People often associate wealth in having lots of things, like cars, diamonds, houses, the newest 3D LCD television, the latest iPhone or other such things. But is real wealth actually all of that? Or is real wealth actually something entirely different?
To generate more wealth, people work harder, invest in stocks, invest in property, buy life insurance, or hold money in the bank. Lets look at each one of these in turn. Mind you, I'm not a financial adviser, I'm not an economist, I'm not a banker and I don't sell insurance. In recent times, I've found a few ways to increase my own wealth which is starting to pay off. How much more wealth can come my way?
I realize that there will be arguments for and against what I'm writing here. The intent of this article is just to raise awareness of how you, as an individual, can generate more wealth for you and your family.
As to being wealthy by having the latest gimmicky electronic device, that's not really wealth. That's just being able to spend your wealth on something that devalues instantly. Yeah, you might look really cool walking out of the shop with a 3D LCD TV but drop it and its worth nothing. You even have to pay the rubbish tips a fee for them to dispose of it.
Working harder. Ok, what is working harder? Does it mean that you spend more time at work? Yes, it can. Does it mean that you start to sell your soul to the company? Yes, it can. Does it mean that you'll have more money? Yes, it can. But it can also mean that you have less time for you, less time doing the things that would nurture you. Is that something that you'd really like to do?
Invest in stocks. Investing in stocks can mean that you'll make a lot of money. Yeah, sure, you'll make 8 to 15% per annum on your money, if you invest in the "right" stocks. If you invest in the "wrong" stocks, you can lose some or all of your money. How would that be? If the stock market falls, all of your stocks fall also and, thus, you lose money. Of course, there are people that make lots of money regardless of whether the market is rising or falling. To do this, you need to be a professional in stock market trading. In addition, if you're just starting out, you'll need to start with a minimum of $1000. Sometimes you don't have that money lying around.
Invest in property. Investing in property is often seen as a great choice when increasing your wealth. You can develop it. You can rent it out. You can sell it at a higher price. All of that sounds really cool. There is one downside that I'm aware of. If you're just starting out, then you may be at a disadvantage because you need a few $1000 just to get started which you may not have. Of course, you could join a syndicate and do it that way.
Buying Life Insurance. Ok, buying life insurance sounds like a good idea to some. For me, it doesn't. Why would I pay money to a company for a pay out to my family when and if I die? Ok, to be altruistic, it sounds like a great idea so that when and if I die, my family will be ok. A lot of insurance companies are also on the stock market and, if the stock market falls, what happens to your insurance cover? Simple. The company won't have the money to pay your family if you die. What if there was better ways to generate wealth and also enjoy it along the way?
Holding money in the bank. People often say that "its as safe as money in the bank." Is money really safe in the bank? Banks are increasing their fees all over the place. Just the mere fact of holding your money in the bank, the bank takes a management fee of some sort. They take away from you a small amount each week, month or year just for the privilege of having your money in the accounts. Also, a lot of banks are now on the stock market and, if the stock market falls, so does the value of your money in the bank. So, is money really safe in the bank?
Ok, so if none of those are good, what is left? You can invest in money/currency, precious gems (like diamonds) and precious metals. Lets look at each of those in turn.
Investing in money. Investing in money sounds like a great idea! I can trade one currency against another and make money along the way. Cool, eh? Ah, no, not really. The value of currency in countries in determined by decree or fiat. This means that the government determines its value. The value of the country's currency is backed up by gold and silver. In effect, the wealth of a country is determined by the amount of gold and silver it has in its stores. But, there's a catch, a lot of countries are in debt and to pay off those debts, they pay it off with gold and silver. With each payment, the amount of gold and silver in the country's stores diminish. This has the like effect of devaluing your dollar. To balance out this effect, the country institutes that thing called inflation in an attempt to keep the value of the dollar high. Unfortunately, this just means that you pay more for the same goods. You, the consumer, are the ones that are paying off the country's debt.
Investing in precious gems, like diamonds. These little carbon-based rocks are awesome to look at, to hold and to wear. They're often given as a gift from the man to his lady as a sign of impending marriage (a wonderful marketing campaign from De Biers in the 1940s). Investing in diamonds can be be awesome idea. They are small, are high value and highly sought after. But, are they a great idea to invest? The diamond market is highly controlled by De Biers. They control the supply and, thus, the value of diamonds. Actually, diamonds are highly abundant on the planet and it is only through the control from De Beirs that keeps the value high. If De Beirs where to actually lose control of the market, then the value of diamonds will drop quite dramatically. That little rock on your finger may have been worth a lot when it was bought and has huge sentimental value but that counts for nothing after a separation, you die or something else. It is what it is, a carbon-based rock that's highly abundant on this beautiful planet and not really worth all that much. Of course, if you have lots of diamonds, then you may be wealthy.
Investing in precious metals, like gold and silver. As previously stated, countries are judged on their value by the amount of gold and silver they have. The more gold and silver they have, the more valuable that country happens to be. What if you could apply the same thing to yourself and your family? What would that be like? Do you remember the old saying about the "family silver"? What if that were actually true?
Hang on! The value of gold and silver raises and falls too. Yes, it does. But that is measured against the currency which, as we've discovered, is a manufactured value. Gold and silver have intrinsic value and are not really subject to the daily highs and lows of the market. History has always shown that regardless of what is occurring in the market, gold and silver are a real measure of your wealth.
Ok, so where can you get gold and silver? You can get these precious metals as bullion, coins, jewellery, and other items.
Buying bullion. You can buy bullion products in 1oz, 5oz, 10oz, 1kg, 10kg or 30 kg. Here in Australia, we can purchase gold and silver the Perth Mint. We can also purchase these through bullion dealers and, sometimes, at auctions. Please don't buy bullion products through eBay unless you're buying through a reputable dealer. Be aware of who you're dealing with.
Buying coins. You can by coins at coin or numismatic dealers, eBay, via auctions and at mints. Buying coins at mints usually have an added premium to their value because they are minted to a certain amount as a collectors item. If that interests you, then go for it. There are lots of old coins, like the Australian 1966 50c coin which was minted with 80% silver. In this particular case, the silver weight value was more than the actual currency value so lots of them were melted down to extract the silver. This has occurred in numerous other countries, including the USA. Check out the American Eagle coins.
Buying jewellery. Jewellery has a premium added to it because its, well, jewellery. Good jewellery valued at more than $2000 is really the only sort of jewellery you should invest in. Alternatively, you would invest in antique jewellery that has lots of gold in it. Not only is there the value of gold itself but also the antique value.
And, there's the family silver. If you buy silverware, make sure its sterling silver as that's 92.5% silver. Anything less is termed "junk" silver and, although good, is not as great a sterling silver.
The essential point is, the more gold and silver you own, the more you are protected against the daily woes of the market.
Have fun and enjoy the gold and silver that shows up in your life.