July 22, 2024

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Investment Advice: What Exactly Are the Experts Selling?

Investment Advice: What Exactly Are the Experts Selling?

Investment advice is a sales pitch, so what are the experts selling?

Investment advice is a commission driven ‘one fit all’ approach clouded by a single mantra: Diversify and invest for the long term.

Diversification is a risk management technique which is widely used when investing in financial markets. It is used by the experts to limit your losses or protect your investments against negative market movements. However, diversification does not work all the time, especially during market crashes.

Long term investing generally refers to the ‘buy and hold’ strategy. History shows that stock markets provide the best returns above inflation over the long term. The hope is that after many years, your investments provide returns equivalent to market averages.

There are a few problems though:

  • Market risks are unpredictable
  • Market returns are unpredictable
  • Periods of negative return reduces the benefit of compounding

Investment advice provided by financial experts focuses primarily on diversification and long term investing. Benefits mainly come from capital gains, not cash flow.

What are the experts not telling you?

Financial freedom depends almost entirely on cash flow, not capital gains. If you don’t have sufficient monthly income to meet your needs when you stop working, you will not be able to fulfil your desired standard of living or lifestyle. One cannot rely on capital gains to support you every month.

The cardinal rule of wealth creation

Financial freedom is essentially dependent on cash flow or passive income generation. This means that income creation is a business, not an investment.

Without cash flow, you have no business, and without a business you cannot create wealth.

It is important to ask whether your investments will be able to support your desired lifestyle. You must take control of your future by building new passive income streams. A passive income business like property is a powerful example of a system that works for you.

Investing in property is a business that allows you to use teams of specialists to generate multiple income streams. You can spend about 5 hours a month running a property business worth tens or hundreds of millions of dollars.

If you miss out on the property opportunity, you may have to soak up a lot of wasted time and energy on ineffective products and investment advice.

What is the key to income freedom?

The key rests with a business system that is self-sustainable, generates monthly passive income and gives you more time to enjoy life.