Finance Expert Ranks Best and Worst Investments

Hey there, real quick, before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience Live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. We all know the types of investments that you invest in have a big impact on building wealth. But the problem is that no one ever told you which ones to trust, which ones to avoid, and which ones to just simply laugh at, you know? So if you've ever felt overwhelmed by the endless options of what to do to build wealth or worried about, oh my God, am I pouring my money into the wrong investments? This episode's for you. Because today I'm going to break it down for you. I'm going to rank the investments like you've not seen before. I'm going to talk about the absolute champions, the hidden gems, the gambles, the things that are going to drain and cause a disaster to your wealth, and the things to laugh.

Here's what I'm do. I'm going to, I'm going to jump to my iPad and we're going to break it down. But before we do that, I want to talk about the tiers so you understand what tiers we're dealing with and where I'm going to rank them. And the very first tier is what I call wealth champions. Now, wealth champions, this is the best of the best. These are the investments that give you consistent returns. That's long term growth. They're reliable. These are the cornerstones of your money machine as we do it. These things are like index funds and certain types of real estate and those kinds of investments that pay you while you're asleep. If this were a relationship, this is the long term relationship that makes you financially happy. Now, that leads me to, that's the S tier, the A tier. The next tier down is what I call growth engines. And these are the, the strong performers. They might need a little more strategy, they might need a little more work, but they can deliver some solid returns. They're, they're good investments. They could be dividends, stocks and things like that. This is the, this is in, in dating analogy. If I keep that going, this is the steady but kind of quirky partner. All right, then we go down one more. That's the B tier. That's hidden gems. This is the investments that could be great under the right conditions, that given enough time, given enough work, that they can be really good investments. But they're not universally suitable for everyone and they take on a bit more risk. They could be, these could be things like collectibles and stuff like that. We'll talk about the ones that fit into that category. And keeping the analogy going, this is that mysterious charmer who needs a bit more attention, if you know what I mean. All right, and that leads me to the C tier. The C tier, these are the moonshot manias. This is the high risk, high reward, high hype. These investments are thrilling. It's a roller coaster ride that often come with a high chance of failure. So this, in the dating analogy that I'm doing, I don't know where that came from, but it's the bad boy or bad girl that your parents warned you about. And then the last tier, the D tier, these are the wealth drainers. These are the destroyers of your wealth. These are financial disasters waiting to happen. Think timeshares and things like that. This is the last dating analogy here. This is the X you keep regretting going back to. All right, so let's jump in, let's look at different investments. Let's start to rank them, let's start to put them in place, and let's give you some things to work with. Now I'm going to start off with index funds and ETFs. When we look at index funds and ETFs, this is, these are one of the best.

Investments from a long term investment perspective that's out there. Okay. Warren Buffett loves it. I love it. The majority of my portfolio is built off of these things. They're low cost, low fee index funds. It's a diversified portfolio. When you look at index funds, the right index funds over the long term, they grow. Okay. They'll go up and down in the short term, but because of diversification, the market goes up. It's been shown that, that hedge fund traders in the long term cannot beat the market. So why are we trying to beat the market? Let's just be the market and we get index funds. So I'm gonna, I'm gonna put index funds in, in the wealth champion. So I'm gonna put index funds here. Index and ETFs are gonna go right here. Okay, that leads me to this one. So that's, that's the index funds collectibles oh, my gosh, collectibles. Well, these are the ones that I think that we need to, to consider on two levels. They can be hidden gems. I'm going to put them here. Now, collectibles could be art, it could be wine, it could be all kinds of things. My wife thinks it's shoes, but collectibles could be here. But these are things that, man, they can do well. But I, I don't. You don't know. In fact, if you look at art in general, I was listening to a recent podcast and they were talking about if you look at a popular artist, a Picasso or something like that, it's only a couple of their paintings that became tremendously valuable. But they can be hidden gems. But you have to be an expert in understanding whether you're dealing with memorabilia, Pokemon cards, artwork, wine, all those things, and know that you're sinking money into it and there is no return on investment unless you sell it. Okay, So a painting on a wall that appreciates in value doesn't really do anything for you. And it's not really part of what we talk about. In my book, that's a money machine asset because it doesn't help you pay your bills, it doesn't fund your lifestyle. And so unless you sell it. And so it's something to think about. Now, the other, the other place that I do think that you can possibly classify.

