A large number of investors glamorize the lifestyle of buying options contracts of AMC on a whim or betting thousands of dollars on Bitcoin to rise in value next month.
But just because one Reddit user on r/wallstreetbets claims to have made thousands trading AMC options doesn’t mean it’s in the cards for everyone else.
However, several millionaires were interviewed to uncover how the rich acquired wealth, where they invested money, and how they viewed finances.
The findings of these interviews blew the mind of many people because the research brought to light how several millionaires live amid working-class people and blend in with society.
After interviewing these millionaires, the researchers found a large percentage of wealthy people:
- Buy used cars outright and keep them for years
- Don’t splurge on items that aren’t assets
- Invest their money wisely using a single shared investment strategy
The third bullet point is one that often goes overlooked or is unknown by many in the financial community, even though all of this research was documented in the popular book “The Millionaire Next Door.”
What is this popular investment strategy shared by millionaires?
Buy and hold, that’s it
Instead of buying low and selling high like investing genius Warren Buffet once said, your long-term investment strategy can be even easier than that: Buy low, never sell.
“The Millionaire Next Door” reported that the majority of millionaires never sell their assets. Whether it’s stocks, bonds, real estate, or any alternative asset — one thing remains consistent: They don’t ever sell.
“Well, how do you make money if you never sell off your assets?”
It should be noted that “buy and never sell” is a bit of an extreme exaggeration. It’s not that these millionaires have never sold an asset, it’s just that they held onto their assets long into the future.
Here’s a real-world example. Say you were one of the amazingly smart people who bought a box of Base Set Pokemon cards for $80 in 1998 and never opened them. This unopened box of cards consistently sells for anywhere between $16,000 to $40,000 on eBay right now.
Seems like a great time to cash in, right?
A millionaire with the buy-and-hold investing strategy would tell you differently. Unless you need the money for something important like a bigger investment or sending your child to college, why sell that box of Pokemon cards?
It’s not like more are ever going to be made. The more those older packs disappear, the more their value will rise. Hence making you more money on your investment.
This strategy works with more than just alternative assets. It can be applied to stocks, bonds, real estate and more! Find out how.
Everything goes up eventually
From index funds to bonds and real estate value, everything rises in value eventually. It might not happen this year or this decade, but if you hold onto the ownership of an asset for long enough then you’re bound to see it rise.
This can recently be seen with Bitcoin. Many people bought Bitcoin less than a decade ago when each coin was only worth between a few hundred to a few thousand dollars.
If they would’ve had the millionaire mindset of buying and holding, more of those same initial investors in the cryptocurrency would have seen a ridiculous return on their money once BTC started to rise into the range of tens of thousands of dollars.
But the real question is: Do you sell once you watch your $500 Bitcoin turn into a $40,000 coin?
According to the strategy of most millionaires, it would be best to hold onto it.
Approaching every investment with the mindset of buying and holding will turn you into a more profitable long-term investor.
Diversification is still king
After the millionaires in “The Millionaire Next Door” reported that they hold their assets and never really sell them, they also admitted that their million dollar portfolios were still diverse.
The book says the millionaires interviewed stuffed their money mainly in:
- Index funds
- Real estate
- Precious metals (Gold, silver, etc.)
Taking into account that this book was originally written in 1998, it’s understandable how bonds made this list. These days, bonds see such a low return that you might want to consider an alternative investment. Possibly crypto or a hobby like Pokemon cards.
Playing the long game has worked in the past
It’s surprising more people don’t play the long-term investing game. It’s historically proven to work in the past and anyone can see it just by looking at a 5-year growth chart of any asset.
Whether it be real estate, index funds, or even Pokemon cards, after a long enough time they will all eventually go up in value.
Yes, it can be extremely enticing to see people making millions by selling NFTs but the truth is that’s not a proven long-term asset. If it looks like a fad and feels like a fad then it’s probably just a fad.
However, proven long-term investments like real estate and index funds have decades of history backing them up.
Buying an asset that will inevitably go up and never selling it is how millionaires become wealthy, remain wealthy, and transfer wealth to the next generation of their family.