Want to increase your wealth over time? Think about putting your money to work instead of renting your time.
Capital is anything you own that can keep making you money. So in effect, many forms of capital can earn you money whilst you sleep. You don’t even have to lift a finger. Once the work is done, you can leverage compound interest and watch it grow (all other things being equal).
“If you don’t own capital in a capitalist economy, you are the capital.” Sahil, the founder of Gumroad, once said.
Things you can own to create wealth include your own business or products, equity in someone else’s business, real estate, stocks, cryptocurrencies, patents, and copyrights. Today knowledge, reputation and influence (if you are Michael Jordan) are increasingly becoming the newest capital.
“Money is always eager and ready to work for anyone who is ready to employ it.” Idowu Koyenikan said. So, your best shot at owning capital is to invest in the right assets with the highest potential of accumulation. You can also diversity to minimise the risk of holding on to many assets.
The ownership of capital is very concentrated. Billionaires, the highest income earners and wealth builders, make a greater percentage of their income through capital.
“Capital is never quiet: it is always risk-oriented and entrepreneurial, at least at its inception, yet it always tends to transform itself into rents as it accumulates in large enough amounts — that is its vocation, its logical destination,” writes Thomas Piketty, in his book, Capital in the Twenty-First Century.
The richer you are, the more you can earn money comes from capital.
You’ve probably heard of the top 1%. “…the top 1% covers a wide span, from prosperous professionals to billionaires with more wealth than many nations, writes Ben Steverman of Bloomberg.
Capital gains are not always guaranteed, though. They may don’t immediately guarantee cash flow, but if you choose the right capital, growth can accumulate over a period of time. Capital can also depreciate.
As technology continues to transform productivity, the wealthiest people in the world are shifting their money to capital investments.
The massive advantage of owning capital it can accumulate without your direct involvement at the latter stage of growth. At the beginning of the wealth-building process, you have to take a lot of risks.
Many of the world’s billionaires started as entrepreneurs. They took a lot of risks at the beginning of their careers or capital accumulation process.
Jeff Bezos created capital leverage when he launched Amazon. Bill Gates, Warren Buffett, Mark Zuckerberg, Elon Musk, Larry Ellison, Larry Page, Michael Bloomberg, Jack Ma, Tatyana Bakalchuk and many other billionaires created capital by building things that have the potential to create wealth.
They launched capital assets they can own that eventually scales or grows exponentially with time — one of the most powerful forces of the universe.
“How we choose to invest that time correlates to the potential leverage we can create. Leverage = value. Value = wealth. Wealth = freedom, ”writes Jason Andrew.
You may not be able to own as much capital as the top 1%, but you can build wealth with little money.
You can leverage time and put your small capital to work. If you can’t build your own capital, use a percentage of what you earn to buy capital.
Start saving, but don’t end there. Put the money to work. Invest it in low-risk and minimal fee investment products. Your money will multiply faster. Vanguard and Fidelity offer some of the best investment funds.
Many people stop at investing in stocks or funds.
As you earn more, diversify. Look into owning equity in companies(both small and large). Find the best dividend-paying companies and invest in them. Check out real estate investment trusts. Invest in low-maintenance businesses.
“Capital is that part of wealth which is devoted to obtaining further wealth.” Alfred Marshall said. Wealth accumulation takes a lot of time. And building capital requires a lot of work in the beginning.
Don’t expect to create massive capital or build making assets in a few months or years. But don’t stop because it’s taking time. Keep measuring and doing more of what’s working.