In this video I discuss how to build wealth through buying assets instead of liabilities. From a financial point of view, assets are things which grow in value or generate money e.g. property you rent out or stocks and shares, while liabilities take money from our pockets like expensive cars and holidays. It is still possible however to allow yourself some luxuries in life and a sensible strategy would be to allow your assets to pay for your liabilities for example rental income or share dividends paying for a holiday. In this famous bestselling book, Rich Dad Poor Dad, Robert Kiyosaki points out that the Rich acquire assets and the poor and middle class acquire liabilities that they think are assets. For the last 14 years I’ve been investing in the stock market buying mainly UK large cap FTSE 100 companies which pay reliable dividends. Some people use the dividends as passive income but I reinvest the dividends and allow them to compound over time. I try to invest in companies which have strong balance sheets and who benefit from economic moats. Over the years I have grown my portfolio to around 25 individual companies spanning a range of sectors. To diversify further I also buy index tracking Exchange Traded Funds such as Vanguard’s VHYL which gives me exposure to companies paying high dividends from around the world and Black Rock’s IUSA ETF which gives me exposure to the complete S&P500 index. To protect my investments from tax, I use a stocks and shares ISA. With this tax shelter there is no capital gains tax or dividend tax to pay and you are able to protect up to £20,000 a year. For my emergency fund I use Premium Bonds which is operated by National Savings and Investments. You are able to invest up to a maximum of £50,000 and all your winnings are tax free. Your capital is fully protected by the government. By having an emergency cash reserve, I hopefully never need to sell my shares and can allow them to compound and grow over time to hopefully enable me one day to reach financial independence and have the option of retiring early if I wish to do so.
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Disclaimer The information presented on this channel and in these videos is for entertainment purposes only and is not financial advice. The price of shares can go down and well as up. Investing in shares is not appropriate for everyone so please do your own research.
