts.  For instance, a bank would go bankrupt.

  • All the people who kept their savings in that bank would lose their savings, other people

  • would see that and would rush to their banks to withdraw all of their savings being afraid

  • that their bank might go bankrupt as well, but because everyone has withdrawn their savings,

  • the bank goes bankrupt, and that will push other people to do the same slowly bankrupting

  • every bank in the country and crushing the entire economy.

  • The panic destroyed the entire economy, but that's just in theory, in practice, well-established

  • companies or banks survive such panics but lose a lot of their value.

  • In times like ours, the uncertainty has created a panic in the market, which led a

  • lot of investors to sell their investments and scared off other investors from buying

  • which resulted in a significant crash in the market. However, once the panic fades away,

  • businesses will get back to normal, and all of these companies will gain back their value.

  • That's why when there is chaos or panic in the street, that's the best time to invest

  • since a lot of great companies would be undervalued.

  • 4. Next, Don't let greed destroy you In 2003, Warren Buffet invested 488 million

  • dollars in PetroChina at around a US$37 billion valuation. At that time, it didn't seem like

  • a good investment. A couple of years later, oil prices have soared, and china's economy

  • wasn't showing any signs of slowing down, and with a series of good fundamental earnings

  • reports, PetroChina's stock jumped significantly to the point where Petro China crossed a trillion-dollar

  • valuation.  Buffett could have made 13 billion dollars

  • out of this deal, but as the company reached a valuation of around 300 billion dollars,

  • Buffett sold his entire stake and made only 3.5 billion dollars.

  • The lesson is, don't be too greedy because your greed can end up losing you more money

  • than you could possibly earn.   He could have waited longer, but how could

  • he possibly know when it will crash. Petrochina is now trading at a 150 billion dollar valuation.

  • 5. Number 5, Diversification is nonsense

  • How many stocks should you own on average? What do you think?

  • Some people say 10, other experts suggest 20 to 30 in order to diversify your portfolio

  • enough.

  • But here is the question. Let's say you have a great company in front of you, it has

  • great products, its financial statements are strong, the company has an excellent management

  • and leadership. The question is, why would you invest in any

  • other company if you have the opportunity to invest in this company.

  • And that's why diversification isn't really a great strategy.

  • But you might say, there aren't many such companies. Fair enough, you are right!

  • That's why you should only invest in a few great companies.

  • So how many stocks should you own? As fewer as possible! With each extra stock

  • you buy, you have to spend extra time and resources to follow it, read it's financial

  • statements, and make a financial analysis.

  • Of course, you should not put all of your eggs in one basket, but you also shouldn't

  • invest in more and more companies just for the sake of diversification.

  • There are some great companies out there in the market that have consistently been doing

  • great, such as coca-cola, apple, Berkshire Hathaway. Because they are such great companies,

  • they will definitely survive any crises and would continue to grow.

  • Each of these companies has at least doubled its stock price since the last recession.

  • 6. Number 6, Dividends matter

  • When it comes to making a profit out of a stock market, what people mostly look at is

  • the stock price. The strategy is simple, buy low, and sell high. That's a good strategy,

  • but stocks don't just go up and down. They provide a stake in the company, which means,

  • every time the company makes a profit, it has to send you your share of that profit

  • - that is known as a dividend. A stock by itself isn't really that helpful,

  • yes, of course, if the stock price keeps rising, you will get wealthier, but you are only getting

  • wealthier on paper, you can't materialize that wealth unless you sell that particular

  • stock at a higher price.

  • It's like buying a piece of a real estate and then waiting for its market value to increase

  • instead of renting it to profit from it every month. And then you use that profit to buy

  • more real estate or these dividends to buy even more stocks and grow wealthier.

  • Passive income is always great! Of course, sometimes its better if the company

  • does not pay dividends, especially if it is in its early stages or if the company has

  • the potential to reinvest that profit to grow much faster.

  • 7. Next, The stock market isn't your only option

  • When you hear the word investing, the first thing that comes into mind is the stock market

  • or the real estate or government bonds. They are all great investment tools, but they might

  • not always be a perfect choice. Remember, investments come in different shapes and sizes.

  • Sometimes the best investment specifically for you might be that business you have been

  • thinking about for some time.

  • Or maybe if you have plenty of extra time after your job, and you have a passion for

  • graphic design. Investing in a photoshop course might earn you much more than if you would

  • have invested that cash in the stock market.

  • Investing doesn't always have to result

  • in immediate materialistic gains. Maybe investing in a self-help book or finance books will

  • have a much bigger impact on your life, in the long run, than any other kind of investment.

  • The point is, think outside the box. The

  • Opportunity might right under your nose.

  • 8.and lastly, patience is everything

  • Finally, after a few months of saving, you have earned enough to invest, but you can't

  • find any good deals in the market. What do you do?

  • Wait. Of course, sometimes the opportunity strikes, and you have been quick enough to

  • take advantage out of it, but quite often, they are traps that will simply drain your

  • money. Don't rush, carefully analyze the market, read one more article, and invest when you

  • are confident enough. That also applies to selling. If the market

  • is down, don't be a fool to rush to sell all of your stocks, maybe that's temporarily,

  • and the stock price will rise back. Don't be driven by your emotions, learn to be patient.

  • I hope you guys have enjoyed this video, make sure you give this video a thumbs up and leave

  • a comment because that will really help the channel.

  • And of course, hit that subscribe button if you are new around here.

  • Thanks for watching and until next time.

How many years do you need to become a billionaire? Some people did it in 10 years while others

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The 8 Rules Of Investing

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    Summer posted on 2020/09/20
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