The Quickest Path To Wealth

The Quickest Path

Dear readers, I’ve been holding out on you.  I have the secret.  The secret to building wealth.  Those of us with high net worth have been banking on it for years.  We don’t talk about it in public.  We rarely mention it in our origin stories.  But there is one sure way to make a lot of money.  It takes little skill, knowledge, or even thought.  The quickest path to wealth, it turns out, is being wealthy already.  That’s right, money begets more money.

For several reasons, high net worth individuals have several advantages when it comes to the money-making game.  Even though it is easy to chalk it up to knowledge and skill, opportunities abound for those who already have fat bank accounts.

It’s patently unfair.  Why should the rich get all the advantages?

There is no simple answer to this question, but if you are feeling frustrated by this conundrum, you are not alone.

Let’s first look at some illustrative examples, and then I will give you my best approximation of what can be done remedy this situation.

Cash is King

I love investing in real estate.  Unlike Wall Street, the real estate market is highly inefficient.  In other words, there are great deals lurking around every corner.  To capitalize on these deals requires a certain amount of skill and luck.

You have to be able to asses the quality of a property, understand the market, and be able to calculate the cost and profit involved with renting or flipping.  All of these skills can be learned with a bit of time and experience.

No matter how smart you have become, it’s all for naught if you can’t close the deal.  Time after time, I have watched a prime property slip through my fingers into the hands of another more savvy investor.

Although you can’t always be the winner, going into any bidding war with a full cash offer not only gets you considerable attention, but also gives you some leverage to negotiate.  In an uncontested offer, coming in with cash allows you to low-ball the price.

Banks trying to offload foreclosed properties are often quite happy to reduce the price to jettison a mortgage contingency clause.

The quickest path to wealth, is to go in all cash.

Money Begets Money

Until recently, I had no idea what an accredited investor was.  According to Investopedia:

An accredited investor is a person or entity that can deal with securities not registered with financial authorities by satisfying one of the requirements regarding income, net worth, asset size, governance status or professional experience

There are all sorts  of criteria, but generally the expectation is that the investor has a family household income of $200k-$300K per year or net worth of at least a million dollars.  Some investments even require a net worth of over five million.

Why is being an accredited investor the quickest path to wealth?  Unlike the general public, these lucky ducks qualify to invest in hedge funds, private equity deals, venture capital funds, and other private placements.  While these investments are certainly more risky, they also carry the possibility of much greater returns.

When Opportunity Knocks

Have you ever found yourself staring at a for sale sign, or a stock quote, or a potential purchase and thought:

If only I had a $100K sitting around!

Well, the wealthy do.  They have disposable assets and the liquidity to jump on a good opportunity when it arises. Remember, money is made when markets are inefficient.  Market inefficiency is often short-lived as other investors recognize the great deal that you are salivating over.  Those with quick access to cash will have a distinct advantage.

So Am I Screwed?

Although the quickest path to wealth is gold-plated, it is not the only one.  The best way to add fuel to your FIRE journey is to go back to the basics.  Especially when you are young.

Before you know it, your net worth will be climbing.  And then you will the baller with the big pockets.

Ready to use your wealth to create even more.