Investing For Entrepreneurs: My Strategy For Wealth & Passive Income

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S welcome back to capitalism.com thanks for hanging out with me. We just completed our quarterly meeting. We get together every three months as a team for two days and map out what changes we're going to implement in the next quarter to make things better, faster, easier and more helpful to our members and our students. And this, this last meeting we had this theme of making everything simpler and simpler and faster and easier. It was a big lesson that I learned in the past three months of we sold out the capitalism incubator, which was 25 people premium price point, didn't have a big sales page, didn't do a big launch and sold it out just by keeping it really simple, keeping the sales process really simple, keeping the promise really simple, not trying to overdo it or oversell it. And we sold it out. And we sold it out quickly. We sold it out ahead of the deadline. And we're all so pumped about the way we're doing this. We kind of have bets internally like which one of these do you think is going to be the next great story? Which one of these is going to be our next, you know, big success that we talk about for years to come. So we've been keeping that mantra of keeping things very simple and very clear moving forward. And one of the things that we knew we needed to get clearer on was what's the 1% about what's it for, who's it for? And what transformation do we help our members have? And that was the discussion for a day and a half or two days when we were getting together and going through everything in the business. And essentially what we've decided to do is we've got these four core trainings that address a different milestone in the entrepreneurial journey. One is all about mindset and vision and becoming the type of person capable of, of running a seven figure business. One is about casting the vision for a seven figure business and deciding on those four products that you're going to sell 25 a day of, that's a million dollar business. One is about building the audience and launching it profitably. And one is about investing for passive income and for wealth, which is what we're going to talk about here today. And what we decided was that those four core trainings are going to be our curriculum inside of the 1% moving forward. And our regular calls will simply lead people through that curriculum so that people join the 1% to have the one year plan to have financial freedom by being a capitalist. And it felt so good to get that as clear as we have been for some of our other trainings. So we're feeling really clear and excited moving forward. One of the decisions that we made was that our first kind of quarterly focus around that curriculum would be on investing and cash flow. So we have this training inside the membership area of the 1% that's called the millionaire class and it's a 10 part training. We previously sold it for $5,000 and it's in the members area of the 1% to serve as the foundational curriculum about passive income, deferring taxes and growing your wealth. And we're going to be going through that October, November and December. And today what I want to do is go through the cliff notes of the overall mindset and methodology that we walk entrepreneurs through when it comes to developing passive income and a long term wealth strategy. Entrepreneurs are a different type of person than most of the rest of the world. So we are not satisfied by most of the wealth education that exists. We tend to be a little bit more risk tolerant. We like big juicy returns, we like business investments and understanding the business side of it. So the idea of putting money into an index fund doesn't really excite a lot of entrepreneurs. Plus we tend to think that all of our money should stay in the business. And so we tend to not invest as much as some people who have more predictable incomes. Like people who work normal jobs often invest more than entrepreneurs because people who work normal jobs have predictability of income and so it's easier for them to take a small chunk of that and, and put it into savings or into long term investments. Entrepreneurs don't have that same luxury of predictability. So we tend to have feast or famine times where we will make a lot of money and then spend it or we will have times where we're tightening the belt and our money has to stay in play in the business. Well, what I want to go through today is the overview of the investing philosophy that I teach to our members. And, and as always, whenever I'm talking about money and investing, I like to Add a little asterisk that I am not qualified to talk about this at all. I don't know anything about what I am talking about. I am just some dude on the Internet that you found on a podcast and anybody can have a podcast. So you shouldn't listen to a thing that I say. In fact, you should just probably do the exact opposite of what I do. Cause I've made so many mistakes that that I'm mostly qualified to talk about what not to do. So don't take my advice over somebody who should be worth listening to on this. I just happen to have gone down the rabbit hole of learning a bunch of things and implementing a methodology that seems to work for me. And when I talk about it to other entrepreneurs, they find it really helpful for them too. And the foundation of my investing strategy is, and this is also true if somebody is just starting out on their journey, is that the first investment that needs to be made is in developing an active and responsive audience. I use the word audience a lot in a lot of my trainings. But what I'm really talking about when I say audience is a group of people that you can communicate with on demand and tell them about your products and your services. I did a training on YouTube for one of our 1% trainings. That was how to have a six figure income with a part time effort. And it was all about how if I lost everything, then my sole focus would be developing a responsive email list and marketing to my email list. The purpose of content is to keep your email list engaged. The purpose of your email list is connection and purchases. Most of the purchases that happen happen via email