A quick online search will generate hundreds and hundreds of articles that promise to reveal the secret to building wealth, no matter what your experience has been like so far. While in some cases these asset building strategies are effective, they also come with downsides, caveats, and special considerations that most people miss.
So what are these popular wealth building strategies, and can they build as much wealth as they promise?
Scrutinizing Top Asset Building Strategies
Let’s take a look at four of the most popular and frequently touted wealth building strategies out there.
1. Rental properties. The idea is to buy one or several properties at a fair price, charge an amount of rent that is slightly more than what you’d pay for mortgage payments, taxes, insurance, and repairs, and eventually build a steady stream of income while earning equity in an asset you can sell for profit at a later time.
So what’s the problem? For starters, most new property investors greatly underestimate their costs. Second, managing a property takes more time than you might think, as landlords are legally responsible for code compliance, utility availability, repairs, safety inspections, and more.
2. Trading stocks. Trading stocks is another one of the popular asset building strategies. The idea is to purchase small stakes in large or promising companies, and benefit when the prices of those shares increase.
There are a couple of problems with this strategy. If you don’t know much about the stocks you’re trading, you could end up on the losing side of the deal. And trading too frequently will cost you a lot of fees and could reduce your overall potential return.
3. Starting a business from a hobby. For millions of people, this is living the dream. You love what you do, so it’s only natural to think about making money doing it. But starting a business is more difficult than most people realize. It’s not enough to start selling what you’re already making – you need to know your target audience, study your competition, and find a way to make your efforts profitable.
4. Reselling goods and services. There are plenty of companies and individuals producing goods and selling services, so why not simply buy them up and resell them at a slightly higher cost? You won’t have to do much work, and you’ll make money doing it. This strategy can work, but it’s not as straightforward as it seems. If you charge too much, nobody will buy from you, and if you charge too little, you won’t make enough money to justify your efforts.
All of these strategies have their drawbacks, but at the same time, they can be effective under the right circumstances. Moving forward, regardless of which asset building strategies you choose, these approaches will help you.
- Research: Do your research before getting into anything. Exhaust your resources to learn more about the pros, cons, and quirks of whichever method you choose.
- Diversify: Don’t pour all your assets or all your time into one strategy, or you could suffer catastrophic losses when things go wrong.
- Personal investment: Get more experience. Learn new things. Meet a wider range of people. These personal developments will make you a more valuable person, regardless of how you invest otherwise.
As long as you know what you’re getting into and don’t put all your eggs in one basket, these asset building strategies can work for you. The most important part of building wealth is knowing that there are no shortcuts and no get-rich-quick-schemes that can get you there. Every path demands hard work in its own way.
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