How to make millions… And how they do it.

How to make a million dollars –

 

Oh, I am not joking. People are constantly looking for ways to make money, to become the overnight millionaire, to be the next You Tube, My space, EBay, etc. Face it; we all want to make it big, and quick. The fact that you are even reading this now proves your ambition to peruse such riches. I’m very happy for you, you can do that on your own time, not here. Because what I’m about to show you, will not make you the next Ebay, it will not make you a millionaire overnight either – rather in time.

 

Time is money; you have heard that expression before so many times, and I bet you are wondering, is it really true? Is my time really worth money? Am I, a college student, a 9-5 slave, a jobless person worth any money? The answer no. (at least in this case) It’s not you that’s worth money, but it’s your money that is worth money. Your money, based on time is worth more in value. $1 today can be $1.01 tomorrow. Your investment today, can be worth 10 times tomorrow.

 

Two of the most important lessons I’ve learned in life is about risk and money management. “No risk no gain”, “No pain no gain”, “No time no dime”. If you want to be an old sucker driving a cadilac at 80 years old, go visit your local investment branch and have them make a “portfolio” for you. If you want to make it big (not overnight of course) lets follow these steps.

 

Ok so now how do we do it? Let us take the average American. 9-5 schedule, works for a decent company, on salary, gets the same lousy paycheck every month to pay his bills, go out, etc etc etc. lets name him Mike. Mike, age 25, building his career, trying to make himself someone, trying to make a foundation, has a degree in business management, but never uses it.. typical average American.

 

Here’s what needs to be done! 80% of Americans today do not know how to save money, out of the 20% that save money, 50% of those take it to ‘retirement specialists’ such as Schwab, Morgan Stanley, yada yada yada… They will setup an account for you and charge you commission every year, you may have some money when you are 65, well certainly more than you would putting it in a CD, that’s fine. However, what about the other 50% of the savers? What do they do? They invest. They invest strategically, they take risk. Risk is a HUGE factor. When you are young, it is important to take risk, because you have your entire life to make it back, don’t worry 9-5 is always there, its not leaving. What if we were able to play with this 9-5 job a little and risk some of our money so we can potentially double triple or quadruple it? Well let’s take a look at what I mean by risk.

 

Many people ask me what an IRA is, of course IRA’s are great, but what risk really does an IRA have? I mean, look it takes 40 years for you to touch your money, which in some ways are great, but on the other hand I think IRAs limit you to what you can do. When you contribute $4000 a year to your IRA account, your $4000 is only worth $4000 or whatever the market does with it. But think about what I was saying before, not only is it true that TIME is money, but MONEY is more money… how? Two words, remember it, live by it, and play by it…. Buying Power. Yes, money is power. Your money is worth sometimes more than you think it is, your money, let’s say $100 is worth $120 to someone else, you can sell this to him. Why? Because cash is king. Always. No matter what anyone says, cash is power. So now that you have understood that money is power, where am I going? Lets see.

 

Suppose we open an individual account to invest. And we deposit $10,000. Right now, your broker says, hey thanks for the deposit you have $10,000 buying power. Great! You have 10k to play around with.. but what if we told our broker, hey mr. broker, why not let me have 15k buying power? You have my 10k as collateral, I have good credit.. please? Mr. broker will typically say sure! We’re lend you $5000, not a problem.. but with premium of course. What the premium? You guessed it, interest. Interest rates, what this US economy literally moves with. The broker will charge you a certain % for borrowing money, you don’t have to pay them back the full principle, as long as you are paying them the interest. This is called a Margin Account. If you have never heard of this term before, I would suggest you read a little bit about it, its fairly simple, you borrow money – you pay interest on that. Simple as that.

 

Ok now enough with the boring stuff. Lets get to the point and cut to the chase.

 

Through out US history, I mean from the start of the stock market, the US economy has averaged a yearly return rate of 10%. Meaning, for every $100 you put in the market for and averaged returned rate of the market, it would turn into $110. Cool huh? The average savings account would maybe give you $103. Here is a graph.

 

Since, the early 70’s, the stock market (Dow, Nasdaq, S&P) have averaged about 10% a year. Of course there have be bumps along the road, but the market has always found its way home. This is one rule I stick by, look at the timeline on the graph, 1973-1975, also known as the great depression era.. market did recover… There will always be a year or two where the market dumps everything, for example 9-11, a disastrous event.. market recovered.

