Building Wealth
Wealth For All, A Guide To Building Wealth
WEALTH FOR ALL, A GUIDE TO BUILDING WEALTH
SECTION 1 THE GOOD BUDGET
SECTION 2 THE BAD BUDGET
SECTION 3 FIXING A BAD BUDGET
SECTION 4 THE RESULTS OF PLANNING
SECTION 5 TWO EXCELLENT AREAS
SECTION 6 INDUSTRY-LEADING COMPANIES
SECTION 7 THE RESULTS
SECTION 8 CONCLUSION
INTRODUCTION
Plan and create a good budget in order to spend less and invest more. This is how a modest income earner can accumulate a significant amount of wealth over the long-term. That is the point of this report. A modest income earner can accumulate a significant amount of wealth by budgeting well, spending less, and investing more. In the case of this report the definition of wealth is a person's net worth, meaning their total assets minus total liabilities. It is not how much a person makes in income every year that determines whether or not he/she will become independently wealthy, it is how he/she budgets his/her income so that he/she can invest more every month of every year. Even the highest income earners have a hard time building wealth without planning their budget in order to invest more and spend less of their income every year.
A question that is often asked is what is the real purpose of sacrificing part of one's income every year in order to increase one's net worth? I will leave the answer to that question up to the reader because different people accumulate wealth for different reasons. In the case of this report the purpose of accumulating wealth is to eventually become financially independent, which means that one can then live off of the income produced by his/her wealth and not have to depend on an employer to produce his/her income. The more wealth a person accumulates through investments the more income those investments produce. For example, a $10 million investment account that produces a 10% yearly dividend produces much more income than a $100,000 investment account that produces a 10% yearly dividend. $1 million versus $100,000. The real purpose of accumulating wealth over the long-term can clearly be seen in this case, to accumulate enough wealth so that it then produces enough income to eventually give a person financial independence.
The idea for writing this report came from my own experiences with budgeting. When I first entered the full time work force I realized that I needed a way to invest at least 15% of my income every month in order to accumulate a significant amount of wealth over the long-term. So I started listing my monthly expenses every month of every year so that I could plan and create a good budget that would allow me to set aside money to invest with every month. This was how I first started accumulating wealth. After a few years of doing this I realized that in order to go one step further and compound my wealth at an even faster pace I needed to constantly find new ways to cut my expenses every month, so that I would be able to invest even more of my income. After I started doing this my wealth compounded at a much faster rate than I ever could have imagined. I realized that I had found an excellent way to build wealth and become financially independent even though I I received a very modest income. This revelation motivated me to share my story through this report in order to help others realize that one really can build a significant amount of wealth and become financially independent, even if one's income is modest, simply by planning and creating a good budget every month of every year in order to set aside part of one's income every month to invest and build wealth with.
I decided to keep this report focused more on creating and planning a good budget but I do include some specific types of investments in this book that are excellent investments for anyone aspiring to build his/her wealth. This report is mainly about creating and planning a good budget in order to invest more of one's income every month of every year, but the investments I do write about are excellent investments for building wealth. I will keep the subject of what to invest in with one's income after a good budget has been planned and created up to the reader though.
The main type of investment that I write about later in this report is companies that are leaders in their industries. These are very high-quality companies that have a moat around their business, have a competitive advantage over their competition, have increasing profit margins, have steady sales growth every year, and have at least a five to ten year history of increasing their dividends every year. Wal-Mart, Chevron Corporation, and Intel Corporation are 3 excellent examples. There are many other types of investments out there though that produce good cash flow and compound a person's wealth at an excellent rate of return. Rental properties are a good example. In this report I leave the decision of what to invest in mainly up to the reader though, being that this report is mainly about planning and creating a good budget in order to invest more of one's income every month.
In this report I will explain step by step how a person at any income level can become wealthy over the long-term. This book will break the false myth that a modest income earner cannot become wealthy. An average worker can become wealthy and this report will prove it.
SECTION 1
THE GOOD BUDGET
First I will explain how to budget one's income every month so that one can then invest more of one's income every month of every year, because this is how any person can accumulate a significant amount of wealth and become financially independent. One must first write down all of his/her expenses and his/her cash flow for each month on paper so that one can then see how much extra money there is in his/her budget to invest with every month. This will give readers a very clear picture of how much extra money there is in one's budget each month to invest with.
