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Building Wealth: A Wealth Building Strategy Is More Than Simply Diversifying Your Investments

Building Wealth: A Wealth Building Strategy Is More Than Simply Diversifying Your Investments

Wealth - an abundance of values. Each of us determines what is or is not of value to us. He or she may not be wealthy even though they may have a great deal of money because they have no honor, no happiness.

I measure wealth not only by the numbers but by holding it up against my happiness level at any given time. Building wealth is fine, but most people assume you are interested in building wealth to become secure, stable, and happy in life.

Assuming you are happy, just not thrilled with your current portfolio returns, you should know that there is more to diversification beyond what the average person thinks is all you need to know.

With a successful wealth building strategy comes the understanding of what kinds of diversification offer you the protection you need from taking great losses in the short and long term.

"Wealth is when small efforts produce large results. Poverty is when large efforts produce small results."

Financial wealth involves the ownership of multiple money producing assets that flow to you, not money draining assets that flow from you.

Investing is a fundamental way to build financial wealth. The sooner you start to successfully invest the more opportunity your investments have to grow.

In order to build wealth there are four simple things you must do:

1) Control your spending.

2) Pay off debts that don't produce some form of income to you.

3) Create or acquire wealth building assets or income streams.

4) Acquire the knowledge to learn how to leverage your TIME and your ENERGY.

Try seeing "diversification" in an entirely different light. As an example, David Futrelle, Money Magazine, wrote a great piece on this entitled "Build Wealth in any Market."

In it he discusses that diversifying investments in your own country's stock market may not be diversified enough.

"More than half the world's stocks are traded outside the U.S. We think it makes sense to keep at least a quarter of your stock money in foreign equities." David Futrelle, Money Magazine, August 12 2004.

Futrelle goes on to give tips on diversification. This is a good exercise in building wealth in the unstable world of stock investing.

Additionally, think of how you can diversify the following sets of capital:

1) Human Capital (your job and career),

2) Physical Capital (your house and other possessions) and

3) Financial Capital (those stocks, bonds and cash).

All these components should work together in your wealth building portfolio.

Diversifying financial assets alone will not offer you enough protection without understanding what kind of diversity offers true protection against avoidable losses.

C.C. Collins is a Financial Planning Advisor and Author of "Scientific Wealth Strategies" at http://wealthscientist.com Find more information at http://wealthscientist.com

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