The rich do not become rich because they find the winning investment.
The way to become rich differs from how wealthy individuals manage their assets.
If I told you that by investing from 2017 to today I have obtained a return of 85% would you tell me that I am good? I guess so.
Then if I told you that I yielded a 250% return you would also tell me that I’m good.
Then someone comes along who tells you that you could have done 574% or 900% or 3000% or 7000% or better yet 31 thousand percent...
Rich people don’t get rich because they found the winning investment.
The rich first made money and then later managed it wisely.
Articles claiming that buying Apple in 1995 would make you a super billionaire today are fairy tales.
Just one example: the Agnelli - Elkann family, which certainly cannot be accused of financial recklessness, invests its family assets in a very diversified way through the financial note Exor which certainly does not only have 3 or 4 investment initiatives.
So here’s the thing. Those who have assets to manage tend to make weak bets. It also easily invests in risky initiatives but with minimal fractions of the capital. The bulk of the capital is employed in "weak" bets.
But what does “weak” mean?
It’s one thing to bet that it will be hot this summer. A bet so banal that you won’t find anyone willing to challenge you (in the northern hemisphere).
The more detailed (or stronger) a bet is, the more difficult it is to win, and of course the greater its reward.
To become rich, however, you need to win a big bet. So when we talk about asset management and diversification we are talking about weak bets.
If I buy an index I am placing my trust in an entire economic system. On the other hand, if I bet a lot on just one stock, I either know it very well or I’m risking too much.
And this is where the way to get rich comes into play. Who knows a certain business very well? Typically the owner. And this helps to understand why insider trading is prohibited. If you pit those who manage a company on equal terms against those who don’t, the latter have lost from the start.
So if a person becomes rich it is also because he was lucky, but mostly he took risks and spent a good portion of his life working and improving himself and understanding his business.
And if things are really like this, i.e. this person is valid and clear-headed, he will also realize that his skill and luck will not be eternal and at a certain point he will realize and diversify. And so his dynasty begins.
So if Bill Gates doesn’t let his daughter inherit Microsoft, it’s no coincidence.
The author has checked all the information presented with the utmost care, but does not guarantee its accuracy and completeness. These observations are made for purely educational purposes and do not constitute an invitation to act. You are invited to rely exclusively on your own assessments of market conditions in deciding whether to carry out a financial transaction and whether it meets your needs.
Past performance is not indicative of future performance and the decision to carry out any financial transaction is at the sole risk of the recipients of this communication.
Original article published on Money.it Italy 2024-04-29 07:01:00. Original title: Diventare ricchi è diverso dal restare ricchi. Ecco perché
