8 TRAPS that Rich people Avoid, but Middle Class does not | Akshat Shrivastava

If I ask you how

rich

Anil Amani is, you'll probably go to Google and start typing how

rich

Anil Amani is and then you'll find out that okay, he's actually bankrupt, he filed for bankruptcy, but interestingly enough, if you look at the type of lifestyle. currently he

does

not enjoy it in any way, he would be considered a bankrupt person. Similarly, if you study Donald Trump's wealth, you will quickly realize that Mr. Donald Trump has declared bankruptcy four times in his life and then you will say that you know he travels on private jets, has his own golf course , he has a lot of real estate, so by what definition is he bankrupt?

The point I am trying to summarize through these simple stories is that the rich, despite bankruptcy, can keep their wealth or many of them are able to do that, the main reason is that they really understand the law, they also know how to bend the rules without breaking them and in the process they stay active, they are able to preserve that wealth, this is very different from the

middle

class mentality that you and I usually have for ourselves, we will always follow the rules, we will just follow the mentality of her, whatever new app comes out, we will go and experiment with them, so as a result, we get stuck in the modern.

Financial

traps

that are built for us like new apps that the rich profit from by trapping us, so in this video I'm going to talk about these eight very modern

traps

that are set up for you, they could be things like, you know, getting the 12%. guaranteed returns by investing 5,000 rupees in a startup so we can also call ourselves Min Sharks, so all these are modern traps, if you

avoid

them you will definitely get rich, so point number one is that the rich understand the risk-reward curve, but the

middle

class

people

or the New Age investors really find it difficult to understand this equation, so let me help you understand this point by using a couple of examples, but first of all, to understand what the curve means risk-reward equation, take a look at this particular graph, for example here if you are investing in fixed deposits, that is what a low risk investment is and the return is also low, so it is a low risk equation and low reward on the other hand, if you go and invest in cryptocurrencies, that's completely another end of the spectrum, so here the risk is also very high and the reward is also very high, so when the rich invest they understand that they are putting your money somewhere along this curve.

They can take a high risk. They can take low risk. They generally balance their portfolio, so that's the perspective. who they invest with, on the other hand, normal retail investors or normal common investors or new investors who are entering the market and who want to increase their wealth, they still believe in meaningless arguments like, do you know what happens if I give my money to anyone? app will grow to 12% 13% 14% Club this so I won't name the app directly but you know what apps I'm talking about so they commit to the fact that you know what if you give us money we will do it.

I will give you a 12% guaranteed return. Okay, it sounds great in theory, but the problem is just understanding that equation again from a risk-reward perspective. Usually, these types of applications weave these rosy dreams. You know, if you give us your money, we'll make it grow. at 12%, okay, you've talked about the first half of the equation, but you've forgotten to mention the risk part of the curve, so this is something that normal retail investors or normal New Age investors don't understand and they can't grow. Your wealth on the other side Wealthy investors like Robert Kiyosaki Warren Buffett understand this point and balance their portfolio accordingly.

I've gotten so many questions you know what, can you talk about this particular app? He promises to give 12%. return should invest all my money in it, you definitely should not invest all your money in it, for the simple fact that the risk associated with such investment will also be quite high, so I hope you understand this point, let's move on to the second point now , when it comes to rich

people

, they mostly live on rent in the early part of their life rather than owning things. what do I want to say with that? Let me give you a practical example.

I live in South Goa and it is one of the most posh society I live in has a lot of villas and I get to talk to my neighbors quite often and I have learned that most of the people who live in this neighborhood own their own businesses, at least most of them and they live on rent, this is something that you may have also noticed among people in the business community, that normally people in the business community what they simply do is, instead of buying a house In the first part of their life, they will put that money into what part of their business, for example, creating a factory, buying land, or using that money to generate some type of cash flow?

They won't use that money in terms of buying a house. What are middle class people doing now? I'm not trying to criticize. middle class, I'm just telling you the practical reality so that you can get these kinds of points, so typically middle class people, what they would do is Jess, as soon as I get a job, I'll start an Emi in my mortgage loan. so that's called buying things too early in life. Now I'm not against buying a house if you're getting a good deal. Definitely buy a house. You should own a house at some point in your life.