The collectibles in is also down at the moonshot, because you might be getting into something that is new and that could take off, but then you have other things that just don't take off. And we saw this with NFTs and those types of considerations. So there are a lot of different ways to look at it. So I put collectibles in kind of two categories. That leads me to money market funds. They're wonderful assets to invest in, but I don't see them as wealth champions. And here's why. I'm going to say that they're protective assets that allow you to protect your wealth. But you're not going to get wealthy from money market funds. It's a place to put liquid funds that get you something more than a savings account rate. But for instance, if you invest $5,000 a year for 40 years, $200,000, and you invested in an S&P 500 index fund, over time, over that time frame, it's going to turn into a million and a half dollars. Okay. If you do it into a money market fund that maybe gets you 2%, it's only going to turn into $300,000. A far cry from a million and a half. And so that's why I look at it and say these are really good assets to have. But I don't look them as wealth champions. I look at them as growth engines. I put them here, money market funds here. They're a ballasting, there's a safety mechanism they allow you to, to do that. Now that leads me to timeshares. Oh my gosh, timeshares. This is one of those that I look at and without, without question it's down here. A timeshare is a money suck. Now I know that there are some people that sit back and they swear by it, but you get taken in by these sales pitches and this magical thing that you're going to be able to vacation all over the place and everything and you end up with this albatross of having to pay fees every year for something that maybe you're not using as regularly. And it's a long term investment and it's hard to get out of. I'm not a fan of timeshares. I, I think it's a wealth drainer. I would rather put money away and take a separate vacation versus putting money into a timeshare that really isn't a sellable asset that without taking a huge haircut on it. So I'm not, not a fan of timeshares. Then we get to cryptos. Oh, the old cryptos. This one I'm going to put in two different categories here and that is this. I'm going to put it here as. And I may get, I may get some ha for this. I get it. But I'm going to put it here as part of the moonshot because I don't know that it is overly established yet and accepted. Now is it a real investment? Is there a utility there like a company that has cash flow, has operations, has growth? No, but it does have some value if you're in established and this is the key. Established establishment, established coins. So basically Ethereum and Bitcoin primarily. And so I think that you have the opportunity to make a lot of money here. Do I think you should put a lot into it. And there are people out there that they put everything into it. I'm not, I'm not a fan of that because the volatility in these things is huge. So I put it in a moonshot mania. But then I also will put it down, down here as well. Drainers and, and this is not for the bitcoins or the Ethereums of the world. It's for those altcoins, it's for those unestablished coins that I think can get you in trouble. We've seen it, we just saw the, the, to a girl, the do that. And that was a pump and dump and it became a scam. And so I think that when we talk about investing, when we talk about building a money machine and building long term sustainable wealth, we want to do things that, that will sustain ourselves over the long term. We're not looking for quick fixes, we're not looking for get rich quick schemes. And that can get us in trouble. Okay, so that's how I look at that. Real estate. Real estate. I love, I love real estate. But I do not love real estate as the starting point for your wealth unless you have a passion for it, an expertise in it, and you, and you have the ability to do it. Here's why I don't do it and this is why I look at real estate. More in the growth engine here than wealth champions is because especially when you're starting out to get into a piece of real estate, it's going to cost you a lot. You know, you have to get the down payment. If I wanted to get into an index fund, I could get into it for $500. I can't get into a piece of real estate that way. I'm going to need 10,000, I'm going to need 5,000, I mean 50,000. So I'm putting a lot of money into a single asset. But not only that, I have to operate the asset. And if I am wrong in the asset that I bought, if I didn't do the right due diligence, if I ended up with a bad tenant, if I do that, I could be in trouble. And for that reason, at the beginning especially, I say I would put real estate down the line a little bit, make sure I have a critical mass to my portfolio. Then I put real estate in, in fact, in chapter 12 of my book, I explain that and explain how to do it and why to do it that way. But the bottom line is this. Imagine buying a piece of real estate and you take and you put $150,000 down, you get a loan on it, you got a mortgage, you get tenants in it. And now you decide you're going to do a roof on the property and a new roof and some repairs and you bring the repair person in, the, the roofer and he comes in and he looks at it, he says, well, wait a second, you have asbestos up in the roof. We have to, we have to Remove the asbestos first. And so, so what ends up happening is that you have to remove the tenants. You have to pay $100,000 for the, the asbestos removal because it was an office building. And then you have to do the repair and then you have to find new tenants, but you continually have to pay the mortgage, the insurance and all the maintenance costs on the building. If you do that as your first.

