How Wealthy People Make Money

Posted on 19. Dec, 2012 by in Business Wealth

How to make money

Do you ever think about how it is wealthy people seem to be able to make so much money? I do and try to analyse the different ways they go about it.

As a clever person, you are probably quite risk adverse. It isn’t a bad thing, it has probably meant that you have been able to maintain a certain standard of living without getting yourself into too much trouble financially, but it  probably also means that you haven’t taken any true leaps towards financial wealth.

Many of us feel that financial wealth is unattainable due to our circumstance or profession, but my feeling is that it can be attainable for many people however, it generally involves some level of risk. In this post, we are going to take a look at a few different ways we can take risks to increase our financial wealth.

Buying property

I know that this is a pretty common avenue and possibly not the right one for everyone because it is often a slow process and doesn’t offer a lot of liquidity, but many wealthy people still keep property as a good portion of their investment portfolio.

The risk factor in property is relatively low, which is why banks will often loan investors a large portion of the funds needed to purchase this asset. The risk comes when (and if) you start to add multiple properties to your portfolio, or get a bit more imaginative and enter into property flipping arrangements.

There is still money to be made in property if you know what to buy, but for many the perceived risk is still too much. A way forward might be to form a business and attract stakeholders that contribute capital to business accounts that enable the business to purchase, renovate, then hold or sell the property for a profit.

Buying shares

Shares are a very popular avenue for many people because they are easily bought and sold and you can enter the market with little capital. The major risk factor is the potential exposure you may have to sudden fluctuations in share prices, which can be a little too much for some people.

Although there are plenty of cases where shares have sky rocketed overnight and made people a lot of money, this is  likely not where many will have most of their money. Stable blue chip stocks are a sound investment, but often tend to move in a similar way to property.

A good approach might be to start with a small amount invested in high risk / high gain shares, then add to this amount as your profits increase. If done correctly in a balanced fashion it is quite possible to take calculated risks that offer a good reward without risking everything.

Starting a business

This can be a great way to create wealth if you have a business idea that is marketable. Many wealthy people are still investing in tech startups too, in some cases with spectacular results. Many startup busnisses fail in a short period of time, which is where the greatest risk is for many people that invest their own personal funds.

If your business idea is a little more generic in nature, it can still be a great avenue to create financial wealth over time.

Side business are a very popular way for people to take on a new business idea and grow it into something that they can eventually work on full time and either make an ongoing profit or sell as an ongoing concern at a later stage. In many cases this involves ‘bootstrapping’ and doing as much as possible with the limited resouces available to you. This is where things like free online tools, free government services and free business banking services come in very handy.

In order to increase your financial wealth it is likely that you will need to take a risk. Make it less risky by doing something that you are personally interested in and will want to follow through with. If you commit yourself to it, the risk is often lowered significantly because your decisions are well informed.

Have you taken a risk that has paid off?

Image by Tracy O

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2 Responses to “How Wealthy People Make Money”

  1. PipsToday

    28. Dec, 2012

    The points Buying property, Buying shares and Starting a business shared under “How Wealthy People Make Money” are most common. There are some more investment options like commodity trading, forex trading etc.

    I am not agree with you regarding the following statement “A good approach might be to start with a small amount invested in high risk / high gain shares, then add to this amount as your profits increase.”

    Reply to this comment
  2. Jenny @ Frugal Guru Guide

    16. Apr, 2013

    I would very much like to get into real estate just for diversification. The bar to entry in this region is really high, though, and that’s our main difficulty.

    Reply to this comment

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