V I am not against that in You need to think carefully about everything except the timing of that purchase decision, so again I will give you the second example of Mr. Mark Yuban who is one of my favorite businessmen and here is an article about him and advises people when they are in their early 20's to live a very frugal life now one of the tenants or core principles of living a frugal life is that you should rent more before you buy the third thing that the rich do really well is who now know how to protect their disadvantages.

What is the meaning of protecting disadvantages? Let me explain this by some of the frequently asked questions that I usually get, so I get a lot of questions from college students that sir, my family income is not very high and I am currently struggling in my life but I want to study abroad and I got an admission from this top university but my party costs like millions and a half and on the other hand I am getting a very good scholarship and it is giving me a free ride but it is ranked 10th so which university should I choose?

So I'll just push you to investigate the worst case scenario here: if you get a full scholarship from a decent college, you won't get any scholarship from a college you can. I can't afford what is The logical decision here I won't even explain it to you, you guys are smart enough so protecting the downside simply means that you won't end up making decisions that can literally erase your wealth now, many times in college. Students come up to me and tell me you know what, I'm not enjoying my college degree. I want to become a full time Trader and I will trade now.

Do you know that almost 99% of Traders don't even beat fixed deposit returns now? is the data that comes from zeroda and again these should not make the kind of decisions that can erase your wealth or just put you in a situation where you are completely paralyzed and don't know that once you fail in that situation what are ? What you're going to do next is that aspect is called downside protection. Now the rich are pretty good at this. One of the main reasons they are good at this is that they create multiple types of income, for example, they have active income. they have passive income they have portfolio income they have a network that they can leverage they start building brands so they do a lot of different things I won't mention this point because there is a separate video I made on this topic and I will link to it We detail it below in case You might want to learn more about it, but to make a long story short, what the rich do is create a portfolio of different incomes, a portfolio of different assets that somehow protects their downside risk.

Now the natural question arises. How can I protect my downside risk now? One of the most important things you can do is have insurance, not experiment with you know what, because this puts you and your family at greater risk and is very, very important. cover your downside risk now many of you would say ok, in the last budget it was announced that in the new tax regime the incentives to buy insurance would now be withdrawn again. Please ask a natural question: why do you need insurance? to grow your money, the answer is no, many insurance companies sell insurance that way, but that is not the goal of insurance, it is to get similar tax benefits, only then will you buy insurance again, that is not the right answer, The only reason you need to have insurance is quite simple to protect yourself from the downsides and purchase insurance.

See the same. They are a wonderful platform. You can speak to an insurance expert completely free of charge. You can use the link in the comments and description box to schedule your free phone call. I personally purchased my insurance using dto Insurance. The fourth thing that the rich do is that they actually own real assets. Now you say all assets are real, what is the difference between real assets and fake assets? So let me give you two examples. The first example is REITs versus real estate. Now think about it this way: did you ever read in the newspaper that Donald Trump bought REITs worth $5 million?

No, he would have read that he actually bought physical real estate in India if he returned. Have you ever read that this rich builder i.e. Hiranandani invested in REIT now again? You will read that okay, Hiranandani bought this real estate cor. What is the point I'm trying to make? The point is that these days in finance. many things are packaged in a certain way for example you will be given the assurance that ok if you are investing in reats you can do it with just 5000 rupees which is a big damage just go and invest 5000 rupees and you will become in Malik. from some house no, that's not correct in what ends up happening is that you end up owning the shares of a particular company now, theoretically, again, this is a very debatable point.

I have made a separate video on readings, please go and watch it, but just to put things into context, if you own, say, five shares of a particular insurance company, what do you actually own? On the other hand, you own some kind of paper asset, if you own five shares of Hindustan, again what is it? own you own a fractional ownership in a particular company, now think about it this way, REITs, what's the underlying here, the underline is real estate, why do you buy real estate? It is very simple to gain control over a particular property, so to speak. so you can rent it, that decision is yours, you can do a lot of things with it, but when you buy readings you don't have any control, so this is the biggest problem in terms of purchasing, personally I will prefer to invest my money in good companies like Hindustan Unit Live HDFC Bank etc. because the underlying growth of these businesses is much higher compared to real estate growth to begin with and also when you buy REITs you get paper assets again and now you have absolutely zero control.

