Investing is putting More Money out to get More Money Back
I invest money to make more money. Therefore the more I make the more I have to invest.
How to do this.
The title of this blog is a direct quote from Warren Buffet. So now we have to know-how. For instance, the answer lies in other Buffett quotes. “if you don’t find a way to make money when you sleep, then you’ll work until you die”.
The question people always ask me is how to do this? So I have answered this question in other blogs and videos but people who ask never follow up.
Why people fail to make money
There are several reasons why people fail to make money, so they can reinvest.
- Get rich quick doesn’t work
- Save more than you spend
- Reinvest your cash in income-producing assets
- Own your business, don’t work for others.
- When the big opportunity comes go all in.
Nobody wants to get rich slow
Not only does it take effort but it takes time. So let’s look at Warrens’s next quote. “Nobody wants to get rich slow. The following is how the quote came about.
Jeff Bezos: “I asked Warren, your investment thesis is so simple…you’re the second richest guy in the world, and it’s so simple. Why doesn’t everyone just copy you?” Buffett: “Because nobody wants to get rich slow.”
In addition “..investing is simple but not easy.” Therefore if it was easy then there would be a lot more billionaires.
Where to put your money
Charlie Munger, Buffet’s partner billionaire says “It’s a game about being there all the time and recognizing the rare opportunity when it comes…and there are not very many.”
Therefore Charlie Munger’s statement based on my experience is 100% true. I have had many opportunities during my investment career and have recognized those opportunities when they came but failed because of several reasons.
- Didn’t put enough money into the investment opportunity when it arose. “be fearful when others are greedy and greedy when others are fearful.”
- My Personal behavior sabotaged my investment. (getting divorced crashes investments).
- I was impatient, therefore leaving millions on the table.
- Trading things for cash doesn’t work unless you own a trading company which I do.
- Don’t take advice from anyone, especially bloggers.
Charlie Munger “Warren and I had tiny little bits of money, we always underspent our income, and we invested money, and if you live long enough you end up rich, it’s not very complicated.”
“We were good at avoiding things that were difficult and finding things that are easy” Munger
Companies I own.
Like Munger and Buffett I own whole companies and parts of others. So it’s not possible for Buffett to own all of Apple, therefore he has a large piece of it. Berkshire Hathaway, the conglomerate he owns 20% in now owns about $100 billion-plus in Apple. Berkshire also has potions in many other companies and has for many years like Coke, American Express, Bank of America, and Wells Fargo.
Like Berkshire, I also own 100% of small businesses with several million in valuation and bigger parts of Companies like Ford, GM, and Apple. In addition, I have real; estate investments here in the states and abroad. So the size of my investments is tiny in comparison but I follow the same ideology of investing in undervalued assets, then holding them as they produce more cash.
Outside of one mortgage, I have no debt on the other properties we own. Therefore my only luxury is our home in the seaside resort of Carlsbad, North County San Diego near the ocean. So I could return to Las Vegas or Austin, both tax-free states with houses less than half the one I live in but I prefer the climate and ocean than the Nevada desert and oppressive Texas summers.
Living and working from home has kept my expenses down and transitioning to a COVID life has been easy and painless.
Heres are other cost-saving tips to keep expenses down and increase cash to reinvest.
- Remove all debt from your life. Doing this increases your net cash for reinvestment
- Don’t purchase anything you don’t need and learn to cook. I make my own coffee and cook all our meals.
- Work from home. No office, low overhead, and no risk of COVID. Plus no commute.
- Buy in bulk online. For all your home and office needs
- Review all your expenses for personal and business and remove or lower where ever you can. When you make a big score reduce your debt and all expenses until it’s the lowest possible level.
Warren Buffett is right when he says to find a way to earn money while you sleep or you’ll work until you die. Above all his words “Investing is putting more money out to get more money back” is the only way to financial freedom.
Mike Addis, Carlsbad, California all rights reserved.