Jaspreet Singh is big on the rule of three. When asked to name the most important thing for building wealth in an exclusive Q&A with GOBankingRates, he replied, “There are only three steps.
First, you have to spend less than what you make. Second, you have to work to earn more money. And third, you have to invest the money you don’t spend.”
On his Minority Mindset YouTube channel, the attorney and entrepreneur went even further and broke down his third wealth-building rule into three parts of his own.
He said, “If you really never want to have to worry about money again, you need three different kinds of investments. You need an investment that’s going to pay you income. You need an investment that’s going to grow your wealth. And then you need an investment that’s going to protect your money.“
There’s no income like real estate rental income.
Singh prefers real estate over dividend stocks or any other income-generating asset. He said that by springing for management services, you can turn a property into a “pretty passive” income stream that doesn’t require you to serve as a landlord.
Whether your buildings are residential or commercial, your renters pay your mortgage and cover your taxes, insurance, and other expenses while also putting some money in your pocket every month.
He also likes that real estate investors get “some of the biggest and best tax breaks that our tax code has to offer.” With just one property, “you can make a ton of money and pay next to nothing in taxes legally,” Singh said on Minority Mindset.
Grow your wealth by investing in businesses.
Singh does not consider appreciation potential in his real estate investments because he buys properties only for monthly cash flow; he aims for 7%. For growth, he invests in businesses because they can reinvest their profits to increase the company’s value.
He said on Minority Mindset, “There are a number of different ways that you can invest in business depending on your risk tolerance.”
The least risky method is to invest in the stock market. While publicly traded companies can go bankrupt, it’s much less likely than it is for a tiny, unproven startup.
The next level is to invest in startups that are actively raising money in exchange for equity stakes. This is riskier but offers much more growth potential. “This is what happens on ‘Shark Tank,’” he said.
The riskiest method of all is to invest in your own business. Singh said, “When you invest in your own business, you invest in yourself, and at the end of the day, you are your best investment.”
But to succeed, entrepreneurs must put everything they have into their businesses, and the risk of failure is high.
When all else fails, it’s good to own gold.
The third and final type of investment that Singh recommends is defensive in nature—he buys physical gold to hedge against losses and economic uncertainty.
Singh said that gold can guard your wealth in the case of crashing stocks, struggling businesses, falling real estate prices, and a general economic downturn. For example, gold has an inverse relationship with the U.S. dollar—when the dollar loses value, the price of gold rises.
Recent history has also reinforced that precious metals are a good thing to own when prices spike.
“Gold is your traditional inflationary hedge because gold has been used as real money for centuries,” he said on Minority Mindset. “Everybody—whether you’re in India, China, Mexico, or the United States—knows the value of gold.”
Courtesy: www.gobankingrates.com