Why Picking The Right Investment Won't Make You Wealthy (This Will)

After 100 investments, I finally found the secret. And if I would have just listened to the greats like Warren Buffett, maybe I would have known it all along. But let me explain what that means. 100 investments in real estate projects that worked, real estate projects that didn't, stocks, crypto, businesses that have been bought and sold, exits, IPOs to public companies, private equity, venture capital, all of those types of investments. And the biggest lesson that I've learned out of all of that is definitely not pick a better investment. When I look back at that track record, almost every loss that I've had over decades have come from being forced to sell at the wrong time. And every single win, at least the big wins I've had, have come from being able to wait. Now, Warren Buffett's partner Charlie Munger told us that the big money is not made in the buying and selling. The big money, it's made in the waiting. And so this lesson compounds into telling us that it's not the right— not choosing, not picking the right investment. It's having the right system for the investment. So today I'm going to show you, I'm going to break it down. I'm going to show you what I finally learned after taking over 100 swings. I'm going to show you what I had to learn, unfortunately, the hard way so you you don't have to. You ready? Let's go. Before we get into the lesson here and explain to you exactly how you can solve this for yourself, let's just understand why we all fall into this trap in the first place. Because if you don't understand what causes you to fall here, you're not able to protect yourself properly. So about 100 years ago, John Maynard Keynes, the, the father of the Keynesian economic system that we have, was talking to Vladimir Lenin from the USSR, from, from Russia at the time, and he said that the best way to destroy capitalism was to debauch the currency, debasing the currency, inflating away the currency. And he said that by doing that, we could inflate the currency over and over until all relation to money is lost and it would break down so bad that the best way to get rich would be through gambling and theft. And that's exactly where we're at today. When you look across the world and you look at any number of countries today that are going through double or triple-digit inflation, you'll see that they all turn to some form of gambling and theft. And the reason why is that everybody realizes that that the rate of their pay increases is not keeping up with the cost of living. They realize that the investments that they've made with their financial advisor, their portfolio accounts, their 401 accounts, their retirement accounts, they're also not keeping up with the rate of monetary debasement, which is the real rate of inflation. And so when you realize that my work can't keep up and my investments can't keep up, what am I going to do? I have to go out further onto the risk curve, gambling. So going into crypto pump and dumps, trying risky option strategies they don't know anything about, I'm trying to day trade daily. Those are all forms of gambling. And so this is what happens at this stage. And so most people fall into that trap, but they go into this trap and they don't realize some of the most important lessons of investing. We're going to fix that right now. Let me give you an example of a true story of how I actually had to learn this lesson the hard way. So of course you don't have to. Now, a saying that I learned is that some lessons in life can't be taught. They can only be learned. And that means that unfortunately, sometimes no matter how many times you read about things or have been told things, you don't really learn it until you've had to live through it the hard way. That's what happened to me. Hopefully it doesn't happen to you. So let me give you a story. I started my career in real estate investing into the mid-'90s. Now, in the mid-'90s was sort of coming out of a big correction in the United States. And so for the next decade, every single project I touched turned to gold. Every single one. I could do no wrong. Even if I messed up the numbers, even if I messed up the time, like the rate of appreciation on those properties would make up for that. I was like, I was like the golden, the golden boy. Then the 2008 crash came. Now, most of you know about that, the great financial crash. It crashed the banking system around the world. And in the United States, it was set off by the real estate sector. And it was specifically hit hard in Southern California real estate, which is where I was at. If you want to know more how you can start using the WealthOS system to build wealth in your life, see the link down in the description. I had a project that I built. Maybe it was the final straw that took me down in 2008. And it was a mixed-use property, meaning that was retail on the bottom and then there was residential on top. Huge property, underground parking. And I had the project for sale for $12 million. I thought I was going to make a lot of money. I was going to get fabulously rich. Unfortunately, the market had other other ideas. And what happened is the price of that building started dropping pretty fast. I got an offer for $11 million, which is kind of a lowball offer. And I'm like, nah, I'm not taking $11 million. I want the $12 million. Of course I want the extra million of profit. Right. But the problem is that the market kept going down further and further and further at a very rapid rate. It went down so fast that the property value was now worth less than I owed on it. It went down so far that I had to end up giving it back to the bank. The bank ended up owning that property. The bank ended up selling that property to an investor for $4 million, not the $12, now for $4. My loss. Their gain. Now, today, that investor still owns the property. And my studio that you see me make videos out of most of the time is actually in that building today. I'm a renter from them. That building today is now worth about $20 million. So what happened is I was forced to sell at the bottom. If I could have held the building, today it'd be worth $20 million, way more than the $12 million, and I'd be very wealthy from that. And so the lesson here is that you never want to be a forced seller, because if you're a forced seller, you could be forced to sell most likely, that's why you're forced, to sell at the worst time. Assets are volatile. All of them. Bitcoin