Investment in real estate, it's going to destroy you wealth. And that's why I don't like it. And that story is true because I had a friend of mine that went through that exact thing. Now fortunately enough he had critical mass, but it didn't, so it didn't destroy his wealth. But he was six months with a building that was just sinking money into it and no rents coming back. Okay. So that's why I put real estate where it's at. And then if you don't buy the real estate properly, it could be down in one of the lower tiers. So you got to be really careful and mindful of how you're buying real estate. Now let's look at the next one which is penny stocks. Penny stocks. I think you probably know my perspective on this. Penny stocks belong down here without question. This is, think of Wolf of Wall Street. This is, this is the companies that are trading for pennies on the dollar. Is it possible you can make money? Maybe, but it's not likely. Okay. Most of these companies don't have substance to it. Most of the time the odds are stacked against you. And so I avoid these, these are not, these are not something that are really going to go anywhere in, in my estimation. So I avoid penny stocks like, like the plague. I'm going to invest in established companies, long term companies that I know even if they drop, they won't go to zero for the most part. And they're good companies and they'll come back. Okay, that leads me to oil and gas. Oil and gas is a different animal. Oil and gas is a commodity and it goes up and it goes down in cycles. And I have some investments in oil, gas and energy. And you can look at other commodities, corn and that kind of thing. I put these as, as hidden gems because when you look at them, some of them do really, really well. Some of them don't go anywhere. Like I've got some that I've done amazingly well. Plus you get certain tax write offs and tax benefits and, and everything from them. So I think that you can use them. There's a place in your portfolio for them. But it's not where I would spend and have a substantial portion of portfolio. I've got a very, very small piece of my portfolio in oil, gas and energy. The majority of it is in the index funds, the ETFs and other thing investments like that. Okay, that leads me to then dividend stocks. I love dividend stocks. Why? Because it's a stock that's going to pay me a check every quarter, every month, every year, every six months. Whatever it is, it's dividends. It's taking a portion of the profits of a company and sending it to the shareholders, to the owners. Now I love them, but I don't invest in them specifically. There are investors that are just dividend investors. So they're, they're buying companies that, that have, have a long term history of dividend paying. And they're buying it so they can get a cash flow and they get some appreciation as the stock price goes up. Here's the challenge I have with it.

If the stock price is going up, usually it's because they're investing in the growth of the company. The way they invest in the growth of the company is through their profits. If I'm taking some of those profits and giving it back to the shareholders in the form of a dividend, does that mean that the growth is lower than it could have been if I had invested it into the future? And we don't know, there's studies that go both ways on it. But. So I don't create a portfolio personally that's all dividend stocks. But do I get dividends? Yes, I make dividends. Dividends and interest in the multiple six figures every year. So, so I have them, I love them in the portfolio. As part of the portfolio I put dividend stocks up here and in the growth engines. And then, then we get down to blue chip stocks. These are the big stalwarts of, of the stock market. These are, these are the big companies. Now let me really be clear for a moment. Big companies can go bad too, okay? They're not immune. So just because they're blue chips stocks doesn't mean that, that they're risk free. There's always risk in investing. But blue chip companies have proven their worth. They've, they've have a long history of profitability, growth, maturity, everything. Think Coca Cola, think Pepsi. Now do they go up and down? Yes, they do. But blue chips are stocks I like. Now I'm gonna bring a nuance in here for you to think about. I do not think, especially at the beginning, you should be investing in individual stocks to begin with, there's way too much risk in them. When you look at a stock that drops tremendously and you have the majority of your investment in that one stock, you lose a lot. Okay, if you look at a Tesla, an Amazon, a Google, all of them have had a Facebook, a Meta. Meta at one point was down at $80. Now it's up at $500 and then it dropped below 400. It's hugely volatile. So at the beginning, again, kind of like real estate, I don't want you investing in individual stocks. I want you to, to invest in a diversified portfolio. Because my job is to give you safety first, a solid unshakable foundation first, growth second. And so, so I love blue chip stocks. I am going to put them up here in, in the, the wealth champions. But I will do them later in the investing game when I have a critical mass to my portfolio. Now that leads me to businesses and angel investing. These are two different things and I want to treat them differently. Now one of the best ways to build wealth truly is business. And so I'm going to put it here as a growth engine. But when you look at the data and the statistics, many businesses fail. If you look at it at a five year and a ten year time frame, they fail. So it's not a given, it's not a guarantee and it takes a lot of work and you're taking on risk. So we need to understand that when we're investing or starting a business that there's a tremendous amount of exposure there, but there's a tremendous amount of potential there. Now there's another way to invest in businesses that I have here and that is angel investing. And I do this. But angel investing to me is down here, okay, at the moonshot level. Because a lot of these companies, they're fledgling companies, you're putting money in, you're really betting on the idea and the management. And we don't know if it's ever going to go anywhere or if it's going to get a buyout or it's going to get funding. And so when you put money in, there's a decent likelihood that you never get any money out. Okay? And so that's why I put them down at the moonshot mania. But some of them take off. I've invested in a couple of angel investments where they literally took off and I did really well in them. And so that's, that's how I would look at that. And that leads me to this one. Cash. Cash is, it's Just one of those things that I'm, what I'm going to put it up here.

