The reason I created this blog was to introduce, educate and inspire people to invest in the stock market. Investing gives us the ability to enter into as many partnerships as we can.
Why do I refer to investing as a “partnership”? Well, because it is! What else do you call a relationship where you commit your hard earned dollars…participate in the appreciation of a company’s value…share losses as well as the profits…and receive dividends and tremendous tax advantages! That’s a partner!
It sure as hell ain’t an employee.
It’s too bad that so many people don’t get that.
Now…there is absolutely nothing wrong with having a job. If you have a very good one, more power to you! However – I want people to open up their minds to the possibilities. The many mistakes I’ve made have taught me very valuable lessons. That is why I feel you must be invested!
Case in point:
Let’s say you earn $100,000 of income in a year from your job. Your tax liability is probably going to fall between 30 and 40 percent. So your take home pay would actually be $60,000 to $70,000.
Now let’s say you bought 1000 shares of XYZ Corporation last year at $15 a share, costing you $15,000. A hotshot biotech company, XYZ is now trading at $100 a share. You’ve been holding it for a year. If you now decide to sell your 1000 shares, how much is your take home? $80,000, because long term capital gains tax is capped at 20 percent.
The beauty about the second example is that it was all passive income. You did not do a thing but make the investment. You didn’t have to show up somewhere at a scheduled hour, stay there for eight hours five days per week, complete assigned tasks and/or projects, and submit a time sheet. You didn’t have to do a thing for that $80,000 except purchase shares of stock for $15,000 and hold onto them for a year!
Don’t you see? This is why I’m not as interested in earned income as in growing wealth through investing – and why I urge you to develop this same mindset.