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How To Make The Forbes 400

How To Make The Forbes 400

On another fateful car ride to my son’s elementary school, we were listening to Bloomberg Radio, and they started discussing the Forbes list of The Richest Americans. My son asked me, “How did Bill Gates get so rich?”

I told him that Gates had started a company in his garage that grew and grew until it was so large that they decided to “take it public,” meaning that they allowed anyone to buy a “piece” of the company. When they did this, Gates still owned a large portion of the company, and everyone buying their small portions of the company caused his larger portion to increase in value. It increased so much, in fact, that he became the richest man in America (and remains at the top of the list with an estimated net worth of $80 billion).

“Oh, okay. Well who is the second richest person in America?”

“That’s Warren Buffet.”

“How did he get rich?”

Then we got to break down Buffett’s journey to wealth. I told my son how Buffett made his fortune by buying up large portions of companies like the one Bill Gates started.

“Who is the third richest person in America?” 

Finally, I just pulled up the Forbes list of the richest Americans on my iPhone, and I had my son read it to me.

I noticed while we looked over this list that many of the people in America who made this list had built their wealth by participating in the stock market. Most had either started companies, bought companies or were the children of people that had started a business that went public, like Wal-Mart or Campbell’s Soup.

When I told my son this, he asked, “Why don’t you put your company in the stock market?”

I smiled and said, “That’s called an IPO. You have to reach a certain size to be able to do that.”

Using Siri, I then pulled up the stock prices of some well-known Atlanta companies. I explained that these prices reflect the cost to buy one share of each business, Coke, Home Depot, Delta, etc.  I explained that they’re called public shares because anyone can buy them and own a piece of that business.

The point in buying into these companies, becoming an investor, is a way to participate in the company’s future growth. So if you can accumulate enough shares in the right companies or the market in general, and hold those shares for long enough, someday the value can be powerful enough to allow you to “retire early” or maybe even hit the Forbes 400 list.

“You know you don’t have to take a company public or own thousands of shares in a company to make money in the stock market, though,” I said. “You can start with a small amount of money, and that’s what my company Wela tries to people do every day.”

This conversation stuck with me for the rest of the day as I thought about how much of an impact the stock market has had in many people’s lives. I love the fact that the same system that made Bill Gates and Warren Buffett billions of dollars can also help anyone in the world grow their net worth.

With so many options now in the financial industry, it’s easier than ever for people to take advantage of this system. If you’re looking to get started, I would suggest looking at some of my past articles here, and even visiting my company’s website if you’re looking to get started investing.

God bless kids for asking important questions.


Read the original article here.  


What Warren Buffett Knows That You Don’t

The other morning I was listening to Bloomberg as I was taking my second grader, to school. On the radio they were discussing the Japanese journalist that was recently killed by ISIS. Then they moved into the Eric Garner case, talking about how he had died being apprehended by police.

My son then piped up from the backseat and asked me, “Dad, why do so many people die every day?”

I answered, “Lots of people die every day, but even more people are born.”

He then pointed out, “But dad, they never talk about that part on the news.”

This conversation got me thinking about one of my favorite Warren Buffett investment themes, the ever-growing Economic Pie.

I wrote about the Economic Pie in December, but I didn’t go into exactly why the Economic Pie continues to grow over time. One of the primary reasons the pie gets bigger is because of our expanding population.

Knowing that we have growing number of people on the planet and a growing Economic Pie is one thing, but my conversation with my son piqued my curiosity. Later that morning, I went into a bit of a research binge to nail down some of the most important overarching demographic themes that impact our planet and the economy that we live, work and invest in every day.

I learned that according to the Ecology Global Network there are about 131 million births per year on Earth. That’s approximately 360,000 babies born every day.

The same study shows that there are 55 million deaths each year, or approximately 151,000 per day.

My son was worried that with so many people dying that the Earth might run out of people… but clearly that’s not a problem.

Let’s put these numbers into context:

• About three football stadiums* full of people die every day

• About seven football stadiums full of people are born every day

*assuming a stadium holds 50,000 people

This explains why we’ve seen our global population balloon from the year 1900, when there were about 1.6 Billion people, to today’s approximately 7 billion people. By the year 2030 there are expected to be over 8 billion people on earth, according to the Ecology Global Network’s population estimates.

While all this information answers my second grader’s original question, it happens to be an integral component of why the “Economic Pie” in the world continues to grow. More people demanding more goods (i.e. houses, cars, food, technology, medicine, fuel, etc.) creates and ever increasing demand to supply those goods. That means companies will continue to meet that ever increasing demand, hence their earnings have the opportunity to grow over time. Hence, the “pie gets bigger”.

With that said, you might be asking yourself, “Does a growing population equal a growing economy?” There are clearly more variables to a growing economic pie than just population growth, such as innovation, the education system, increasing worker productivity, more intelligent use of data, and the list goes on. However, a tailwind to this growth is the growth of a population.

These stats are based on the years 2010 to 2014, and were pulled from for the GDP growth and Trading Economics for the population growth.

• United States of America

o Average Annual GDP Growth Over 5 Years: + 2 ¼ %

o Average Annual Population Growth Over 5 Years: + ¾ %

• China

o Average Annual GDP Growth Over 5 Years: + 8 ½ %

o Average Annual Population Growth Over 5 Years: + 0.4%

• Italy**

o Average Annual GDP Growth Over 5 Years: – ½ %

o Average Annual Population Growth Over 5 Years: – 0.1%

• India

o Average Annual GDP Growth Over 5 Years: + 6 ½ %

o Average Annual Population Growth Over 5 Years: + 1 ¼ %

**Notice, the only country with negative GDP growth over the past 5 years has been Italy, which is also the country that has negative population growth over that same period of time. Coincidence?

With all of the detailed minutia that we are hit with every day, it’s always important to remember that it’s very often the simplest concepts that are critical to understand first. I think this straightforward concept of births vs. deaths is an interesting one to make sure you are aware of as an investor. Ultimately, our children have nothing to worry about when it comes to the world running out of people, and the economic pie will continue to grow.


Read the original article here.


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