10 Roads to Riches: Nine Ways to Get Rich – Plus One Foolproof Way
by Alexander Green, Chairman, Investment U
Investment Director, The Oxford Club
When those of us on The Oxford Club’s Fall Foliage Tour – aboard the Crystal Symphony – reached Bar Harbor, Maine last week, the bright colors came to an abrupt end. At least, temporarily.
The weather was so nasty – and the water so rough – the tenders couldn’t take us ashore. It was just a cold, grey, wet, rainy day. The perfect day for a book, in other words.
So I spent the afternoon perusing money manager Ken Fisher’s new book “The 10 Roads to Riches.”
According to Fisher, a member of the Forbes 400, there are only 10 ways to get rich. (This is after discounting things you can’t control like a lottery win or a big inheritance.)
10 Roads to Riches
Here are Ken Fisher’s 10 roads to riches:
- Start a successful business. This is the richest road. Prime examples are Bill Gates, Charles Schwab, Sam Walton, Larry Ellison and Michael Bloomberg. Of course, you’re unlikely to do nearly as well as any of these men. But that isn’t necessary. With enough time and effort, you can get plenty rich filling a need for a local product or service in your hometown. (That includes starting a plumbing business or putting braces on kids.)
- Become CEO of an existing firm and juice it. This was the method for Jack Welch, Steve Balmer and others. This requires a lot of years of experience – and generally a lot of loyalty to one company. But if you have the drive and ambition, the salary and option compensation can make it well worth your while.
- Hitch your wagon to a star. This method involves tying your fortunes to a successful business visionary. Charlie Munger did with Warren Buffett, Jeffrey Skoll with Jerry Yang, and Peter Chernin with Rupert Murdoch. This is a tough one though. You have to recognize a visionary early, offer him something of value and stick with him. Not easily done.
- Turn celebrity into wealth. We all know that celebrities are loaded. But unless you’re a world-class athlete, a terrific singer/songwriter or have Lana Turner’s profile, you should probably give this one a pass.
- Marry well – really, really well. This seems shallow, I know, but a 2007 Wall Street Journal poll found that two-thirds of women said they’d be “very” or “extremely willing” to marry for money. Half of men surveyed said they’d marry for money, too. Who’d have thought? (Also, expect a prenup.)
- Steal it, legally. Some people think plaintiff’s lawyers are crusading saviors. Fisher sees them as bloodsucking leeches and extortion artists. (He quotes the age-old Mexican curse: May your life be full of lawyers.) But if you can handle law school and pass the bar, this method is a possibility.
- Use other people’s money. This is the most common road for the ultra-wealthy. Managing other people’s money is how bankers, brokers, insurance companies, mutual fund managers, hedge fund managers and personal money managers like Ken Fisher make their millions. (Whether their clients are getting what they pay for is another story entirely, one I cover in my new book “The Gone Fishin’ Portfolio.”)
- Invent an endless future revenue stream. In this scenario, you create something – a book, a movie, a Broadway play – and find a way for it to create long-term royalties. This, admittedly, is a long shot. If you’re going to try this path, says Fisher, “Think lunch boxes.” Products that end up on lunch boxes – Spiderman, Star Wars, etc. – are the really big moneymakers.
- Monetize unrealized real estate wealth. Millions of Americans have gotten rich in real estate. And many will in the future. But Fisher says skip the idea of flipping houses and condos – the transaction costs alone will kill you – and concentrate on good properties in desirable areas with predictable cash flows.
- Take the Road More Traveled. This is the method we focus on here at Investment U. It’s about maximizing your income, controlling your outgo, religiously saving the difference and then managing your investment portfolio intelligently.
The Classic Way To Riches For Everyday People
The Road More Traveled is the classic way for everyday people to get rich. Most of us don’t have the time, the capital or the expertise to found and run our own business. But we can always use the stock market – the quintessence of capitalism – to become business owners.
This takes time and discipline. But it is the surest way to long-term wealth.
This is not the route for high-paid professionals only, incidentally. Fisher’s firm doesn’t accept accounts starting at less than $500,000. But he has plenty of former middle-class workers as clients.
Fisher writes, “If your passion is truly social work, teaching kindergarten, or quilting – fine. Then focus on frugality. It can be done! I have clients who were postal carriers, teachers, cops, etc. They did it. Frugal!”
How is this possible? There is no magic. These people live beneath their means and save.
“Skip mocha-caramel-triple-lattes,” says Fisher. “Pay off credit card debt. Avoid designer labels. Buy used cars. Eat in more, out less. Total no-brainers. Yet some can’t do this – just can’t.”
If you can, great. If you can’t, Fisher warns, you better find a higher paying job.
In other words, see 1-9.
Today’s Investment U Crib Sheet
While we all can’t start successful businesses, we can take advantage of the first way to becoming rich – by owning a successful company through stock ownership. It’s the easiest, fastest way for an average person to own a business.
Ken Fisher’s eighth way to get rich – invent in an endless future revenue stream – is another approach we’re quite familiar with at Investment U. Our Perpetual Income Portfolio is designed to do just that, without having to create a lunchbox character or icon.
By making a few, simple portfolio changes, you could see the benefits of an endless revenue stream with 96 fat dividend checks a year. You’ll get these checks month after month, regardless of whether the market is up or down.
Our Perpetual Income Portfolio is based on the research from Dr. Jeremy Siegel – professor at the Wharton School of Business.
He conducted an exhaustive study of stock market returns from 1871 through 2003. Siegel proved that this simple approach to investing has produced “97% of the total after-inflation accumulation from stocks… [while] only 3% comes from capital gains.”
With that knowledge in hand, we’ve been keeping our eyes out for bargains in dividend-paying companies.
In October, we looked at 5 Pharmaceutical “cash machines” that are kicking out healthy dividends to shareholders, and how you can tell if a company is going to “pump up” its returns.
Recently, we took a closer look at the benefits of investing in dividend paying stocks. Because they work well in both rising and falling markets, dividend-paying stocks are a great way to play defense in your portfolio without “running to cash.”
About Alexander Green
An expert on momentum investing, value investing and investing based on insider activity, Alex worked as an investment advisor, research analyst and portfolio manager on Wall Street for 16 years. He now runs the wildly successful Oxford Communiqué, ranked as one of the top investment newsletters by Hulbert Digest for more than a decade. He is also the author of four national best-sellers: The Gone Fishin’ Portfolio, The Secret of Shelter Island, Beyond Wealth and An Embarrassment of Riches. He shares his wisdom in his free daily e-letter, Liberty Through Wealth.