I’m an online entrepreneur, an investor who specializes in exotic assets (including exotic assets pertaining to exotic jurisdictions such as China, with ChinaFund.com being my most recent project) such as domain names and an economist. This strange and somewhat unique skillset puts me in a reasonably good position to offer wealth management tips to those like me, to people who make money online in one way or another. It’s what I do over at ChinaFund, it’s what I do through my books and so on.
Today’s post is a tribute to Stephen Covey and his famous “The Seven Habits of Highly Effective People” masterpiece and a way to spread some wealth management wisdom in an easy-to-digest manner.
So, without further ado, here are the seven habits of wealthy entrepreneurs, whether you live in China or the proverbial West:
- They don’t care about Mrs. and Mr. Jones. So what if their neighbor bought a fancy new car or always acquires the latest gadgets the minute after they become available? This doesn’t mean they have to compete just for the sake of keeping up with them. If other people choose to make silly financial decisions such as wasting money on overpriced rapidly depreciating assets in the spirit of keeping up with the Joneses, it’s their prerogative, wealthy entrepreneurs don’t feel the need to follow the herd and neither should you. Whether we are referring to China where consumerism has just started on a historical scale or the West where it is deeply-entrenched, there’s nothing to be gained and everything to be lost by listening to Mr. and Mrs. Jones.
- They framed the phrase “opportunity cost” and put it on the fireplace mantle. The term in question is relatively easy to understand. Whenever you’re wasting money on something (for example, by purchasing a $40,000 vehicle when a cheaper one would have been just as good), you’re not just saying goodbye to the amount in question (in our case $40k) but also to all of the money you could have made by investing it more wisely.
- They diversify and don’t put all of their eggs in the same basket, one of the reasons why I specialize in jurisdictions such as China and generally speaking, assets you don’t come across every day. Nobody can predict the future in an accurate and consistent manner, wealthy online entrepreneurs understand this state of affairs and therefore aren’t on a constant lookout for that magic asset class which never goes down in value. There’s no such thing. Instead, they try to go after more than one desirable asset type whenever the time is right and as such, are in a far better position than most people to do well.
- They don’t spread themselves too thin. In other words sure, wealthy online entrepreneurs do diversify but they don’t go overboard by having exposure to an outrageously high number of assets, as that would be overkill. Yes, by all means, diversify but do it within reason. Gain exposure to Chinese assets but not assets pertaining to some random tiny island to give an extreme example.
- They see the big picture, unaffected by short-term volatility, especially those who choose to invest in less established jurisdictions such as China. They know their portfolio will occasionally go through less than ideal periods and deal with it. If you expect your portfolio to always go up in value, you’re in for a rude awakening. No matter how talented you are as an investor, your portfolio will occasionally lose value over a certain period and there’s absolutely nothing wrong with that. Don’t panic, don’t lose sight of the big picture and you’ll most likely end up doing well in the long run.
- They invest and re-invest in their businesses aggressively but not recklessly. Sure, investing in various assets is great and everything but let’s not forget about whatever it is you did to make money in the first place. It would be downright ridiculous not to re-invest in your business or whatever it is helped you make money. However, don’t make the mistake of constantly re-investing everything (even if you believe Chinese assets, bitcoin or anything else will go to the proverbial moon), as it would be a surefire way to go bankrupt.
- They invest and re-invest in themselves. In their health and the things which affect it (you spend hours upon hours each day in a chair or on a mattress, buy a good one) because at the end of the day, being in optimal physical and mental shape should be your top priority. Just don’t use this habit as an excuse to buy a fancy new TV under the pretense that you’re investing in yourself… I know, I’m a party pooper but you’ll thank me in the long run.