See how to use “The Black Box” investing strategies the ultra-wealthy use To Make Millions.
The most successful people in the world are absolute masters at building a portfolio to create wealth and give themselves financial stability regardless of any other income streams. Along with active income, portfolio income is an absolutely essential pillar of building wealth.
More from The Elevation Group CEO and investment expert Brian Fouts from his latest training call:
Hi everyone, Brian here again and I want to continue our conversation about the three sources of income that we talked about here in the previous video. Now, the first source, as we mentioned, is active income. Now, when you want to build wealth, you want to have that wealthy life that we all want, having an active income is almost always going to be a part of it, especially at the beginning. Because when you're producing an active income, you're actually trading time for money or you're actively involved in the business or whatever you're doing to generate that income or revenue. And if you stop doing what you're doing or if you walk away from that business, guess what happens, right? No more income. It stops because you're not actively involved anymore.
So we learned that when you maximize your active income, or you gain control by being self-employed, or you start your own business, whatever it is that enables you to get control, maximize it. Only then can you leverage your active income into other sources of income, which we'll talk about right now.
So the second income stream that we’ll talk about today is portfolio income. What is portfolio income? Basically a portfolio is made up of different assets that you invest in order to produce a return and grow your nest egg. More precisely, a portfolio is going to include things like mutual funds, non-dividend paying bonds, things that actually typically compound. Some of the most successful people in the world talk about building a portfolio to create wealth and to give yourself real financial stability.
So what you’ll be doing is pulling capital from your active income and funnelling it into your portfolio to create a new income stream: portfolio income. So the way that it typically works traditionally is that you have active income, right? You have your job, your business, whatever the case is and you use a portion of the capital from your active income to fund a diversified portfolio. At a certain point, your portfolio income overtakes your active income to become your predominant income stream.
So how is this going to work? So think of a 401k as an example. When you're invested into a 401k when are you getting cash flow? You don’t because guess what? With a 401k you're essentially taking your active income and you're investing it into the 401k it to build it up over years. And then once you retire, once your active income dries up, the 401k takes over, right? So then what is the difference here between active income versus portfolio? How do you get income from your portfolio? Answer: You have to sell it. You have to sell the asset, think of a mutual fund for something like that, you have to sort of liquidate this asset. So if you have stocks or bonds, things like that, you've got to sell it in order to make any money off it. That's how you generate income from a portfolio.
Now, what is concerning about that? Well, when you try to sell this thing off, the value of it is going to go down. So this is going to be a shrinking asset. So you have income coming in here. Once that goes away, then you start to sell the asset right here. Hopefully the asset is big enough to last you long enough to survive retirement. So you can see that building a portfolio to create wealth is a tricky thing. That's the way that the traditional path works which, by the way, I don't like the traditional path. I don't like this model right here. But I want to explain to you so that you can better understand what the three sources of income are and you can build wealth for yourself.
So once again, a portfolio is a shrinking asset, right? That makes things tricky, but it’s important to note that when you’re building a portfolio to create wealth it can be a big part of your overall strategy. Pretty much every successful investor, entrepreneur, business owner that I know has a portfolio of assets that they own that they can sell to generate income if they want or need. But the third source of income is where they all want to be, where you want to be as well, which you talk about in the next video.
So once again, the three sources of income. The first one is active income trading time for money. If you stop doing it, you stop making the money. You take a portion of this and you try to put it into a portfolio to build this one up for later on in life. And then when you want income from your portfolio, what do you do? You sell the assets inside the portfolio, Hopefully it lasts until the next time you need to generate income.
We'll talk about the third source of income right here with that. Take care. I'm Brian Fouts with Elevation Group. And if you want to follow what we do here and go to theelevationgroup.com. Take care. Talk to you soon.
We’ve put together a free online training we’re calling “How To Use The Black Box Investing Secrets of the Super Rich”. This free online training condenses a decade of intense research into the banking habits of the super-rich, down to 3 “Black Box” secrets the super-wealthy don’t want the rest to know.