Economic downturns cause panic, leading people to sell valuable assets like stocks and real estate at a discount. Those with cash and financial knowledge can acquire these assets cheaply, creating significant wealth. It becomes a Black Friday for investors.
Money is just one pillar of a happy life. Without physical health, mental well-being, and a spiritual purpose, wealth is meaningless. Financial fitness provides the fuel and freedom to enhance the other areas, but it cannot fix deficiencies in them.
Media outlets are incentivized to generate clicks through hype and fear. This creates a distorted view of the market, causing retail investors to panic-sell during downturns and FOMO-buy during bubbles. The reality is usually somewhere in the less-exciting middle.
ARMs tempt buyers with low initial payments, but they are a gamble. You're betting that your income will rise, rates will fall, or home values will increase before your payment jumps significantly. This risk is often downplayed by lenders who are incentivized to sell loans.
When the government guaranteed student loans, it removed the risk for colleges. This allowed them to hike tuition prices unchecked, knowing students had access to funding. The resulting flood of graduates has also made a college degree less of a differentiator in the job market.
Creators with valuable financial education often must use sensational titles like "Market Crash" to get views, as nuanced titles get buried by the algorithm. This creates a dilemma where the packaging is misleading but the content is necessary, requiring viewers to look past the headline.
While passive market investing is wise, the highest potential returns often come from actively investing capital back into your own business. It is the one asset over which an entrepreneur has the most control and which offers the greatest potential for asymmetrical upside.
Selling in a downturn is driven by two distinct forces: voluntary panic from seeing portfolios in the red and consuming negative media, or forced sales (margin calls, foreclosures) when investors have used too much debt and can't cover their positions.
Trying to beat the market by active trading is a losing game against professionals with vast resources. A simple, automated strategy of consistently investing in diversified ETFs or index funds mitigates risk and leverages long-term market growth without emotional decision-making.
Cash is not a long-term wealth-building tool due to inflation. Its purpose is strategic and short-term. You should only accumulate cash for an emergency fund, a specific large purchase like a house down payment, or to deploy into investments during a market downturn.
Instead of budgeting, create a system where every dollar earned is allocated automatically: 75% max for spending, 15% minimum for investing, and 10% for short-term savings. This plan scales with your income, ensuring that as you earn more, you automatically invest more.
Schools teach us to earn a salary, not own equity. The home you live in is for making memories, not money, and is an inefficient way to build wealth. True financial independence comes from owning equity in assets that generate income and appreciate in value, a concept rarely taught.
A Wall Street Journal experiment pitted a monkey throwing darts at a stock list against professional traders. Over a ten-year span, the monkey's long-term, passive 'buy-and-hold' strategy won. This demonstrates the power of long-term investing over short-term, active trading.