This is a chapter from my Lifestyle book: 13 Tips on how to make money.
Chapter 26 - Thirteen Tips on How to Make Money
Here are my thirteen tips on how to make money. These tips are not “get rich quick” suggestions, rather if you follow this advice you will (over time) significantly increase your wealth.
1. Buy Low – Sell High
It seems too simple and too obvious, but it is powerfully true . If you buy and sell properties, investments, equities, or anything using this tip, you cannot go far wrong.
Everything moves in cycles and history does repeat itself. For example, look at the New Zealand dollar against the US dollar in the last ten years. If you had bought the NZ dollar under 42 US cents and sold it above 70 US cents, you would have made a fortune.
Similarly if you buy property when everyone is talking doom and gloom and no-one wants to own investment properties, you will always do well.
Do not buy equities (shares) when everyone else is buying them and the market is at record highs. Similarly do not sell after a crash.
You do not need hindsight to take advantage of this tip. When you see something that is historically cheap (except individual stocks which might be going down the gurgler) for no good reason, buy. If you own something that someone is willing to pay you much more than you think it is worth, sell.
2. Follow momentums
When you see momentum building in relation to a particular market, buy into that market. If you get in early enough and take a big enough exposure, you can make a killing. Property markets, share markets, commodity markets etc move in cycles driven by momentum. Stop buying and/or start selling when you see the momentum slowing considerably.
3. You never buy at the bottom or sell at the top
It is helpful to remember that you pretty much never buy at the very bottom of a market, or sell at the very top. As long as you get the direction and momentum right you will make money. For example, say that gold has been around US$350 per ounce for a couple of years. You wait until it goes up outside its recent trading range. Say you buy it at US$380 per ounce. It then builds on this momentum and gets to US$460 per ounce. You decide to sell and in the next few weeks it reaches its peak of US$490 per ounce. It then drops to US$400 per ounce. You have not purchased at the bottom and you have not sold at the top, but you got the direction and the momentum correct and you made US$80 per ounce.
The reason this is important is that it is easy to beat yourself up for not picking the “perfect” moment to buy or sell. The truth is that it doesn’t matter, and it is impossible to pick the exact high and low.
4. Go with your strengths
In any business or investment venture go with what you like and what you are good at. For example don’t start a recruitment business if you don’t like interacting with people. Don’t buy an investment property if you can’t stand real estate. Do start a business or invest in things you understand and are passionate about.
5. Go for broke if you are onto a winner
If you find something that is really “hot” and you have some real successes in that area already under your belt, stop looking for something else and just concentrate on that. Put all of your energy and resources into that. Can you imagine Bill Gates spending half his time developing software and the other half running a chain of restaurants? No he just went for broke on software.
6. Think Big
One of my favorite quotes is from Donald Trump’s book “The Art of the Deal”:
“I like thinking big. I always have. To me it’s simple: if you’re going to be thinking anyway, you might as well think big. Most people think small, because most people are afraid of success, afraid of making decisions, afraid of winning. And that gives people like me a great advantage. “
He is right. If you are thinking about a business or a venture have a big dream, think about what might be possible. If you have a retail business think about franchising it, or think about having one of your shops in every major city in New Zealand and Australia. Michael Hill (Jeweler) is a good example of a big thinker. He had a successful jeweler shop, but he wasn’t happy with that. Now he has retails shops across New Zealand, Australia and Canada.
When I was at university I though that if only I could think of a product to sell to every person in India that netted me just 50 cents each, I would make $ 500,000,000. I am still trying to think of that idea!
7. “Be decisive and make lots of decisions” – Anthony Robins
This is a great quote from Anthony Robins. You (yes you!) might be fantastic at business or investments, or trading currencies, or whatever. But if you never make the decision to go for it, and then keep making decisions to keep yourself going for it, then you will never know, and New Zealand and the world will be worse off for it.