list. Everything else is acquisition. To this day, email is still the highest converting mechanism for sales. So all of your ads, all of your front end content, all of your Amazon transactions, all of your content just exists to build a very responsive audience. And to me, that is an email list. So if you've got an Instagram following, if you've got a podcast following, you should be using that leverage to build the email list and do all the converting via email. This is also true with Amazon. If you have a successful Amazon store, you should be getting in front of those customers and getting them onto an email list. And that's when you can have a real predictable launch system because you've got people who want to hear from you when you have a new product release. So what does this have to do with investing and wealth? Well, investing and wealth generation is all about having assets. It's all about having assets that put money into your bank account. Robert Kiyosaki talks about the difference between an asset and a liability. And he argues that an asset is simply something that puts money into your pocket and a liability is something that takes money out of your pocket. So the house that you live in is a liability, it's not an asset. But to be rich, your goal is to acquire cash producing assets, things that put money into your bank account. And the most reliable thing that puts money into your bank account is the audience that you control. It's the customer list that buys from you over and over again. It's the previous purchasers who come back and buy, unsubscribe and save, or join your continuity program or pay you every month or buy every time you have a product launch. It's the most predictable way to ensure that you're always going to be profitable in your business. So if you do not have the ability to hit, send and make money, then your first investment is your audience. That is the thing that will drive the cash flow for you to be able to do all of the other things that you will want to invest in. And without it, you will never have predictable income and you'll never be able to have profitable launches. I was once asked a question, if I only have $500 a month to be able to put into a business, what would I put that in? And I told them they should be amplifying their best content with Facebook ads and they should be sending that content over to an email list. That's how you can build enough of an audience to ask them what they would want so that you can launch products more predictably and more profitably as well. So the foundation of my strategy for investing is to have that responsive audience that you can tap into in order to have predictable sales. Now what about from there, when you have a business that is taking regular sales, the next kind of layer up on the investment strategy is, in my opinion, dividend paying stock. Dividend paying stock is the one long term investment that if I can convince people to do, will radically change their lives and their financial futures. Now, I prefer dividend paying stocks to other investments because when you run the numbers, dividend paying stocks have the most long term upside in a lot of cases. Now this is assuming that you are not able to predict that Zoom is gonna become $100 billion company, or that Netflix is gonna go from a $50 billion valuation to a $300 billion valuation. If you can stock pick, then you're better than most financial advisors. But if you can't stock Pick then. The foundation of my strategy is long term dividend paying stock. And the reason for that is because there's something called that I call, I don't know if anybody else calls it, but a double compounding interest with dividend paying stock. There are two different ways to compound your money. The first is by dividend reinvestment plans. So when you have a stock and it pays you a 5% dividend and you're getting 5% of your money every year, you can have the option to take that money out or to use it to buy more stock. Well, if you use it to buy more stock, then over time this compounds because that 5% buys a few shares this year and a few shares next year, and then the year after that and the year after that. And all the while you continue to buy this income that goes up and up and up and up. So the 5% actually becomes more like 5.5% or 6% because you continue to reinvest those dividends. There's another way that this compounds, and that is because I only buy dividend paying stocks that have raised their dividends predictably every year for at least 10 years. So if a company has continued to raise its dividend regardless of what the economy has been doing and they've shown consistent growth for 10 years, then I can reasonably expect that that company is going to continue raising their dividend for quarters and years to come. So if a company like Target, which is one of these dividend aristocrats, they're called, a company that's raised its dividend consistently every year, If Target pays 3% this year, and it has a history of raising its dividend by 10% a year, then that means next year it's going to be 3.3% on my original money. And then from there it's going to be 3.6, then 4, 4.4, 4.8, 5.3. You see where this is going? So every year your percentage of a return goes up a little bit. Now, when you combine these two things, when you've got the compounding interest of buying more stock and you've got the compounding interest of the dividend amount going up, every year you have a double compounding interest. So your first few years of doing this aren't very sexy. Getting 4 or 5% on your money isn't going to turn any heads. But in year 10, the numbers get real sexy and we're not even factoring in if the stock goes up in value, if the stock goes up in value, then the appreciation adds to the additional ROI on your money. So when you combine all of these factors and you can expect that a stock is probably going to go up in value over the long term, you're going to be getting dividends every year and that's going to go up over time and you'll use it to buy more stock. The numbers over the long term get very sexy. So what I suggest to an entrepreneur or to somebody who is entrepreneurial and still working a full time job to take 10% of your take home income after taxes, after.

