Can you imagine if you were afforded the same opportunities that you can provide for your kids? 

The stock market is one of the only investments that is all but guaranteed to expand your wealth over the long term . The stock market has recovered from every crash, EVERY ONE. 

The S&P 500, an index that measures 500 of the largest companies in the United States currently sits at 3,925. Looking at historical data the year I was born the S&P 500 opened the stock market at 164.04. If you invested $100 in the S&P 500 at the beginning of 1984, you would have about $5,345.40 at the beginning of 2021, assuming you reinvested all dividends. This is a return on investment of 5,245.40%, or 11.35% per year. If my parents invested $100 a month over that time frame it would be $550,845. 

What is your stock birthright? Here are some numbers for you to consider for investments of $100 a month based upon the last 60 years. 

2001 (20 years): S&P 500 Total Return: 324% | $100 a month invested: $55,472.33

1991 (30 years): S&P 500 Total Return: 2,039% | $100 a month invested: $264,640.90

1981 (40 years): S&P 500 Total Return: 7,791% | $100 a month invested: $1,011,716.95

1971 (50 years): S&P 500 Total Return: 177,559% | $100 a month invested: $2,483,405.37

1961 (60 years): S&P 500 Total Return: 312.61% | $100 a month invested: $5,790,473.86

Now you see that we all have the potential to be millionaires. Our kids have the potential to be millionaires and so on. These numbers only reflect an investment of $100 a month. Can you invest more? Probably. These numbers also represent the stock market as a whole, the average. 

Some companies such as Apple, Disney and Amazon have returned significantly more over shorter time frames. Now that you have this information what are you going to do to build generational wealth?

Here are some numbers if you invest for your kids future at a 10% return (S&P 500 average annual return).

$100 dollars invested over the next 21 years at a 10% return: $86,664.11

$250 dollars invested over the next 21 years at a 10% return: $216,660.27

$500 dollars invested over the next 21 years at a 10% return: $433,320.54

$1,000 dollars invested over the next 21 years at a 10% return: $866,641.08

Now we can’t predict what a stock like Apple, Disney or Amazon would return over the next 21 years but what would have happened if you had started investing 21 years ago for your kid in well known stocks that were obvious 21 years ago.

$100 a month invested in Disney over the past 21 years: $140,071.24

$100 a month invested in Microsoft over the past 21 years: $203,467.19

$100 a month invested in Amazon over the past 21 years:$1,172,375.13

$100 a month invested in Apple over the past 21 years: $2,717,135.02

Now you can see the power of investing. The worst you could have done for your kid is a nest egg of $140,071 by investing $100 a month in Disney. On the flip side your kid could have been a millionaire by investing in either Amazon or Apple. 

The world would like us to believe that investing is either only for the rich or the geniuses. In reality it is a numbers game. The longer you invest and stay consistent you are almost guaranteed to win. Leaving this money in a savings account would have done next to nothing.

The truth is you should be rich but you just keep giving away your inheritance. Let’s try not to repeat the same cycle with the next generation. 

The next step is figuring out what is the next Apple, Amazon Microsoft or Disney. The other part is staying consistent and not taking your eye off the ball. This is how we build generational wealth.

If you have not opened a custodial account here are some of the apps that are easy to get started, these include STASH and M1 Finance or check your local brokerage. 

My definition of wealth is a lot more simple. Wealthy means being able to walk away from your job and all of your expenses are covered for the unforeseeable future. Being wealthy prescribes attaining a level of financial independence where you no longer work for your money but instead your money works for you. 

Think about that for a second. 

Imagine sitting at home and making the same or more money than if you were to go into someone’s 9-5 and work a job. More importantly, true wealth is generational and can be passed down. Of the top 10 richest people in the world, only one was born into generational wealth...an example that creating new generational wealth is entirely attainable for most today. What are you passing down to your kids?

