First of all, we must clarify our investment goals and life plans. It sounds simple, but few people actually do it. where is the problem? It’s just that many people don’t understand basic mathematics!
If you just want to make some pocket money and don't want to be too tired, then buying some bonds is enough. 1 million principal, annual return of 3-5%, extra $3,500 per month, enough for you to buy your favorite gadgets.
But if you want to outperform inflation and don't want assets to depreciate, you'll have to work harder. Don't believe the official inflation numbers. You have to keep an eye on the stock market index and house prices. If you want to outperform inflation, you have to take certain risks. Index ETFs and real estate are good choices. With a principal of 1 million, the annual return is 5-8%. After compound interest calculation, your net worth can keep up with the pace of inflation.
If you want more income, such as an extra job, then you have to pursue Alpha. Passive investing can only earn Beta. If you want to earn Alpha, you have to take the initiative. This is exactly what hedge funds are good at, and their returns average around 20%. 1 million principal, an extra $200,000 per year, which is equivalent to an extra job income. This is not a small amount, and it can allow you to buy a house twice as early as possible!
But if you want to truly achieve financial freedom and do what you want to do, you have to look for inefficient markets. I have been recommending cryptocurrencies in recent years because the market is full of inefficiencies and can easily be manipulated. It is not difficult to find a strategy with an annual return of more than 50% in the currency market. The principal of 1 million will be $500,000 in one year, which is $40,000 per month. If the return rate can reach 80%, the target of 20 million can be reached in 5 years, which is only a little more than one Bitcoin cycle.
Of course, if your goal is to become a billionaire, speculating in currencies alone is not enough. You have to go to the equity market to look for opportunities, and through financing, fund-raising, listing, etc., you can increase the market value of the company ten times, a hundred times, or even a thousand times. Look at those big guys with tens of billions or hundreds of billions, most of them started their careers in this way. You either have to start your own business or make equity investments to be able to replicate their success.
All in all, when investing, you must first set goals and then make decisions. Don’t get the order wrong. Only by matching your life plan and investment strategy, can you achieve financial freedom before the age of 40 and live the life you dream of!