goes up and down. Real estate goes up and down. The S&P 500 goes up and down. And the key is to never be forced to sell. Always, if you are going to sell, make sure you're selling at the right time. Okay, that sounds simple enough, right? Well, just don't ever be forced to sell. But sometimes you have to, right? Okay, so how do we mitigate against that? Because life gets in the way. A lot of times your financial advisor is going to give you these plans and show you, well, just hold. If you just held Bitcoin for the last 10 years without realizing that life gets in the way, people get sick, emergency medical bills pop up, your kids need things, they need to go to college, my car breaks down, whatever it may be. So what we want to do is we want to plan for whatever life can throw at us, the risks. But what if? But what if? But what if? Write all of those what-ifs down and then we can engineer how to solve each one. Let me give you a couple of lessons that I learned in this specific story. So markets can go down temporarily. I understand that most assets have a cycle. For example, the age-old lesson in real estate is buy a property you don't plan to hold for at least 5 years. Why 5 years? Because traditionally we've seen real estate oscillate on about a 5-year cycle. Bitcoin moves on a 4-year cycle. There's never been a point in Bitcoin's history you could have bought at any peak ever and still been in profit 4 years later. The problem is when you don't understand the asset you're buying and the cycle that you're buying it in. And so I don't understand what I'm buying. I don't understand the cycle that I'm in, number one. So I bought Bitcoin hoping to sell it in a year for more money. I bought the real estate and I hoped I could sell it later. So number one, know what you're buying. Number 2, we have to mitigate for unexpected things. So what happens if I need that money in emergency money? I wrecked my car. I got sick, something like that. Okay, so now here's where we use something I call the 4 layers of liquidity. Now, the 4 layers of liquidity are really there for 2 purposes. Number 1, they're there to protect us, to mitigate the risk that we have of holding volatile assets. We need volatile assets because we need them to go up over time. We want to protect ourselves from holding them, number 1. And number 2, they're there to allow those assets to grow. As I said in the beginning, Charlie Munger told us the big money's made in the waiting. I have to wait for the asset to compound. So 4 layers of liquidity. Let me break them down for you. Layer number 1 is our cash. This is our operating expenses, our bank account. This is money that I have in the, in the bank right now. Today I can run my debit card against or send out a wire transfer. Typically, you're going to need at least a minimum of 0 to 3 months. If you have investments, if you have loans, if your income is lumpy, meaning like you're work on sales commission, big commissions that come in sporadically, then you might need more. If you have a business with lots of bills going out, you might need even more. Maybe you need 3 months, 6 months, 9 months, whatever that is for you. So if an unexpected, you know, bill pops up, tenants don't pay the rent, they trash my property, they leave, I got to pay to fix it up before I can move new people in. I should have the operating expenses, the cash on hand to cover that. Now, what happens if it's more extreme than I planned for? It's more catastrophic. It takes longer to rent the property out. My medical bill was even higher. Well, then I have liquidity layer number 2. Liquidity layer number 2 are investments that I'm making money on, but they're cash equivalents. They're not cash, but they're cash equivalents, meaning they can be turned into cash very quickly, typically less than 48 hours, for sure less than 7 days. And there should be no volatility because I need to be able to sell it at a moment's notice. There can be no volatility. This could be Treasuries, could be money market accounts, could be income assets like stretch and SEDA, things like that. So I could be making 5, 10, 12, 13% on this. But they're cash equivalents. Now, let's say that I burned through layer 1, I burned through layer 2. This is a really bad downturn. I'm out of a job longer than I thought. My tenants messed up the building way worse than I had planned for. Then I tap into layer 3 liquidity. What is layer 3 liquidity? Layer 3 liquidity are assets that are collateral assets. Now, one of the first things we have to do is we have to understand that assets are like tools in a toolbox, meaning each asset is bought for a very specific purpose to accomplish a very specific thing to help me achieve my very specific financial goal. All assets are not the same. They shouldn't be. And they weren't bought and designed for the same thing. So we do something called a balance sheet X-ray where we have to understand and break down all of our assets into 4 categories and then in a matrix of 4 levers. If you want a video on that, leave me a comment down below. I can break that down. But for this purpose, in liquidity layer number 3, we use collateral assets. These are assets that I can use as collateral for more liquidity. So this could be a home or rental property with a HELOC against it. I can tap into that money. Could be Bitcoin. That I could issue credit against. It could be any number of assets that I could issue liquidity against. So in this example, you start to understand that cash is liquidity, but all liquidity is not cash. So if we go through 1, we go to 2. If we go to 2, we go to 3. And then if we, if we fall back past 3, we could be forced to start selling some assets. We don't want to. And that all is to protect layer 4, which layer 4 are assets that are not really good for liquidity. That could be land in Bali, that could be a private equity investment that's not liquid and things like that. Okay. So that's one of the main ways we mitigate our risk as we build this wealth operating system portfolio. And it all comes down to, again, never being a forced seller. As Charlie Munger said, it's made in the waiting. Make it in the waiting. As Warren Buffett said, never lose money. So we build that system out. Now, if you want a full system so you can build 3 wealth engines that compound together to compound wealth faster and forever without ever being forced to sell, you might want to watch this video that explains the whole thing right here. And I'll see you over there.