“No bird soars too high if he soars with his own wings.” - William Blake
To double your money every three years, you need an average yearly profit of about 26%. Does that number seem low to you? If so, do the math. A hundred dollars becomes $126 after the first year, $157 after the second year, and $200 one year after that.
How hard is it to get a 26% return? When I look at the investing I’ve done, here’s what I’ve found.
- Stocks: Overall, I’ve averaged less than the traditional 9% yield.
- Bonds: Like everyone else, I get the market rate.
- Riskier forms of stock and bond investing (such as futures and options): Never had the nerve.
- Real estate: A mixed bag. Local rental-real-estate investing has been good to me. In the five years that I’ve been active, I’ve averaged more than 25%. In my out-of-state rental investments, I haven’t done as well. There, I’ve averaged about 18%. Investments in a friend’s development business have yielded about 15% overall. And my overseas investing is still very much up in the air. Conclusion: I’m doing well in real estate, but I’m not doubling my money every three years.
There is, however, one area in which I have reached — and, in fact, exceeded — the 26% goal. That is with my investments in small businesses. Although individual businesses that I’m involved in vary greatly (a few lose money, a few linger at breakeven, a few make modest profits, and a handful hit the jackpot), I’ve probably averaged about a 50%-per-year return over the years.
This is a goal that you can achieve too — and an even better way to do it when you’re just starting to build wealth is to make that investment in your own business.
Of course, investing in your own start-up business takes a lot more than money. It takes a good deal of accumulated knowledge, hard work, and care. But the rewards are worth it. Not only can you double (or even triple) your money every three years, but you can also enjoy the many other benefits of being your own boss:
- the freedom to choose your own schedule
- the power to create your own products
- the excitement of being fully challenged
- the knowledge that you are providing an income for your employees
Last week, in Message #964, I told you that I’m going to be helping DF start a business built on something she loves (working with pets). The motivation for her to do that grew out of a conversation we had while looking over her current retirement plan. We figured that if she keeps her present job and continues to increase her responsibility and her income, she will be able to have a comfortable retirement in 14 years (at age 67).
That’s not bad. Most people in her (our) age bracket won’t do that well. But if she puts her energy and resources into creating a successful business of her own, she can look forward to a much better return on her “investment.”
DF is going to start her new business on the side, working evenings and weekends. She’s going to find a partner to back her, develop her product, and take it to market. When we went over the numbers, it became clear to DF that this secondary business — if it is successful (and I’m pretty sure it will be) — will allow her to achieve her retirement goals in five years instead of 14, while she is still relatively young.
At that point, she can do whatever she wants to do with the rest of her life.
That’s what a business can do for you.
Think about your own financial situation. Are you OK as you are — or would it be helpful to triple your money every three years? If you need that kind of way-above-average ROI in your life, you simply have to consider starting your own business. Don’t quit your day job. Just get something going on the side. You don’t have to invest a ton of money or work endless hours. You can do well starting small.
First, pick your business. That shouldn’t take long. (In fact, I’ve asked my staff to write a workbook on the subject to make it easier for you.) Once you know what you want to do, you need to develop a marketing plan. The best way to sell — especially for small, home-based businesses — is via direct mail. Learn how to do that by reading books and taking courses.
Then you can start slowly, from your home, investing only modest sums, working weekends or at night, and build your little business slowly until you can figure out the best products and how to sell them. When that’s done — and that should take about a year (maybe less) — you’ll be ready to hop onto that 26% train.