Getting Rich, Staying Rich
By Gary Silverman, CFP®
Getting rich quick is a topic that sells many books, empties magazine shelves, packs seminars, and drives web traffic. Yet, with the exception of picking the winning lottery ticket or being the favorite niece of some rich uncle, there’s just no short-cut.
Jeff Bezos, Warren Buffett, Elon Musk, Andrew Carnegie, none of these nor the countless like them were overnight successes. It took good ideas, some luck, excellent decision making, some luck, perseverance, hard work, and some luck, for them to become rich.
Why folks think there is some shortcut with all the examples of what it actually takes is fascinating. It is particularly acute in the realm of investing. Now, can a person pick Amazon or Apple or Tesla, put the majority of their assets in the stock, and become incredibly wealthy? Sure can. I know some who have. But I have also known a lot more who bet on a stock or three, lost most of their money, and swore off investing forever, calling it a fool’s game.
If Bill Gates and the rest of the Microsoft team weren’t in the right place when IBM was looking for an operating system you probably never would have heard of him. That Bill would be successful at something related to computers I do not doubt, but that one moment changed everything. Still, he could have earned a good living. He could have even started and sold several companies. This may not have earned him $billions, but he would likely have amassed a nest egg measuring many $millions.
I know this (okay, I reasonably guess this) because that is what has happened and continues to happen all around us. People take a little risk, work hard, invest back into their ideas, and grow rich.
Of course, many try to do the same and things don’t work out. Starting a business is always speculative. No matter how good you are, how good your ideas are, success is never guaranteed. (The statistics on business failures are frightening.) And since it often takes a sizeable investment, and most can’t find more than a few friends or family (if any) to chip in, it can be a one-and-done deal if you fail.
Investing will not make you mega rich, or ultra-rich, but you can get rich—just not rich quick (absent a lot of luck). But it also has a great advantage because you do not have to put all that many eggs in one basket. You can diversify. So, if one of the companies you invest in gets unlucky, you do not lose most of your money.
That is, unless you are only investing in one or two companies. Then, yeah, you can lose it all if you get unlucky.
And that’s why the very rich, while they may have made their fortunes by concentrating their assets into one endeavor do not keep things that way. They diversify. Because they know that doing otherwise is speculation. And while speculation might get you rich, speculation can also make you poor.
Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing.