Moon landings
I was gently amused by the Blue Origin 11-minute space odyssey this week, which generated a little controversy online, and gave me a brief inspiration for a long Easter weekend blog post.
When a real space shuttle leaves the earth’s gravitational pull, most of the fuel is used during the take-off phase, and the Solid Rocket Boosters are typically jettisoned within the first 10 minutes of the flight.
The shuttle still requires some fuel in the cruising phase of the journey, of course, but there is far less power and energy required.
Naturally that’s because the thrust from the engines has given the vehicle the momentum to reach an enormous orbital speed of around 17,500mph, allowing the shuttle to coast through space with relative ease.
Getting to base camp
The great investor Charlie Munger once said in a 1990s shareholder meeting that “the first $100,000 is a bitch, but you gotta do it.”
In a capitalist economy, you generally need to become an owner, stakeholder, or investor to thrive, and saving and scraping together your initial investment capital through whatever (legal!) means necessary is the investing equivalent of the shuttle’s boosters getting you off the financial ground.
Interestingly Munger made his first millions through real estate development, though he became far more famous later as Warren Buffett’s sidekick, and a consummate investor in businesses and equities.
The 3 phases of investment wealth
There are essentially three phases of investment wealth when it comes to building a real estate portfolio.
The first stage is to earn, save, and acquire your first quality investment property or two, which allows you to start the snowball rolling and benefit from long-term compound growth over your investing lifetime.
In some ways this is the hardest step to achieve – and it’s certainly the most important step, because it lays the foundations of everything that follows.
The second stage of the journey is the accumulation phase, which might require tipping in some more of your savings and capital, while potentially redrawing some equity from your first investments to grow your portfolio further.
Crucially, you are now beginning to break the cycle of trading your time for money.
In time you will reach a landmark moment where your investment portfolio is generating a far greater annual increase in your wealth than your earned income, which often leads to an “ah-ha!” moment for investors wanting to escape the corporate rat race.
Finally, you will move into the exponential growth phase of the portfolio, where the annual growth of your asset base comfortably exceeds all of your living expenses, gifting you financial freedom while allowing your net worth to continue growing and compounding in perpetuity.
This presents you not only with freedom, but also many more life choices and options.
3 tips for reaching escape velocity
This all seems simple enough when it’s mapped out like this, but in the real-world life tends to get in the way of such smooth progress, and there will surely be a few key hurdles that need to be overcome!
The first hurdle is to be able to spend less than you earn in order to begin your investment journey, which in some ways is harder than ever given the ability of ‘Big Tech’ algorithms to sell you dreams of fast cars, exotic holidays, and all the latest gadgets.
A second challenge is to stay the course through the market cycles without losing interest or falling prey to the siren songs of get-rich-quick schemes or the temptations of other ill-advised ventures, of which there may be many.
And the third key step is to never give up, despite the inevitable setbacks you will experience along the way; if there’s one immutable law of life it’s that some bad stuff will happen to all of us, and you’ll need to demonstrate some resolve to keep ploughing on regardless.
Building wealth through property investment is said to be simple but not easy, and it tends to help if you can surround yourself with optimistic and like-minded people to share the journey with you.