They say that if it was easy, everyone would do it. You will come up against barriers and frustrations and doubts and nay-sayers. But you have to keep persevering until the breakthrough happens. After a year in my recruitment business I made a loss and I hadn’t made one really lucrative placement. Things were not looking good and I was running out of money. I almost applied for a full time job. I went as far as downloading the job application form. I sat on the form for a couple of weeks, and I made a big effort to find a teacher for a vacancy I had in England. After lots of emails and phone calls I finally made my first big placement. That gave me the confidence (and some cash) to keep going. Within six months I was making a good profit and I was on my way.
If you go into business, make sure that your business provides a win-win situation for you and your customers. Many people have the mistaken idea that business is about screwing your customers or putting one past them. Nothing could be further from the truth. The more your customers win, the more they will tell others and the more they will come back.
Take a simple example. When you go to a shop to buy milk, you win because you don’t have to have your own cow, or drive to a farm to get milk. The shop wins because they make a few cents on the purchase.
My recruitment company is a good example. When I place a teacher, the teacher wins because they have found a good job, the school wins because they have found a good teacher, and I win because I receive a fee for the placement. It’s a win-win-win situation.
10. Meet a Need
If you go into business you must meet somebody’s need. People will love to do business with you because you meet their needs. Perhaps their need is more time in their day. If you offer them a fast efficient way of doing something for them, they will use your business. Perhaps their need is for a flavoursome energy drink. If you supply that need at the right price, they will use your business.
If you see a need that is not being met, start a business to meet that need. People will flock to you to meet their needs.
Look at any successful business – a need is being met.
11. Work smart, not necessarily work hard
There is nothing wrong with working hard and at some times in business you will need to work hard. However this should be the exception not the rule. If you work too hard “in” your business, you will no have time to work “on” your business. For example looking at strategies for growth, looking at trends in your business, or looking at what your competitors are doing.
One of the reasons for starting your own business is lifestyle. If you work too hard you cannot enjoy a good lifestyle. Further, if you work too hard you can get to stressed and busy and tired to follow up on new opportunities and “great deals”.
12. Be Entrepreneurial
Entrepreneurs either do something new, or provide a new way of doing something that is already being done. Ignore most of what you have learned from text books and go out and break new ground, and make plenty of mistakes. The more decisive you are and the more mistakes you make, the more you learn and the more successful you will become.
13. Be Generous
I can’t tell you how little generosity is practiced, but how effective it is.
One excellent example is when I applied for some shares in an initial public offering (IPO) through my share broker. The shares were very “hot” and were expected to stag (open strongly). The shares did in fact do very well, they went up 40% on the day they listed. I made $6,000 on one day. I was very pleased and I rang a top Wellington restaurant and paid for a $150 voucher which I then posted to my broker with a thank you note. He had been broking for over ten years and he told me that he had never received a gift! Six months later another “hot” lPO came up. Guess who got the highest allocation of shares of all his company’s clients? I did, even though I am a very small client compared to many of their clients.
Another example is when a British Head Teacher flew to New Zealand to interview a number of teachers (some put forward by me and some not). He interviewed teachers at Auckland Airport because he only had one day in the country. I phoned one of the restaurants at Auckland Airport and gave them my credit card number. I said that the Head teacher could spend what he liked on dinner, and to give him a nice bottle of NZ wine. I then told the Head Teacher the arrangement. He of course was delighted to have a free dinner during a day of interviews and was happy to take a nice bottle of wine with him. The total bill was less than $100. We are now that school’s preferred supplier and we have earned tens of thousands of dollars in fees from them.
I cannot emphasise this tip enough times. Whatever you spend in being generous in business will come back to you tens or hundreds of times over. Of course that is not the main motivation. It is simply being a good human being to be generous to those around you. It also makes the world a better place to live.
Try it today! Send your 10 best customers or clients a case of wine or similar. Don’t wait for it to be a Christmas gift. Just tell them you appreciate them!