With the growth, the growth engine. Just like money market funds, just like CDs, all those things are there to give you a stable foundation of liquidity and safety. They're not there to create wealth, they're create, they're there to protect wealth. And we need some of that. So I'm going to have a certain amount of cash in an emergency fund, in a high yield savings account to make that happen. Then we get to MLMs, network marketing, direct Sales. And I know that there's a lot of people that make a lot of money on it. But by and large, when you look at the data and you look at the statistics.

The highest percentage of people actually lose money in MLMs. So what you're getting is a pitch of a business opportunity to make money and that kind of thing. And the reality is that most people don't. And so I look at these and I try to avoid these. I as, as, as much as I can. And so I put them down here as well. Trainers, they might be moonshot mania too, if you really work it, because you can make a good amount of money if you do it right. But some, the majority of them don't pay. And then, then we look at CDs. CDs are up here with growth engines, just like CAST and just like.

Money market funds, but they're locked in. So what you're doing is you're tying your money up for six months, a year or two years and you're getting a higher interest rate in, in return for tying that money up. So it's, it's a good ballast for your, for your wealth creation, your wealth journey. But it's not a place. Again, the rates of return are still too low to build substantial wealth on a long term basis. So you use it as a mechanism for liquidity and protection to park temporary cash and get a return in that perspective. But I don't use it as the core to building my wealth. And then we get to luxury vehicles. All right, this is planes, trains and automobiles. This is the luxury cars. And I watched someone tell me that the best way to build wealth is to go buy a Lambo and rent it, y'. All. You're not building wealth off so off of luxury vehicles. I don't, I don't care. Okay, now there are some that maybe have, because they have these luxury vehicles and they're trading them and all that stuff. But that's a business. It's not an Investment. Okay. And if you want to invest in luxury vehicles, then you do it because you love luxury vehicles. I walk. I walk every Saturday morning. I see. I see a group of guys in a parking lot with their classic cars, the classic Stingrays and Corvettes, and good for them. Is it a place that they're going to be able to build a money machine and build wealth and everything? Not likely. And if they do it properly, they can afford it. Great. So I look at these things, and I don't look at them as investments. I look at them as wealth drainers. So I want to put the luxury vehicles down here.

And I'm gonna group in it. These high hype investments also, because these are those that they come to you and say, have I got a deal for you.

When you hear that, think Ponzi scheme. That's how I got caught. All right? If they're high hype, they're pushing in, they go, look, we can get you 20% in six weeks. If it sounds too good to be true, it is too good to be true. The high hype, the high pressure, all that stuff. It is a wealth drainer run for the hills. All right, that leads me to the last one. This one's really important for you to think about. Okay? And that is skills education. That is up here. I believe that this is the one investment that you can make that will always pay dividends if it's a valuable skill and you use it to create value in other people's lives. So the proper education, the proper degrees, the proper certifications, the proper experience, the proper skills, all of that gives you the ability to get paid more, to be more valuable and to make more money. Doesn't mean it guarantees it. There's plenty of people that have degrees and they don't make any money. There's plenty of people that have a lot of experience or a lot of expertise, and they don't make any money. Why? Because they're not using it properly to help solve problems. When we take those skills to go and solve problems in other people's lives, people will pay for it. And the bigger problems we solve, the better skills we have. The more we get paid, the more we get paid, the bigger the shovel we have to build wealth with. That's why I think it's one of the most important in here. All right, that's it. There's plenty of other investments we can go through, but I think that this is a good primer for you to start to look at it and say, wow, all right, where do I rank. Where do my investments rank? And you. Now you see where the majority, if you look at the majority of my portfolio, is built in the top two tiers, the wealth champions and the growth engines. Do I have some hidden gems? Yes, I do. Do I have some moonshot manias? Yes, I do. Do I have some wealth drainers? I don't think so right now, but I have in the past, trust me. And so. So it's a matter of being smart with your money, understanding the types of investors because they're not all created equal, and putting a plan in place that fits your. Your journey, your financial journey, because everyone's journey is different. It's why they call it personal finance. Your financial journey to financial freedom is personal to you. And so we need to mix and match the investments with the plan and the strategy to make your dream a reality. I hope you found this valuable house. Hope that you found it a little bit fun, a little different than some of the things that I've done in the past. If you did, do me a favor, make sure that you're subscribed and share this out. Let people know. All right? The whole purpose of this, this channel, this site, the show, is for me to provide you with the tools, the tactics, the strategies to take control of your financial life, to be in the driver's seat, to know that you can master your finances and you can eliminate the stress of money in your life, and you get to live a life by choice. All right, till I see you in the next episode, in the next show, or on your road to financial freedom. Always, always.

Thank you for listening to the affluent entrepreneurship with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com forward/group, and I'll see you there.

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