I'll say okay, good point, but what about the gold? Because I find it very difficult to buy physical gold, store physical gold, this whole template is there, so

does

it make sense for me to go and buy something like Sovereign Gold Bond? I once read that Robert Kiyosaki invested in Sovereign Gold Bond or some variant of it, the answer is no, he actually buys physical gold. Any rich person who believes in the gold story ends up acquiring physical gold. Is there Jam associated with it? Absolutely yes, there are nevers. associated in terms of gold acquisition, storage, etc., etc., but to summarize, it has a specific purpose.

People buy gold as a hedge against risk. What is the meaning of risk coverage? For example, if there is some type of government non-compliance. or if there is higher risk or if there are wars between countries then in such situation gold becomes a good asset but what kind of sovereign gold bond? The answer is no, it is the physical gold that gains value in case a particular situation occurs. government defaults I am not talking about the Indian government here, but in general, if a particular government defaults, any type of bond, including the Gold Bond, its value will go to absolute zero, so what the rich really own are real assets, not fake assets, rich people.

They know where their money really goes, but most new investors or the middle class are notYou are aware of this fact, so let me give you some examples and back them up with some logic and facts, for example, many of the rich people invest through hedge funds. now hedge funds are what they are, so hedge funds are managed by these big people like Bill Amman and Mr. Ralio, so they manage their own hedge funds and these people manage other rich people's money. Now, the rich actually closely monitor the performance of hedge funds. The hedge funds tell them that they have frequent calls with these rich people, they explain to them why they are investing in certain assets and not, etc., so for example , let's say if Mr. mkes Amman is giving his money to Bill Amman to manage, then he We will keep a very close eye on him and Mr.

Bill Amman will categorically explain to him where Mr. Mukesh Amani's money is invested, but On the other hand, when it comes to average and New Age investors, what ends up happening to most of us, even if we are investing our money in stocks or other asset classes. What do we do? We normally give it to mutual fund managers. Now we have an idea of ​​where our money goes in mutual funds for most of us. The answer is no, besides that, these days you may have seen applications. What are they doing? They say you know what we will automate investments for you.

All you have to do is know that we will round it up to 100 rupees. and 5 rupees will go into some asset, you will say okay, automatic investment, but the problem is that now there are two layers of commissions, like two layers, one is that you see that these apps or New Age apps are not doing some kind of dharm, right? Secondly, they will charge you some commissions, if they round up and give money to some mutual fund manager to invest on your behalf, then there is a second commission, now you will say okay, commission, a little commission here and there .

So what is the problem? It's not like it's the end of the world if I'm paying an additional 1% commission. What is the problem? Now the problem with 1% commission can be understood through this simple example, so let's say that By putting one lakh rupees in the stock market, you can generate a return of 10%. So what does that become? Now it becomes 1.1 lakhs. If you pay an additional 1%, then how much profit percentage are you paying? So the answer is about 10% of how you do the math and tell me about it in the comments box, but that's the analysis I'll leave you with.

So when you say that 1% of my money is paid in commissions, you have to recognize the fact that that 1% of AUM or assets under management is equivalent to almost 10% of your profits at some point, so keep that in mind. Count where your money goes and how many commissions you are paying so that all these rich people know this game and us, the new normal investors, continue believing. in this automation stock NOW the rich do not take consumer loans, they take commercial loans and in their businesses they take more consumer loans. Now, how is this mechanism developed?

Let me use some examples to illustrate the power of this point, so back to the above. Example where we started the story of Mr. Anil Amani, then Anil Amani went to banking but his personal assets or a big part of his personal assets is intact, how is it possible? Okay, so in India we have a concept called LLC or limited liability company or limited liability company. company or limited liability company now, what does limited liability mean? It just means that there is a bifurcation between the wealth of the individual and the wealth of your company, for example, if I am creating a company called Wise Hat and you can go see our company and we also manage it. wonderful courses to help you understand investing better, we have a wonderful community that is built around it and people discuss with each other to improve their investment vision, so imagine that I am running this company and I get a business loan on it, for For example, let's say 5 rupees now, if for some reason the company goes bankrupt, it won't hurt me personally, so let's imagine my personal worth is 10 rupees.