I know, you are going to say this just sounds like being rich, but does it really? Obtaining “rich” status is not that hard. How many rich people have you heard of that still went broke? Tons! Just off the top of my head MC Hammer, Evander Holyfield, Nicholas Cage and about half the people who hit the lottery. That is because they obtained riches but their mindset never changed. The biggest flaw among the just rich is that their level of spending often jumps to an unsustainable level and they spend their money instead of investing it. Being wealthy means more than just making more money, it means the complete understanding of earning potential, debt, taxes and investing as pillars to sustained wealth. Being wealthy is an entire recalibration of how we as human beings conduct ourselves. In truth most of us are so accustomed to the consumer mindset that we never realize that with just a few changes we too can obtain wealth. 

If you just want to be rich, I’m sorry but you have come to the wrong place. If you want to build wealth, let’s map a proven blueprint and dissect the moves of the wealthy. Let’s understand what they do and how they do it so that we can apply it to our own lives. 

My version of ‘wealthy’ is real simple and there are many paths to get there. This includes starting your own business, real estate or stock investing, it can even include a successful career. We will probably focus most on the stock market as the greatest multiplier of wealth that any and everyone can use to maximize their income potential.  The numbers are simple but when you really understand them you can appreciate the simplicity even more. 

The stock market gains approximately 10% per year, meaning you can double your money every 7 years by investing in the stock market. However, most people are so afraid of losing money that they miss out on this potential of multiplying their wealth. If you invest in the stock market as a whole, you are 99% guaranteed to make money in the stock market over the long run. There has never been a crash that the stock market has not recovered from. NEVER! Don’t get me wrong, you can lose money in the stock market by picking bad stocks but investing in the stock market as a whole, namely through ETFs like SPY, DJIA or QQQ is almost foolproof. Look at the chart below of the S&P500 (an index of 500 stocks), every drop is followed by a recovery. 

Stockcharts.com

10% is the average return from the stock market without even trying but if you invest wisely those returns can be magnified significantly. Everyone generally knows that Tesla, Apple, Amazon and Netflix are good investments but do you know how good?

Here are the returns from those stocks over the past 10 years.

These types of stocks I call Money Multipliers. Most Investors will tell you to keep investing in these companies. All 4 of these companies are great investments long term but at their current valuations it is highly improbable that they will provide the same returns over the next 10 years as they have over the previous 10. So how do we find the next Tesla, Netflix, Amazon Apple? That’s where learning how to see the potential in companies before they take off is essential. This won’t be easy and in truth it does require a bit of luck, but you only need a few of these stocks to build your wealth beyond the market average. Is Bitcoin the new Tesla? Only time will tell, but you should be positioning yourself to be a part of these opportunities. The only sure way to fail is to never try. 

However, getting Tesla like returns is only one part of the equation. If you do not change your mindset about how you approach finances you will never attain true wealth. You will also need to set realistic expectations, your return potential is limited by capital investment. Meaning, it does take money to make money. So stop spending yours frivolously and learn how to invest it properly. 

What does it mean for the average person to be wealthy or capable of walking away from their 9-5? Well here is a very simple formula. Take your current salary/income, and subtract how much you need to live off of. Now we will use the average stock return as a benchmark. In order to truly be wealthy, using the stock market as an investment vehicle, my simple formula is to obtain liquid assets of 10-12X your current salary. At 10X if you are living off of $50,000 today then $500,000 should be your minimum target to be financially independent. This means that if you have $500,000 invested in the stock market you can reasonably expect for those investments to return $50,000 a year without you working a 9-5. If you make $100,000 the target should be $1 million.

Now here is when reality sets in. If you make $50,000 and your goal is $500,000 then you can see how having one or more Money Multipliers in your portfolio can get you there. I am not your genie who will magically bestow wealth upon you. This process has to be driven 100% by YOU. There are several common mistakes I see people make that even I myself have fallen victim to. It can only take one bad event to totally derail your finances/investments. That can include losing a job, a high cost medical procedure or some other act of God that changes your entire financial outlook. Many distractions can derail the path to success like too many stocks in one’s portfolio, too little focus on their finances and debts that drain financial independence. Being wealthy is not easy, if it were everyone would be. You can and will be but the journey starts with a single step.