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Techniques to become a millionaire from scratch

Cover of  by Guy Thomas

(Translated from Spanish) Become a millionaire from the bottom is not impossible, just very difficult. While most of those who dream entrust this task to systems such as the pools or the lottery, which is comparable to the probability of being successful by a meteorite.

Among those who still hope to get rich by their own methods, however, abundant resource investment: The market is open to a private buyer who still use many small investors who do their personal capacity and building a modest amount of money. Like playing the lottery, everyone dreams of getting rich buying and selling securities, and as in the lottery, only a few end up taking the prize.

In Free Capital (Ed Harriman House), Guy Thomas profiled twelve British millionaires are from scratch, in all cases due to participating in the stock market, and itemizes what techniques continued to enter the world of investment with a small amount of money and leave it turned into millionaires. "Private investment can change your life dramatically," says Thomas about his work. "The most reasonable is not from the basis that will happen, but the idea that you can. In the case of the 12 investors who portrays the book, is something that ended up happening. "

In fact, Free Capital is "a book about lucky people," says the author. He speaks of people "unlike most, have reached middle age with a life far better than they expected, at least in financial terms." Twelve fortunes are by luck but also because the good fortune must be know how to manage, explains Thomas. "There are two types of luck. The luck of the lottery, that is pure chance and luck Pasteur, and named after Louis Pasteur, who managed to sum ​​up in a memorable phrase: In the field of observation, chance favors the prepared mind. " The twelve stars of Free Capital were once subject to this kind of luck and when they did, they got rentabilizarla through a series of techniques that they became millionaires.

1. Thinking small

Of the twelve investors, eleven amassed his first million by focusing exclusively on small local companies, most of which did not even have international divisions outside the UK. The reason they gave to Thomas when it comes to explain why their strategy is simple: investment professionals-usually paid-supply houses have their eyes on the big companies on the rise in the stock market, for so that let the opportunities offered by small firms, even when they show signs of growth.

This is not the only advantage, according to Thomas, which offers investment in small businesses: small companies are more accessible, more willing to change and if they grow, they become easy targets of acquisition from third parties. Triple, quintuple or even multiply by ten the initial investment is something that occurs bit on the investment world, but if it does, it does when you invest in small, seldom if we put our money in big companies.

2. No fear cash

Owen fictitious name, made ​​his fortune always providing large amounts of cash are not subject to any investment. His is the most extreme example of Free Capital, but the truth is that most millionaires in the book by Guy Thomas remained consistently more effective conventionally considered healthy. "It is a misconception in cash burning a hole in your pocket," said Owen. When it comes from the ground, the bottom is not investing for its own sake, but when the occasion is propitious.

3. Fiscal efficiency

"Most investment-related elements are fluid and uncertain," said another of the investors in the book. "Taxes are the few things predictable and stable enough to be able to do something about it." As is clear from the experience of the twelve cases collected in Free Capital, tax efficiency is indispensable in the long-term investment.

4. Financial advisors, far better

Thomas says that "the consensus in the expert opinion is worth little, for when the case is about something that is already reflected in market prices. Successful investors tend to predict things for themselves. " In fact, most millionaires surveyed in his book not delegated decisions on advice or investment professionals, but they exercised their own judgment even when contradicted the majority opinion.

5. Keep track of investment forums

Along with stock information or publications of specialist analysts and blogs, the websites of professional and amateur investment have become an indispensable tool to become a millionaire. Some information and opinion about the markets, such as Motley Fool or ADVFN - are added which also include deals - Interactive Investor or Green Energy Investors -. In Spain we have examples such as Rankia , InverForo or Investment Forum .

6. Do not try to cover too

Spread your money across many different assets, as stated in the first unwritten rule of investment, can be a very useful advice to not end up in bankruptcy, but could not resultarlo if we want to make a fortune. Most millionaires are in Free Capital investment portfolio had a markedly reduced and in some cases, less than ten values. He who is portrayed by the pseudonym of Vince, who made ​​his fortune with an ISA fund and now has an advertising agency based in Switzerland, as summarized in a simple maximum: "Minimize the risk by diversifying your investment also takes you to minimize the benefit. "

7. When the value grow or sell it or hold back

When starting from scratch is essential to grow sustainably. An investor of Free Capital, real name Nigel, reduces their success in the investment world to a simple rule which states have always adhered: when something doubles in value, sell half. The arithmetic is simple: 50% of an asset that has doubled in value equals 100% of what it cost, so that means selling off the initial investment while retaining the other half, which will continue paying dividends. If the value evolves for us to repeat the operation two or three or more times, always making sure our money will grow the ROI, minimizing risk.

8. Look up values

Most of Free Capital investors actively sought to invest in securities of companies with good growth prospects whose actions, however, prove cheaper. For this they resorted to various techniques, while one chose companies that specialize in products of a temporarily depressed market, whose activity would eventually return to normal, that others have acquired securities of companies with good track that atravesasen, however, a complicated situation caused by conditions beyond its control. The lesson, if anything, is the same: if the benefit did not file hasty investment in rising markets, but in the purchase of securities of discrete markets and wait for profit rebound.

9. Read the signs

If product prices rise, increases the value of the companies that mediate consumption. When the actual quotes contradict this simple principle, something may be interfering with the mechanics of the market. And the investor aware of what you should not forget that by tempting it is to operate when the market gaps or contradictions experience, it usually ends up resetting. So it was that the Free Capital millionaires per system prevented companies use higher operating value, however, depressed markets. They also tried to avoid-locate-profitable companies in numbers with a symptomatic internal evidence of a sloppy operation, as the delay in presentation of results, the resignation of its auditors or consultants or changing dates on your calendar of financial commitments.

10. Cautious and long-term investment

Only one of the Free Capital investors it was short term, the rest tended to hold their purchases for months or years, paying the dividend reinvestment and personally supervising the development of each and every one of the companies they put their money. The caution, the author of the book, is not incompatible with amassing a fortune, although it is usually in a hurry.

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