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7 Things The Rich Never Invest In | How To Invest Money Like The Rich - YouTube
Channel: Betterment Boss
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If you know anything about millionaires
you'll know that they are avid investors
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and in order to continue to build their
wealth they must avoid investing in the
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wrong things therefore in this video I
will share with you the seven things
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millionaires don't invest in so that you
too can make great investing decisions
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and become rich yourself in life one of
the best ways to succeed is to take
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after the lead of those who have
succeeded before you and this method
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certainly works for investing it is why
thousands of people spend countless
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hours studying the investment strategies
people like Warren Buffett and Charlie
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Munger funny enough these investing
moguls
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also took their investing strategies
from those who came before them for
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instance warren buffett investing
strategy was learned through his teacher
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and the author of the book the
Intelligent Investor Benjamin Graham
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Benjamin Graham was known for being
diligent almost surgical in his
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financial evaluation of companies his
experience led to simple effective logic
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upon which Graham belt a successful
method for investing this oldest say
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that investing is an intricate art and
knowing what investments to avoid is
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just as important as doing which you
should invest in well some commonly
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thought of investments can seem like
winners when trying to grow your wealth
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the reality is that some can actually
cost you money in the long term making
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them things you most definitely should
avoid so which investments in particular
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do billionaires avoid investment number
one bonds well it's true that a lot of
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millionaires do hold some bonds in their
portfolios this type of investment tends
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to be avoided when millionaires try and
maximize their wealth the first issue
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with bonds is that their returns are
generally much lower than what you could
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realize by investing in stocks instead
in fact many buttons barely keep up with
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inflation earning on average just 3%
annually for example in the past three
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years in the United States the average
inflation rate has been just over 2%
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annually which means that on a $50,000
investment you would be ahead 1% or
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pharmd dollars as a net return so if
bonds have such low yields why would
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anyone invest in them in the first place
the truth is that bonds are generally
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lower risk investments in stocks and are
rather liquid meaning that if you want
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to dispose of them then you can get your
money
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fairly quickly moreover bonds tend to
pay interest making them income
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generating assets unfortunately their
low yields make them more of a wealth
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preservation tool than a wealth
generation tool which is why
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millionaires tend to avoid putting large
sums of money into this type of
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investment investment number two penny
stocks any stock that trades on the
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stock exchange for less than five
dollars per share is considered a penny
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stock and millionaires avoid them like
the plague millionaires avoid this type
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of investment for a few important
reasons first companies who trade low
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value shares are not required to
register with the Security and Exchange
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Commission commonly referred to as SEC
and do not have to present them their
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annual reports in essence this means
that there is no oversight into the
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validity of the financial information
these companies are reporting making
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them very volatile investments moreover
having a lack of access to credible
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financial information makes it very
challenging for investors to get a sense
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of the true value of their holdings
which is an important factor of
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millionaire investing decisions now sure
these types of stocks do have the
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potential for exponential gains and
significant returns for investors who
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want to gamble on these unproven
companies but millionaires know that
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penny stocks are bound to fall another
recent penny stocks make for bad
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investments is due to their low levels
of liquidity because most people don't
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invest in these types of shares finding
a buyer for a stock you own can be
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challenging while most popular stocks
are traded thousands of times a day
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penny stocks are bought and sold less
often which also affects their price
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which is another downside of penny
stocks holding investments that are
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volatile in price makes it hard to gauge
the true value of your holdings and can
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make investing very stressful as you see
your money rise and dip to extreme
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levels over time so for these reasons
millionaires do not invest in penny
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stocks investment number three digital
currencies for the last few years all
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anyone has talked about was Bitcoin and
other popular cryptocurrencies but this
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type of investment tends to be avoided
by millionaires now I would be lying if
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his said that there weren't people who
made millions investing in
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cryptocurrencies but these people are
far and few
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between the first problem with digital
currencies is that they aren't
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government regulated this means that
there is no oversight into how the
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companies behind them are operating
which can be scary if you were investing
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large sums of money into them the second
problem with cryptocurrencies is that
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they have no inherent value their price
is totally speculative kind of like
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penny stocks which makes the price spike
when there is hype around them and
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prices draw when attention cools off for
instance when Bitcoin received a
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ridiculous amount of attention in
December 2017 the price of a single
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Bitcoin rose to over seventeen thousand
dollars USD then as the tension moved
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away from Bitcoin the price began to
decline an investor's saw there once
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bo-lieve equipped a currency trading at
just over three thousand dollars USD one
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year after its peak finally unlike
normal investments digital currencies
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are at risk of hackers and theft take
the example of BitFenix a Bitcoin
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exchange company in 2016 the platform
was hacked resulting in depositors
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losing over 70 million dollars sadly
this instance is not uncommon
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I was highlighted in the US Department
of Homeland Security study roughly
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one-third of all Bitcoin exchanges have
been hacked at one point or another so
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if you add up all these elements and the
fact that cryptocurrencies don't produce
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income like investment properties or
dividend shares do there's no wonder why
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millionaires seldom use digital
currencies as a primary investment
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vehicle investment number for
certificates of deposit another
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unpopular investment of the rich are
certificates of deposit if you're
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unfamiliar with certificates of deposit
