The Dangers of Quick Wealth and the Power of Long-Term Investing

If you have $110,000 in the bank right now and you want to grow your $10,000 to $100,000, most people think that you have to just keep working to earn more money to grow your $10,000 to $100,000. But that's not the only way that you can grow your money to $100,000. Today, I'm going to be going over five different ways that you can grow your $10,000 to $100,000.

What are these five ways? Number one is you can save your way to $100,000. You make more money and you save as much as possible to get it to $100,000. Number two is you passively invest your way to $100,000. You're working to make money, you invest this money, and then your money is also growing to grow to $100,000. Number three is you're going to invest a piece of this money into your income so you can increase how much money you're making. That way, you can get to the $100,000 sooner. Number four, you can invest your money into an active asset. That way, now you're working to grow your money, and your money is also working to grow as well. And number five, you're going to put it all on black. You're going to take the high-risk, high-potential reward model to grow your money to $100,000.

So let me break this down step by step. That way, you understand the different levels of reward and risk associated with each one of these options.

Let me start with number one: saving your way to $100,000. According to the Federal Reserve Bank, the median household income in America right now is just under $71,000, which is actually a little bit lower than where we were back in 2019, which I just thought was a little bit interesting. So if your household is making $71,000 a year, and you go out and you say, "I'm going to save 10% of my income," which actually is more than what the average American is saving—the average American today is saving just under 5% of their income according to the Federal Reserve Bank—so if you're saving 10% of your income, well, you're already doing more than double what the average American is doing. That means you're putting aside $7,100 a year into your savings.

Now, the one nice thing about saving your money today, as opposed to two years ago, is that today you have some high-interest savings accounts that are paying three, four, even close to 5% in interest on savings. Yes, these are FDIC-insured banks. So if you have $10,000 already put aside and you can put aside an additional $7,100 a year, and let's just say that you can get a 4% interest rate on your savings, which many banks are paying nowadays, that means it's going to take you 10 years to grow your money to $100,000. This is the lowest risk and also the lowest reward option because it's going to take you 10 whole years to do it. But on the low-risk side, it's low risk in the sense that you just got to keep working your job, putting money away, and just keep saving the money.

The risk now here is: what is the $100,000 actually going to be worth in 10 years? Because we're still facing high inflation, so 10 years from now, the $100,000 isn't going to have the same buying power as today.

This brings me to the second option, which is you passively investing your money to grow it to the $100,000. This means you're going to take the $10,000 that you have in your bank and you're going to put this money to work. Either you're going to use this money as a down payment to buy a rental property or a home, or you're going to use this money and invest it into the markets. And then, as you make more money, you're going to keep investing more money, kind of like what you did in the savings number where, let's say, you're putting aside 10% of your income every year to keep putting it away into your investments. That way, you can grow this money and get it to the $100,000 sooner.

The number one difference between passively investing your money and saving your money is risk. Because when you put your money into the stock market, there's a chance that your money can go down. And because there's a chance your money can go down, you're going to expect a higher reward versus just keeping your money in the bank. Because if you put $1,000 into the bank today, you're going to go there tomorrow and expect $1,000 to be there. If you put $1,000 into the stock market today, you will expect that number to change. Maybe it'll just be a dollar or two up or down, but you expect the number to change. So when you have this higher level of risk, that also comes with higher potential reward.

The historical average stock market and real estate return has been somewhere between 7% to 10% a year. This includes factoring in the recessions and market crashes that we've seen pretty much every decade for the last century. But if you can grow your money by, let's just say, 7% a year, and assuming that we don't see any sort of recession or market crash in the near future, now you put $10,000 into the market. You're putting an additional $7,100 a year into the market, and now you can grow your money by 7% a year. Based on these numbers, it is going to take you 8 years for your money to grow from $10,000 to $100,000.

Now you might hear that and say, "But that's not that much different of a return than me just saving my money that's going to take me 10 years." This has more risk and only takes 8 years, and you're right. But the difference between investing your money into the market and savings is, number one, you can see potentially higher returns in the markets. And number two, the real compounding effect is over the long term. When you get higher returns for a longer period of time, that's when your returns really start to grow, compound, and add up even more.

If you took this money and you invested it into a rental property, it's a little bit different now. Number one, you're going to be getting rental cash flow, which ideally you can reinvest. But you can't just throw that money back into another property because that means you need enough money to use as a down payment or to finance the entire purchase of a new property. Unlike the stock market, where you can easily put in $7,100 a year or $500 a month, you can't just put $500 into real estate every single month because you actually have to go out and buy a physical property. So if you passively invested your money, it's going to take you around eight years to take that $10,000 and grow it to $100,000.