I have kept it in my bank account, but I took a loan of Rs 5 CR for my business, which is a trap of wisdom if the company falls into what happened in Mr. Anil Amani's case, that company disappeared, it does not come out money from her, but my personal wealth remains intact, of course, it's more complicated than this, but I hope you understood the difference. Between taking business loans and personal loans, what most rich people do is create their own companies, take loans and these companies take more loans to buy more assets. Now this is going to get into a conspiracy realm, so we'll get back to the topic, so the lesson we need to learn is why the story is quite simple: you and I should at least

avoid

taking out a lot of personal loans because one day it might happen that we want to start our own business.

We may want to take loans for productive purposes so that our credit score and our acceptance of credit will be affected, so be very aware of the things for which you are taking out loans so that the rich understand what things they are investing their money in. money now. what do I want to say with that? Let me give you an example. These days there is a problem where you know what is the shark tank culture and normal retail investors can also invest in startups while initial investment may require a lot of money but you can become an angel investor just invest like 3000 rupees 5000 rupees and you can call yourself Angel Investors now do you understand where your money goes?

How can you liquidate it? The short answer is no, why do I say no? because any startup you are investing in can ask itself questions like people do in the moment of shock. The short answer is no, no, there will be a pitch deck that will be attached to that particular website through which you are investing. and beyond that, you won't understand the audited financial statements of those startups you're investing your money in again. The answer is no. Do you have any third-party comments on those startups? In most cases, you won't even find basic information about that.

Starting up will get difficult, but people are getting carried away with this whole ecosystem and you know what it's like to just go and become Angel Investors. As a retail investor, you will make a lot of money. Now other problems arise, for example, once you have invested your money. or given your money in a particular startup, liquidation becomes very, very difficult. What is the meaning of liquidation? It simply means that for example, tomorrow you go and buy HDFC Bank shares now and the day after tomorrow, if you don't like it, you can sell them. Why, because there is liquidity, liquidity means there are buyers for your stake in H BFC bank, but can you do the same when you make an initial investment?

The short answer is no, your money will probably get stuck, it will be very difficult for you. to liquidate those positions now the rich invest in startups the rich invest in real estate the rich invest in businesses they make investments in stocks they make investments in hedge funds W with the intention of understanding the exact deal they are getting to spread their little little money into different sets of asset classes and build positions accordingly, this is something we all need to understand, be very aware of where your money is going and understand the pros and cons of the asset class you choose to invest your money in.

The rich have a portfolio of income, not a portfolio of money-saving strategies. what do I want to say with that? Let me contextualize by giving some examples, e.g. Point number one here is that it is easier to make money than to save money, why do I say? This is because the rate at which the mangi increases, just check the rate at which you ate restaurant food 3 years ago, if you now received a bill of Rs 400,500 at the same price, the per capita bill could work out to 800 900. rupees, so inflation or price rise in the economy is simply increasing at a strange rate, so in my opinion, there is hardly any major benefit in terms of discovering five strategies on how to get more cashback on cash or what credit card you should use. use it today to save like 25 rupees more now.

I'm not saying these things are completely useless, they can be fine from time to time if you do it, it's fine if there is some system you have created. completely cool, but your energy should be focused in terms of developing or cultivating the vast majority of your portfolio income. Now, on average, every millionaire has eight streams of income, so his mental energy and his thought process must go where it needs to go to generate more streams of income. figuring out how, if you have a day job, how you can work on the weekends to create a second source of income, if there's a way to launch digital products or if you can cultivate some kind of community, can you monetize that? skills now when I give this kind of advice people take it in a very wrong spirit sometimes they say if you are a money minded person you always talk about money no that is not the point of view in the modern world money indicates some freedom It gives you the luxury of traveling to places to save time and spend more time with your family, so understanding and cultivating this positive thinking process will put you on the path to financial and time independence, so that's the spirit with the one who made this video.

I hope you can understand the eight points and I very much hope that you will not fall into these modern financial traps. Let me know in the comments box which of these pitfalls you are currently witnessing and agree with. my thought process and if you have more points to add thank you very much and see you soon