or CDs for short then let me explain
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what they are a certificate of deposit
is a product offered by banks and credit
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unions that offers an interest rate
premium in exchange for the customer
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agreeing to leave a lump-sum deposit
untouched for a predetermined period of
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time essentially you're trading access
to your money for interest income
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unfortunately CDs have the same main
disadvantages bonds they don't offer
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very substantial returns meaning that
again you will struggle to fight
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inflation by investing in them in fact
as of September 2019 the highest CDs
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only of the 2.25 percent annually one
upside to certificates of deposit is
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that
tend to have shorter terms and bonds
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meaning that you can get a similar
return while being without access to
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these funds for a shorter period of time
which equates to less risk while CDs
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aren't a terrible investment
millionaires expect higher returns and
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rely on these returns to build their
wealth faster which twice certificates
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of deposit aren't the investment of
choice of the rich investment number
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five collectibles
the next type of investment millionaires
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avoid are collectibles collectibles
include things like art antiques stamps
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classic cars wine and comic books and
believe it or not they are big business
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according to a report by Deloitte the
market for collectibles was stranded
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sixty-two billion dollars in 2012 and it
was expected to grow year-over-year
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but even with this expected gross
millionaires still shy away from putting
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their money into collectibles for a few
reasons
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first collectibles are only worth what
someone else is willing to pay for them
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meaning that there is no real defined
price for these assets Connelly
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cryptocurrencies the assets value is
based on how much other people's
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perceive it to be worth rather than
having a real monetary value associated
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with it this means that that nice
painting you own may be worth a lot to
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you but it is worth nothing unless you
have a buyer willing to part with their
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money for it and add to this issue
unlike stocks and bonds there is usually
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little public information available for
individual collectibles making the
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valuation process that much harder
the second reason the rich don't use
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collectibles as investments is because
they don't generate income sure a
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painting is nice to look at but it won't
fill your pockets on a monthly basis
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making it a less than ideal investment
to hold probably the biggest downfall of
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collectibles as an investment is how ill
acquit a for instance it takes the right
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kind of buyer to want to spend thousands
of dollars on an antique car or comic
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book collection meaning that if you want
to part with your collectibles in order
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to recoup some cash you may be waiting
awhile until those funds are received in
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short while growing a collection of
valuable items can be fun they
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definitely don't make the best
investments investments precious metals
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the sixth thing that a lot of wealthy
people do not invest in are precious
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metals and more specifically gold now I
get why some people would want to invest
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in precious
metals generally speaking gold and other
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precious metals can act as a kind of
safeguard against economic downturns
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this is because precious metals tend to
have an inverse relationship with the
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stock market simply put when the prices
Docs and bonds go down gold and other
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precious metals tend to go up and when
stocks are on the rise precious metals
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decline in value you may be thinking
well isn't it smart to have investments
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that will offset any losses that may
experience well in theory this makes
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total sense the reality is that precious
metal prices don't typically go up
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enough to make up for the losses that
you would experience in an economic
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downturn making them quite lackluster as
a hedging tool the other issue with
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holding precious metals is that like
most of the other investments we've
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discussed in this video they're rather
illiquid again if you were in a
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financial bind anied money selling off
these assets that may be harder than you
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would expect leaving you without the
cash you need and if you need more of a
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push to avoid this type of investment
you should know that investing king
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warren buffett thinks that gold is a
terrible investment Buffett believes
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that stocks are a much better investment
and often highlights just how much
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better returns on stocks have been in
the past verses it's precious metal
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counterpart for instance if you invested
ten thousand dollars in both gold and
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stocks in 1942 the value of your gold
will be now worth four hundred thousand
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dollars now this seems like great return
but the same $10,000 invested in stocks
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would be worth a cool 51 million dollars
today proving just how powerful stock
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investing can be therefore for these
reasons wealthy people tend not to
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invest in precious metals investment
number seven companies you don't
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understand at this point you've probably
come to the conclusion that stocks are
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the type of investment that millionaires
gravitate to but not all stocks make for
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a good investment this is because there
are many companies that trade on the
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stock market that are so complex that
the majority of investors can't even
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comprehend what business the company is
in in fact experienced investors like
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Warren Buffett won't invest in most
stocks because the help complex they can
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be and he's been investing for longer
than most people have been alive Buffett
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preaches the importance of investing
only in companies you understand and he
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practices this himself by restricting
his investments to those that fall
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his circle of competence his circle of
competence is where as investing
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expertise lies and only businesses that
fall into this circle are considered for
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investment Buffett makes the argument
that if you don't understand the
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business
how can you project performance for
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example Buffett did not suffer greatly
when the tech bubble burst back in the
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early 2000s because he was not heavily
invested in dot-com stocks in short
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investing in Sox is a powerful tool for
growing your wealth but your investment
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should be limited to the companies that
you understand in conclusion if you want
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to start investing like a millionaire
then you must avoid putting your money
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into bonds penny stocks digital
currencies certificates of deposit
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collectibles precious metals and finally
companies you don't understand it thanks
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for watching if you want to go from the
life you have to the life you deserve
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then hit the subscribe button now
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