The third thing that you can do is you can invest this $10,000 into your income. This is where things get really fun because now, when you're investing this money into learning new skills and new education, which can allow you to earn more money, you can see 20% returns, 50% returns, 500% returns—there's really no limit here. I can only talk to you about my experience here because I've invested in my education in a lot of different ways. I started by investing my money into traditional education because I spent money and time getting my law degree. I am a licensed attorney, but I didn't really get much of a return on that dollar because I don't practice as an attorney. However, I have invested money into my own—you want to call it self-education or financial education—that has given me much bigger returns.

The first time I ever invested in my own, let's call it non-traditional education, was when I was in college at the time or finishing college. I bought a class or program on wholesaling real estate, and this was after I got my real estate salesperson's license. I went to the seminar about "real estate investing." Now, I don't consider wholesaling real estate real estate investing—it's a type of real estate flipping where, instead of actually buying a property, you're entering into a contract to buy a property, and then you're going to flip the contract. But I learned about this real estate wholesaling during the seminar. I thought it was really interesting. Then, at the end of the seminar, the person who was teaching was pitching a $3,500 program to learn how to wholesale. Back then, that was a lot of money for me, but I decided to make the investment partially because it was such a compelling pitch.

I invested that $3,500 into the program. One month into it, I made no money, no sales. Two months into it, I made no money, no sales. Three months into it, I made no money, no sales. Four months into it, I made no money, no sales. It wasn't until the fifth month that I actually closed my first deal, and that first deal was $10,000—my commission from the wholesaling that I learned. So did I make my money back? Yes. Did it take time? Absolutely. Did it take work? Yeah. Was it risky? Oh yeah. Most people who go through any sort of online education program are going to go nowhere with what they learned, either because they give up, they're not willing to put in the work, or maybe they didn't learn anything useful.

So you have to understand how you can use something, how you can learn something that's going to leverage what you're currently doing. That wholesaling real estate education for me was leveraging what I was already doing because,

at the time, I was a real estate salesperson. I was a real estate agent. I knew real estate. I knew how the business worked. And so that was a natural progression for me. That's why I say you can see really big returns here because the reality is, if you are able to take your $10,000, invest in your education, your skills, learn a new degree, get a certification, whatever it is, and then double your income, it could be much more worthwhile than waiting 8 to 10 years for your money to grow. But there's no real easy way for me to tell you the best way for you to do that because this requires you to take some risk.

Now, the risk here is: what if your investment goes wrong? What if you go to a new school, get a new degree, learn a new skill, and you hate it? What if you go to a new school, learn a new skill, get a new degree, and you're just not able to monetize it? That's where it requires you to now understand that there's risk here, but with more risk can come more reward. Now, this risk is a little bit different because it's not putting your money at risk. It's putting your career at risk. It's putting your time at risk. And it's also putting a little bit of your money at risk.

Then number four is you can invest in an active asset. This means you're going to take this $10,000 that you have, and instead of passively investing it in a stock or real estate where you're going to put money in, close your eyes, and pray, you can actively invest this money into a rental property that you're going to be managing. Maybe you go out and buy a home, and now you're going to be fixing up the home, and you're going to do the repairs yourself. Maybe you start a business where you're going to take this $10,000, and you're going to buy a laundromat, or you're going to buy a vending machine, or you're going to start some other sort of business. Or maybe you're going to go out and you're going to buy some physical products that you can resell. So now you are actively working to grow your money, but at the same time, your money is also working to grow because now you're starting this business. You have the ability to grow it. Maybe you buy a small business, you do the repairs yourself, you invest the $10,000, and you also put in some sweat equity. Now, your $10,000 can grow to $100,000.

This is not passive, but the real potential here is much bigger because now, if you know how to run a business, you can potentially see much bigger returns because you can also leverage how much money you're making. You can increase your time, and you can increase your labor. Maybe you put in the $10,000 to start the business. Now you're going to keep reinvesting your time and your money to keep growing it. This way, your money can potentially grow much quicker to $100,000.

The risk here is now you're putting your $10,000 at risk, but you're also putting your time at risk. You're putting your labor at risk. But with more risk can come more reward. You're just going to have to be more involved with the business. This is what you see a lot of wealthy people do because when they start making more money, they can take more risk. And when they can take more risk, they have the ability to potentially grow their money much faster. You can do the exact same thing with this $10,000, but you're going to have to know a little bit more about what you're doing because if you have no idea how to run a business, you can start the business, lose all of your money, and then you're going to be very upset.