Whatever you take in that money, 10% of that should go into long term dividend paying stock that you are just never going to touch. And that will compound and grow very quickly. And as it continues to appreciate in value as it goes, as the dividend rises, you'll see that income start to climb. Here's the weird thing about dividends. You know how this year's been weird, have you noticed that? And the stock market's fluctuated from the Dow Jones industrial average being 30,000, then 18,000, then 27,000, then 24,000, then 28. It's going all over the place. Well, when you're buying cash flow, when you're buying dividend paying stock, you aren't so concerned with the paper value of the stock market and the paper value of the dividends that you're buying. Because all we're really concerning ourselves with is the cash flow that we're gonna get over time. So when the stock market goes way down in value, that means cash flow is on sale.

You follow that if you're gonna get 5% dividend on a stock that you like right now and then it floats, falls 25%. Well now you're gonna get a 7% return on your money year one. That's really good. And so we're not so concerned about where the stock market is, we're concerned about where the company is going and has gone over the last 10 years and what it's gonna pay us in terms of a dividend and if they're gonna raise that dividend over the next several years. And that allows us to relax a little bit and stop trying to predict what the economy or the market is doing and simply buy companies when they are on sale. An example I like to use is this is probably nine years ago now, Target had a credit card leak. And Target got just taken to the cleaners in the news because people didn't think it was secure to shop there. And what happened was they're stuck, just absolutely got crushed. They fell to like $50 a share. And at the time, that meant that if you bought, if you bought Target at that price point, they were paying about a 4% dividend. And a 4% dividend is my target to say, okay, cool, I like this stock. This is enough of a dividend to reward me taking this financial risk.

Well, I knew that wasn't gonna last long. I knew that the credit card leak was only gonna be bad news for like six months. So I bought a lot of Target stock at that $50 price point. And now I've locked in a 4% yield for the next however long, probably at least 10 years. But I also know that I'm gonna reinvest those dividends and that they're gonna continue raising that dividend. So I'll probably average more like a 7 or an 8% return when things are all said and done. But then Target made a massive company comeback. And at the time of this recording, Target is worth about over $150 a share. So not only did I get cash flows of 7, 8% per year, but I also tripled my original money. So 8, 8% is great if you've got it in the bank, but if the bank triples your money in that time too, that's good. That is a good return on investment. And you just can't get that from any other source except for dividend paying stock. Another example that we gave to our members inside the 1%, when Covid was at its peak, we did this report of stocks we were eyeing during COVID was a company called GPC Genuine Parts Company. And GPC is a company that has been around since like the 1920s. And they're a parts company and a distribution company for car parts. They've been around forever. They raise their dividend every year. And they're a stock that I track and have tracked for a long time. Well, GPC got up to about $100 a share at the end of last year. The beginning of this year when Covid hit, they fell by 50% and they bottomed at like 50 or $55 a share. Well, at that bottom, GPC had a dividend of five and a half or six percent, which is. That's juicy. Six percent is great for a company that has been around for a long time. And so if we bought at that time, we could lock in a 6% return for the foreseeable future. For a long time. Right. And again, that dividend's gonna go up over time. We're gonna buy more shares. So it might End up being more like 9, 10 or 11% return. Well, that's great. If we can get 10% average return on our money, we're happy. You know, we're happy at about 8%. Well, GPC has recovered since then and now they're trading back near that hundred dollars a share mark. So your original money has doubled but you still locked in that dividend rate. That is going to be cash flow for years to come. So this is why I like dividend paying stock as a foundational piece of my investing strategy and why I encourage entrepreneurs to consider it as part of their portfolio as well as.

