On Wealth Generation | Building Your Capital and Net Worth

As many of you are aware, I love talking about investing. Investing is one of the main pillars of my life. I'm always on the prowl for great investments and ways to build my income.

I was having a conversation today with a buddy of mine about building your wealth and chasing financial freedom. It was a good one and I felt that I had some good points that ought to be shared here on Steemit.

My First Tip

First and foremost, I think it's crucial to define what a "good investment" is. If you don't know what's good and what's crap, then you're likely to run into a lot of trouble in your journey to financial freedom.

Many people will also have their own opinions about good investments and bad ones. It comes down mainly to your circumstances, your available capital, your resources, knowledge, etc.

For me (and many others such as Warren Buffet, for example), the best investment is one that generates a reliable and growing income.

Investing in things that don't pay an income - namely - growth stocks, certain real estate investments, etc. - is a great way to sit on an asset and wait until it appreciates.

This is most definitely a form of speculation. It's similar to buying a piece of art for $1k and hoping that someone will give you $2k for it tomorrow. Speculation can be useful in certain circumstances, but in my opinion (not financial advice) the majority of an investors capital should be invested into income generating assets.

STEEM

(STEEM) STEEM POWER is a great investment that yields both speculative gains as well as income gains.

Speculation (speculating in the price increasing) has been a great way to make money in crypto and STEEM. The price fluctuates several percentage points and is highly volatile which means there is a lot of upside and downside potential.

What I love more about STEEM however, is that you can simultaneously speculate on the price WHILE also participating in income-generation.

Having both of these creates exponential gains because the income is generated in the form of STEEM which also has the potential to go up over time as well.

Second Tip

My main second point was about keeping too much cash on hand. My friend loves to keep cash on hand and I was trying to root out the reasoning for doing so.

There are certain positive reasons for keeping a certain amount of cash on hand - namely, the ability to invest in opportunistic investments (one like today would be good with buying the dip in crypto) - but there is definitely a cut-off point where one can keep too much cash on hand.

My friend is on this side of the spectrum. He keeps well over 30% of his net worth in the form of liquid cash. I recommended that he re-think this amount.

Having too much cash on hand means that you're vulnerable to theft (depending on how you keep it) and you're also having a significant amount of money that is depreciating rather than appreciating or distributing income.

I view cash as being something you spend. If I keep $1000 cash on hand, that $1k is meant for spending purposes. It's far from an investment. In fact, it's a depreciating asset in my opinion.

I would never keep more than 10% of my net worth as liquid cash. The only time this may ever happen would be brief as I would be transferring capital from 1 investment into another. That would be a short period of time and it would be my primary goal to offload that cash into an investment as quickly as possible.

Otherwise it's just sitting there and not generating any income or appreciating any value.

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What do you think about STEEM as both a speculative and income-generating investment?