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Two Reasons Rich People Continue to Make Money

Tuesday, February 24, 2015 6:12

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How do rich people continue to make money?

What do they do differently that allows them to keep making money?

On my latest Inside True Wealth podcast, I asked two guys who would know – David Hall and Van Simmons. (They’re mentors to me… I told you about them yesterday.)

David and Van talked about two distinct reasons rich people make money investing…

David Hall: They do their homework. And I’ve found that a lot of the real wealthy people are very much contrarians. Maybe it’s the sense of self-confidence that helped them be successful in business or whatever they were successful in.

There’s such a herd mentality… We had people [when gold was] at $1,900 screaming on the phone that they had to have their gold today, and where are these people [now]?

Steve Sjuggerud: The phone’s not ringing at $1,300 and the phone’s ringing off the hook at $1,900.

David Hall: Yes, at $1,900. I’ve found that wealthy people have the self-confidence to buy when there’s blood in the street. Now it’s not that bad. But, you know, when things are a little out of favor, and they’re high-quality (in terms of both the quality, the condition, and in terms of their importance), that’s the time that you want take a position.

Steve Sjuggerud: That’s exactly right.

Van Simmons: That’s the hardest thing to do. For example, in 2010-2011, I called a couple of real estate friends of mine. I said, you know, I’m interested in buying real estate.

They go, “Oh, you’re out of your mind.” And I said, “Okay, well, find me something.”

I looked at one condo, which I bought, and I paid $160,000 for the condo on a short sale… Now the thing’s worth about $300,000, $325,000; so it has doubled in the last four years, plus you collect 10 percent rent based on my investment.

It was really hard to get even friends of mine who are real estate guys interested. I’d say, “Well, what about building things? What about doing this?” and they’re like, “You’re insane. I wouldn’t do this now. You’re smarter than that.” And I’m going, “Okay, well if the guy selling real estate is a friend of yours and he’s telling you not to do it, you’re probably pretty close to the bottom.”

According to David and Van, rich people…

1.	Do their homework. They understand their investments. And they…
2.	Avoid the herd mentality. They are good contrarians.

These ideas might seem simple. But they’re harder to put to work than you might think.

Buying against the crowd is tough. From personal experience, I’ve learned that it’s unsettling when you’re the only one buying like Van was when he bought that condo. But that’s often when you have the most upside potential. You have to trust your experience and your homework in those situations.

These are two ways that rich people continue to make money.

If you want to continue making money like wealthy investors do, then follow David and Van’s advice.

Good investing,

Steve

P.S. I urge you to check out my Inside True Wealth podcast with David and Van. It’s free, and it’s available right here.

Source: http://www.stansberryresearch.com/dailywealth/2949/two-reasons-rich-people-continue-to-make-money

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