Now that's kind of my foundational piece and my recommendation is that entrepreneurs and other people carve out about 10% of their take home money to put into dividend paying stock every month. Hopefully when you're running a business, you have profits at the end of your year and when you have profits at the end of the year or at the end of the quarter, whenever you do distributions, that's the time for you to pursue other types of investments. Investments that are a little bit more risk tolerant but have higher upside if they go well. For example, I like to put my money into syndications. Syndications are private investments where people are raising money for a specific deal. For example, I have a buddy here in town, his name is JP Newman. He runs a syndication called Thrive, Thrive FP for profit, for purpose. And they buy apartment buildings all over the country, but their heavy emphasis is here in Texas. They do syndications where they'll raise money from investors and they'll pay a percentage of their profits to those investors. And depending on the sector, if it's apartment buildings or it's commercial buildings or commercial lending, sometimes there's been cryptocurrency syndications. Depending on how the person who is doing the raise performs, they're going to pass a portion of those profits out to investors. One of our former backroom members has a syndication where they buy apartment buildings and I invest with them and it's been my best performing cash flow asset for the past year. So they've been paying me every quarter, you know, a percentage of profits from those apartment buildings and my money is still tied to the original asset, which is apartments. And in this case, so at the end of every quarter, at the end of every year, we take our profits and we decide where we're going to put that in order to have even more cash flow being sent to us. So that's from real estate. It could be from if you're into cryptocurrency you could put it into cryptocurrency. If there are other stocks that you want to buy that are more growth stocks, this would be the time to buy those. If you want to invest in other businesses or if you want to put your money into a fund like the capitalism.com fund, that's where you would do this. You would do it with the profits that are left over at the end of every quarter or every year. And the reason for this is because if you wait until the end of the quarter or the end of the year to make that distribution and then go put your investment somewhere, you're less likely to piss that money away, you're less likely to waste it. You're more likely to make those good long term investment decisions. And if you make a bad decision, then it doesn't take away your bread money. It doesn't hurt your business, it doesn't hurt your investment. Nut it only is a one time bad decision if you make an investment and it goes to zero. All right, you wasted this quarter's profits, but you still have your salary, you still have the investments that you made. You made one bad decision, but move on. Next quarter is another quarter, next year is another year. So we make our more risk tolerant investments with the profits of our business every quarter or every year. And preferably we are putting that money into tax efficient investments. So real estate is tax efficient. Businesses can be tax efficient. Dividends are tax efficient. Stocks that go up in value over time are tax efficient because of capital gains rental. Real estate is tax efficient. These are all ways that we could theoretically pay less taxes. And my rule that I teach entrepreneurs is the best time to pay taxes is always later. It's always later. I disagree with some of the wealth advisors out there who suggest taking the tax hit now for tax savings later. I think the best time to pay taxes is always later because later you can take the growth of your of your wealth and invest into more deferred tax investments. So always later, always later, always later. My opinion, another example of one of these types of investments for your end of the quarter or end of the year would be a life insurance policy. So I use a capital warehouse where I park some cash. It grows at a tax efficient rate. I can borrow against it. And I basically have two forms of growth. I have the growth of.