 

Here, take a look at 9-11

I have this belief, I have this 1 rule that I stick by. Many 9-5 guys don’t, because of fear of the market.. whenever they hear “stock market” its like an automatic “oh no! stay away! The market!” type of thing. The market will always follow the economy. If your $1 is not worth $1, the stock market will deflate, if your $1 is worth $2, the stock market will inflate. Simple rules to obey. Do not worry too much about your money, you’ve got time.

 

Looks promising doesn’t it?

It really is. There is no catch.

 

So where’s the risk? I mean, I’ve got 40 years no? By then I’m sure my money will inflate!

 

So here is where we get tricky but smart. You ever wonder why a bank is willing to give you 3% yield when you put your money in a CD? I bet 85% of the people who do it don’t. I bet they have no damn clue. Well, they do what we are going to do.

 

Rip you off.

 

If I was Bank Of America, I’d be more than happy to say, “Hey! Mike, give me your $10,000, for 1 year, in a CD (that you can’t touch of course) and I will give you 4%-5% return a year. Hows that sound?” Mike says, woah, what a deal! Free money!

 

Mike does not realize, what bank of America does is invest his money, and makes 10% on HIS money and gives mike a kickback of 5%. So basically, the bank said mike give me your money and lets be partners.. no worries, I’ll give you 5%.

 

Don’t you want to kill your bank now?

 

But what if we could do that.. what if we were able to say.. hey lets borrow money, invest and get paid on an almost guaranteed investment! Now, of course NOTHING is guaranteed but looking at those graphs you can see that your chances of losing all your money is if Iran successfully drops a nuke on the US, which by then who even care about the dollar anymore..

 

Good news is, we can do it – Using a margin account. Now, there are some good brokers out there that can lend you money cheap, say around 5%-6%. I recommend a company called Interactive Brokers www.interactivebrokers.com (“What’s your excuse?™”). Depending what interest rates are at in the economy (read up on interest rate cycles and dollar cost averaging I can’t get into that its too lengthy, but it will give you an idea on when to borrow the most, and when to be careful).

 

Be careful though, because margin is RISKY!!!!!!
MARGIN IS RISKY!

 

However, if you plan it out right, you should be able to survive a catastrophe.

 

My recommendation?

 

I’d start off slow, borrow 40% of your total cash. So if you deposit $10,000, I’d borrow $4000. Invest that. Let it ride. Watch your gains. You will see that every year you borrow for 5%-6%, you will make 10% and have made money on OTHER peoples money. Doing exactly what the bank does, with less risk (because your broker will never say, hey! I need my money back!) and you have all the time you need.

 

Remember, timing and strategy is key. Read up on dollar cost averaging, and how interest rate cycles work.

 

So what do you invest in huh?

 

Well there are many funds, ETFs that you can pick. You can get even riskier by picking some foreign funds like ASIA, Europe, these markets can serve as a hedge on the US market.. which will probably make you more than 10% a year.. and as for your broker – yep still only gets 5%-6% no matter how much you make.

 

So I’ve taught you really basically what should be done. Before I could show you the actual money that can be made. (mainly cause im not a crooked broker who wants to charge you a commission for every word that comes out of my mouth)

 

Lets use a basic IRA calculator to see what potential we have.

 

Lets say you were to invest $4000 a year. And borrow 40% each year. With a average interest rate of 5% (very fair). And an average return of 10% (fair fair fair! When I say fair it means you can do WAY better than 10% if you put a little bit of your mind to it, 10% is if you just pick a fund and let it ride.)

 

After 30 years, your account should be worth around 5 million. Calculating it on a spreadsheet isn’t that easy.. do it yourself. But you get the idea.

 

 

Remember – Using debt as leverage to purchase investments can magnify your return!

 

Did I mention the tax savings?

 

Mike, age 25, single.. Contributes to a 401k, pays his medical insurance pre tax dollars, and even donates money to his local charity and still gets taxed heavily by Uncle Sam! What if I told you, Mike, you were able to deduct that interest from your margin account from your taxes? Oh yes, 5% cut right off! The bank doesn’t do that!

 

You get the point, use other peoples money to make your own. That’s how all the millionaires do it, why shouldn’t you?

 

Congratulations, you are a bit smarter now.

 

Josh