As 2022 advances, many are still determined to be healthier, save better, and be richer. However, as interest rates continue to disappoint, the savings aren’t going to make anyone rich anytime soon, but Mr Rothschild has shared six ways exclusively with Express.co.uk that could work even better.
Many think of wealth as having lots of money on hand and even more savings, but in the modern financial world that is no longer the case.
Studies have shown that the average billionaire actually only holds about one percent of their net worth in liquid assets like cash.
This could be because, as interest rates continue to fall well below inflation rates, holding money in cash is just another form of loss in value.
The vast majority of the rich tend to keep their wealth in assets or investments that will follow and outpace the rate of inflation and this is what keeps them rich.
Former CEO and chief advisor to global investment firm BlackRock Asset Services, Mr Rothschild shared his six key tips for growing wealth the way the rich do in 2022.
Mr. Rothschild explained, “To create wealth is to own equity in a business. Whether it’s shares, owning your own successful business, part of a product, or a slice of intellectual property such as a work of art or a book, fairness is the key. Building equity means you are constantly making money, even during your downtime.
It is important to note that every investment carries a capital risk and that no result or return can be guaranteed.
Many fear investing because of these hard truths, but Mr Rothschild has revealed a few formulas that may reassure investors:
“For example, the return on equity (ROE) ratio will tell you how much money the company in question is making on invested capital. For example, a ROE ratio of 130% means that for every pound you invest, they will earn £ 1.30. The higher the ROE, the more profitable this business and the more interesting the participation will be for you. “
He continued, “Other key ratios to look for that will help you better assess a business are sales growth, gross profit margin, net profit margin, liquidity, equity, debt to equity ratio, operating cash flow, operating costs and profits of a business. Before Interest-Tax-Amortization-Amortization.
Make money with compound interest
Compound interest essentially adds interest to the original sum and to the interest it has earned since, generally building wealth faster and more easily than the simple interest used in most savings accounts.
Mr Rothschild said: “Investing in the stock market is the easiest way to build long-term wealth because it is actually a dialing machine, as long as the stocks you choose work consistently. . “
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Find asymmetric investment opportunities
Mr Rothschild explained that this would see investors choosing opportunities that offer more advantages than disadvantages, where the likelihood of a good return outweighs the potential risk.
“These types of investments support the philosophy of keeping enough cash to help you in case an emergency arises and you are forced to liquidate at an unfortunate time, resulting in a loss.”
Invest in the stock market
Investing for the stock market can seem daunting, and investors are advised not to invest more than they can afford to lose.
That being said, it’s been notoriously profitable for wealthy names like Warren Buffett and can be a straightforward way for investors to align their money with their values by backing companies with initiatives they resonate with.
Mr Rothschild noted: “However, understanding the risks is essential. You will be faced with two main types of risk: unsystematic risk and systematic risk. The latter is linked to macroeconomic events such as political changes and recessions, or pandemics, while the former is ad hoc affecting a specific company or sector. “
While unsystematic risk generally cannot be predicted or controlled, investors are generally advised to diversify their portfolios by having a variety of investments so that they can offset any industry specific catastrophe.
Mr Rothschild added: “Either way, investing in ETFs or mutuals rather than individual stocks is a better way to minimize risk, allowing you to spread your investment with minimal costs.”
He cautioned, “The types of mistakes I have seen in my years of investing include clumsy attempts to time the market, it doesn’t work that easily and you have to be stuck with a trading platform. at least 11 to 12 hours a day. 5 days a week to cover international markets. We then end up focusing on stocks offering a poorly thought-out asset allocation.
Think about the crypto space
Mr Rothschild began: “It is not for the faint hearted and should never be more than a small part of a diverse portfolio.
“Cryptocurrencies have gone way beyond the initial expectations of many economists and analysts who called them crazy gold. Of course, it is a high risk volatile industry and cryptocurrencies are volatile in value. However, Bitcoin, Ethereum, and many other competitors have shown that investing in crypto can be a viable way to increase your wealth.
The cryptocurrency market has taken the world by storm despite being relatively new to the space and the ramifications of this market now offer a wide variety of ways to build wealth.
Mr Rothschild explained the range of routes one can take in the crypto space: “Trade in the market the same way you would with other alternative assets or invest in a mining pool.
“Invest when the prices are low or when they have a big drop and wait for the next rise, it works well for cryptos.”
He advised: “When you make gains, take a portion of the profits and invest in alternative investments, as governments are considering introducing Crypto Yen, Crypto Euro and Crypto Dollar along with many others and at a time. given, severe restrictions or prohibitions will likely be imposed. introduced, it would drastically reduce the value of Cryptos overnight or could even render some of those exotic investments worthless.
“While it’s hard to make a solid forecast, average Bitcoin investments have returned 200% from last year, according to the latest IntechOpen report. Cryptocurrency is therefore a potentially extremely profitable investment. However, I would recommend that you invest no more than 5% to 10% of your investment portfolio in cryptocurrency, as it is a high risk volatile asset class.
Invest in real estate
Property and real estate have been a staple of investing for decades, and they continue to offer attractive returns for investors who buy in the right areas.
However, while many only look at the final sale for their returns, Mr Rothschild has suggested other ways for investors to increase their returns long before they sell or lease the property.
“For example, refinance your original loan at a lower interest rate. By lowering the base cost of real estate investing, you will increase the amount you earn. For residential investments, location of location is key. This will determine how much a piece of land or property will appreciate, desirability and limited supply lead to higher growth.
“Rather than selling, you can also make your wealth grow by renting. Real estate profits from rental income are regular, largely reliable and consistent. Whether you choose to buy and hold while leasing the properties, reverse the investment, or choose the increasingly popular option of Airbnb vacations or rentals, there are always ways to grow your wealth through real estate.