The policy growing over time and I have the growth of what I put my cash into when I borrow against the policy. So I have two forms of growth there and both of them are tax efficient. In doing so, all right, I'm going a little bit in the weeds here, so please forgive me, but that is my overall philosophy for investing for entrepreneurs. You have the audience being the foundational driver of everything. You have dividend paying stock being the central part of, of your long term wealth strategy. And then you're taking the profits every quarter or every year and putting it into other investments that you don't need to perform, but will grow over time and continue to pay you cash flow. Now, where do you get to buy a car? Where do you get to increase your lifestyle? You get to do it in two ways. The first way is, is when you have enough passive income for you to grow your lifestyle. That's the time to grow your lifestyle. If you make $100,000 and you take that hundred thousand dollars and you use it to buy, you invest into a real estate fund that pays you 10% income per year, you can increase your lifestyle by $10,000 a year. So if you want to go buy a bigger house, you can go buy a bigger house. Your mortgage can't be more than a $10,000 per year increase. You can now live off the passive income of that real estate fund. So we don't increase our lifestyle by the $100,000 that we got, we increase our lifestyle by the $10,000 that the 100 grand is now paying us in passive income. Now what this means is when that investment matures, we're going to get our $100,000 back. So you can have the bigger house, you can have the passive income, and you can still have your hundred grand. When you do it this way, if you just take the hundred grand and spend it now, you'll get the liability that you bought with it. You don't get any interest and you don't have the hundred grand anymore. I have one of my most watched videos on YouTube is how I quote got a Tesla almost free. And basically what I did was I had the hundred grand to pay for the house, for the pay for the car. But what I did instead was buy a rental property that paid me $1,000 a month in profit. And I took the thousand dollars to pay for the car. And now I have the car. I have an asset that still has my hundred grand in it. And those things are going to grow over time. And, and I use that to pay for the car rather than just spend my money on the car. So that's my philosophy. That's when we get to increase our lifestyle. The second time we get to increase our lifestyle is when the government rewards us for expanding our lifestyle. For example, if you buy a certain type of commercial vehicle, which could be like a Hummer, then you can increase your lifestyle. If you can buy a bigger house and write off part of the house as an office, then go buy the bigger house because it's going to actually be the same cost. At the end of the day, the write off is going to offset some of the increased cost. So when the government incentivizes us to increase our lifestyle because there are certain behaviors that are favorable in the tax code, that's when we could consider increasing our lifestyle. But we don't just make our money in our business and piss it away onto a bigger lifestyle. We buy the investment first and we use that to pay for our lifestyle. We buy assets that pay for our lifestyle. So this is my overall investment philosophy. And if you follow this, you'll be in a much more controllable position of your finances than most people who are making money and then spending money and making money and wondering why they never get ahead in business because they're always worried about money. Now I'm doing a class for the 1% that goes a lot deeper into this. So I'm doing a class that goes through this methodology and you'll get our course, which is called the Millionaire class, which is about making your money and keeping it and growing it over time and not paying tax on it. We'll be using that as our foundational course and I'll actually be doing live trainings that help you go through that and also update it for current times. I'm also going to be joined by Tom Wheelwright who is kind of the entrepreneur advisor when it comes to the tax code. He'll be joining us on one of our upcoming lives and I will also be talking about how I use options to generate more cash flow from my investments. So there are ways to use options in a non risky way, a low risk way to generate more cash flow on the investments that you want to make. So I'll be holding a class classes about that for 1% members as well. If you'd like to join us, just hop into the 1%@Capitalism.com 1 and you'll be able to attend these classes and also go through the training that's in the members area about building wealth and protecting it and growing it over time. So if you found this valuable, I'd love to see you inside the 1% for our upcoming trainings that go deeper into this topic. If you know an entrepreneur who is struggling with this, please forward this episode. To them, you may just change their life. Thanks so much for listening to capitalism.com I hope to see you on our upcoming trainings inside the 1%. And until then, I'll see you on the next episode. Take care. There are two kinds of people in this world. There are members and non members. If you are enjoying this stuff you have got to join us inside the 1%. 1% members get access to our courses on building businesses and investing the profits. They get access to experts who are bringing in lessons on a regular basis, some of the best in the world. And they're joining regular calls with myself or members of my team to keep the community growing. The 1% is a community of entrepreneurs who are actively building businesses and investing the profits. And every month you get a community newsletter to see what's going on in your community and what the opportunities are to create the change that you want to see in your world. Join us@capitalism.com, the number one that's capitalism.com 1.