And number five is putting it all on black. This is where you take that $10,000 and you invest it into a high-risk, high-potential-reward asset, whether it's going out and trying to trade some sort of cryptocurrency, trade some sort of high-risk, high-reward stocks, or just going to a casino and putting the $10,000 on black. This is not recommended, but it is one of the options. There is a potential for you to grow this money to $100,000, but there's also a good chance that you're going to lose it all. That's why I want to give you this because it is an option. This is the riskiest option. It has the biggest reward, but it's also the one that could leave you with the biggest potential loss.

Think of Las Vegas. They're thinking, "How could I turn my $10,000 into $100,000 this weekend?" Most of the time, 99.9% of the time, that $10,000 is going to pay rent for the casino. In fact, why do you think the casinos are so beautiful, so nice, and so grand? Well, the money that you're gambling is going to fund the casino's mortgage, the casino's rent, and all the beautiful things that you see. But there's going to be that small, teeny-tiny percentage of people that will win, and that's what's going to drive everybody else to want to try the speculative way—to put it on black and try to win.

Now, this doesn't mean you have to necessarily gamble your money, but there are a lot of other ways to do this. We all have that one friend who's always looking for that get-rich-quick way. They don't say it's called a get-rich-quick scheme, but they're always looking for that get-rich-quick strategy. Maybe it's the next hot meme stock. You read something on Reddit, and they're telling everybody about how much money they put into it, and they're ready to see this thing soar. It starts to go up, and then it goes down, and they lose 70% of their investment. Maybe it's the next hot cryptocurrency. They see some cool cryptocurrency options, and then they find these unheard-of cryptocurrency trends that are happening in some weird blog on the internet. They start putting their money into this cryptocurrency, and then they see it soar and tell everybody else to buy it, and that's when the cryptocurrency crashes, and then they lose all of their money. We all know somebody that does this.

This can make you a ton of money, but it can lose you all of your money just as fast. This isn't something for me, but I'm going to give you a piece of caution here. If this is you—if you're always looking for that way to get rich quick—let me just tell you something. Everybody wants to get rich quick. I mean, it's not attractive to get rich slowly, but the reality is some people will—a very, very, very, very, very small percentage of people will. Is it going to be you? Probably not.

Now, this is where you can play the odds. If it's probably not going to be you, statistically, is it worth your time, effort, energy, and brainpower to keep trying that, or to go to something that has potentially higher returns but just takes a little bit more time? That's a decision that you're going to have to make because if you just keep gambling your money, doing all these hype-y things, well, there's a reason why you haven't gotten there yet. This is where, now, if you can follow the path of people that have actually become successful—they haven't gotten there because they gambled their money. They didn't get there because they found the next get-rich-quick scheme. They got there because they consistently did something. They consistently invested their money slowly over long periods of time. They consistently worked to grow their income and put some of that money away, whether it's invested or saved. They consistently worked to build their business, even when things got hard. They consistently made pivots so they could grow the value and the income that's coming out of their business. Those have been proven—some are riskier than others—but they've been proven to make more money.

This is where you have to decide what is the right option for you, and are you willing to actually do what it takes to become wealthy? Because if you keep going down the get-rich-quick schemes, well, those are the same people who get so salty and have such a negative taste towards the entire economic system, towards successful business people, towards successful investors, because they keep getting burned. But maybe the reason why they keep getting burned is because you keep going down all the wrong routes. I know that's the attractive part. Vegas has all those lights because they want people to come and look at the lights—that's the attractive part. But real wealth building is done in silence. Real wealth building is done in stealth mode, where you're working when nobody else is, and you're working in silence. That's where real wealth is built.

Now, when it comes to actually putting your money to work, there are ways that you can get better returns. The way that you can get better returns is, number one, you invest in your financial education, but also, number two, look for where the opportunities are. The opportunities are always changing. In the 2020 pandemic, when stocks crashed, that was a huge opportunity. In the 2008 crash, when real estate prices crashed, that was a huge opportunity. In the 2000.com bubble burst, that was a huge opportunity to go out and buy some internet companies like Amazon, which had fallen by more than 90%. So, the question is, how do you find the opportunities? The way that you do that is by paying attention to what's happening in the markets around you and studying the trends. If something is not going to die, but its valuation is falling, that creates an opportunity. This requires you to understand what's happening and what's going on with consumers, understand what banks are doing, and understand what's going on in different parts of the economy so you can make better decisions with your money.

Let's take a look at what banks have been doing in just the past few weeks. We've seen a number of different banks come out and report the latest earnings, the latest profit figures, and then their predictions of where the economy is going. The common trend among most big banks—not all of them, but most big banks—is that profits have been soaring because they've been seeing increases in lending and credit card transactions. But it's not just the fact that they've been seeing more lending and more borrowing happen, but the fact that this borrowing is happening at significantly higher interest rates. Now, when you swipe money on your credit card that you don't have, the interest rate on your credit card is significantly higher. When you go out and borrow $500,000 for a mortgage, your interest rate is a lot higher. That means the bank is making more money in interest, which can help drive up profits, as long as people are borrowing money. Right now, people are still borrowing money.

Now, all of this so far is the obvious part. The part that's even more interesting isn't just the profits that banks are making right now, but rather what banks are predicting about the economy coming in the future. That's been signaling some interesting pressures ahead in our economy. I want to do that by going directly to the source, meaning directly to the banks, and seeing what the banks have said instead of listening to the media's coverage or what the banks said. That way, we can get a better idea of the bank's predictions of what's coming in the economy. I want to take a look at JPMorgan Chase Bank's press release that they put out when they released their earnings statement. Just so you know, if you want to read the press release for yourself, I've also linked it for you down in the description. Jamie Dimon is the CEO of JPMorgan Chase Bank, and in the press release by JPMorgan Chase Bank, Jamie Dimon put out his own statement about what he feels is going on in the company and what might be coming in the economy ahead. Let's take a look at that.

He starts off by saying that we have seen another quarter of strong results with huge profits and growth across the entire business. But then a little bit later in his statement, you start to see a few words of caution about what might be coming next. The company is doing great today, but he's also taking it with a grain of salt. "The United States economy continues to be resilient. Consumer balance sheets remain healthy, and consumers are spending, albeit a little bit more slowly. Labor markets have softened somewhat, but the job market remains strong. That being said, there are still some salient risks in the immediate view, many of which I have written about in the past year." The reason why it's interesting is that he says that consumers are still spending, but it's slowing down. The job market is strong, but it's softening a little bit. Then he says that there are risks in the economy that he's been talking about.

What are these risks that he's been talking about? Well, consumer spending. The interesting thing about consumer spending is that consumer spending is good for the economy, especially in the short term, but it's bad for the consumer. Just take a look at what Jamie Dimon said when an analyst asked him about that: "The consumer is in good shape," says Jamie Dimon. "They're spending down their excess cash." Our economy is based on spending. The more money you spend, the richer somebody else gets. Period. If you don't spend your money, that's not good for the economy. It might be good for you because now you can save your money, pay down your debts, and start investing your money, but it's not so good for the growth of the economy because that means Chipotle, Sweetgreen, Lululemon, and Apple are not making money because you refuse to spend your money, or because you have no more money to spend.

What we've been seeing happen recently is that savings balances have been falling because people are digging into their savings to fund their regular expenses. In addition to that, credit card balances have been rising because, again, people are using credit cards to fund their daily expenses. The economy is booming because people are spending, but people aren't just spending their incomes—they're having to spend their savings, and they're having to spend their credit cards. When you spend and the economy is booming based on people's incomes, no big deal. But when people have to go beyond their means in order to spend, and that's why the economy is booming, well, there's a lifespan with that because how long can you keep doing that before the savings are gone and you max out your credit card? Well, eventually that's going to catch up. This is where Jamie Dimon says the economy is resilient today because people are spending, but they're digging into their savings and into their credit cards.

At the same time, we're starting to see the job market weaken a little bit. It's not weak, but it's weakening. It's softening, meaning some companies are starting to lay off workers. We're seeing more and more layoff announcements, which again can put some more pressure on the economy. In addition to that, some other risks that Jamie Dimon has talked about are the obvious things like quantitative tightening, the high interest rates, and the high core inflation. Then you also have some of the other geopolitical risks, like the Russia-Ukraine war, the oil prices, and the fact that the dollar is strong relative to other currencies. So, these are some of the risks that Jamie Dimon has been talking about.

At the same time, what BlackRock is seeing is opportunity. BlackRock says that this is the first time in a generation, at least a generation, where we're seeing opportunities in money market funds and in the bond market. Remember that BlackRock is the largest asset manager in the world with around $10 trillion worth of assets under management. This is the first time in a generation where we're seeing opportunities like this in money market funds and in the bond market. And it's because of the higher interest rates that we're seeing. The reason why BlackRock sees so much opportunity is because now you're seeing interest rates on things like treasuries that we haven't seen in 20 years, and because these are guaranteed returns backed by the United States government, that provides opportunity because you're getting safe returns. In addition to that, as interest rates eventually top out, they start to peak and eventually start to come down. You can also see bond prices go up, meaning that you can see capital appreciation there, not just the yield.

This is where BlackRock sees opportunity, and they're getting ready for more money to flow into the fixed-income markets and into the money market funds because now there's a chance for people to get returns and to grow their money without taking on the same risks as before. If people are able to get 4-5% a year, guaranteed in the treasury markets, you're going to see a lot of people move their money out of stocks and into fixed income, which again will create a lot more demand in the fixed income markets.