Here is an example of a good budget that allows a person to invest a good portion of his/her income every month, after paying all of his/her bills and expenses. This budget is an example of a person that makes $3,000 a month in income and still sets aside a good portion of his/her income each month to invest with, thus compounding his/her wealth at an excellent rate:
Income $3,000.00
EXPENSES
Groceries $400.00
Mortgage $600.00
Property Taxes $100.00
Utilities $100.00
Entertainment $400.00
Total Expenses $1,600.00
Money Left To Invest $1,400.00
This is a person with an excellent budget. This person has total expenses every month of $1,600.00 with a monthly income of $3,000.00. This person's budget leaves him/her with $1,400.00 every month to invest and build wealth with.
If this person wanted to invest more of his/her income every month he/she would simply cut one of his/her monthly expenses by a certain amount. For example, say this person wanted to find a way to invest $200.00 more each month. This person might decide to cut $200.00 from his/her entertainment budget since entertainment is not a neccesary expense. If he/she decided to do that his/her budget would look like this:
MONTHLY INCOME $3,000.00
MONTHLY EXPENSES
Food $400.00
Mortgage $600.00
Property Taxes $100.00
Utilities $100.00
Enertainment $200.00
Total Expenses $1,400.00
Money Left To Invest $1,600.00
Of course, this is just an example of a person that has an excellent monthly budget which allows him/her to invest over 50% of his/her income every month. This example gives readers a clear picture of what a good budget looks like. Some readers will have either higher or lower expenses relative to their incomes though. It is the concept that is important though, not the absolute numbers. Planning and creating a good budget in order to invest more of one's income each month can be applied by any person, no matter what his/her income or expenses are. The purpose of creating and planning a good budget is to always be able to have money set aside in one's budget each month, after all expenses are paid, to invest with so that one can build weatlh and become financially independent.
If there isn't any extra money in one's budget, after all of one's expenses are figured into one's budget, then he/she must find a way to have extra money in his/her budget that he/she can then invest with steadily every month in order to accumulate wealth over the long-term. This leads me into my next subject, what a bad budget looks like.
SECTION 2
THE BAD BUDGET
A bad budget planner does not plan his/her budget well enough to be able to invest at least part of his/her income every month. Here is an example of this:
MONTHLY INCOME $3,000.00
MONTHLY EXPENSES
Food $800.00
Mortgage $1,000.00
Property Taxes $200.00
Utilities $200.00
Entertainment $1,000.00
TOTAL EXPENSES $3,200.00
MONEY LEFT TO INVEST WITH $0
This is an example of a bad budget. Not only does this person not have any of his/her income set aside every month for investment purposes but he/she also is spending more than he/she is making every month. This is an example of negative cash flow.
The first thing this person needs to do is to decrease some of his/her expenses from his/her budget. This person spends $1,000.00 on entertainment every month. This is not a necessary expense, so this is the first expense category that he/she could decrease. The second expence category to decrease might be food. Maybe this person doesn't really look at the price of each item of food that he/she purchases at the supermarket. If they were to decrease their food expenses by purchasing food in bulk, shopping at low-cost supermarkets, or by paying attention to the prices paid on each food item then he/she could significantly decrease his/her monthly expenses in the food category. The third expense category that this person might want to decrease is utilities. This person could cut his/her monthly utility expenses by turning any lights off in the house anytime they are not in use, turning off any electronics when they are not in use, and turning off the air conditioning or heat in the spring & autumn when the temperature is mild. The mortgage expense category would be the fourth expense category that could be decreased, but this category is not that important to think about in the short-term though because this expense goes down naturally over the long-term anyway by paying it off and decreasing the principal owed.
After this person has thought about what expense categories he/she wants to decrease the next thing for him/her to do is to take action.
SECTION 3
FIXING A BAD BUDGET
The person in the bad budget example in Section 2 could start decreasing expenses slowly at first, so as not to cause a shock to his/her monthly cash flow. He/she could decide that they wanted to set aside at least $200.00 a month to invest with. To do this he/she might decide to decrease his/her monthly entertainment expenses by $400.00, being that entertainment is not an important expense category. This would bring his/her budget back in line with his/her monthly income as well as set aside $200.00 every month for him/her to invest with. This is what his/her budget would look like after these changes were made:
MONTHLY INCOME $3,000.00
MONTHLY EXPENSES
Food $800.00
Mortgage $1,000.00
Property Taxes $200.00
Utilities $200.00
Entertainment $600.00
TOTAL EXPENSES $2,800.00
MONEY LEFT TO INVEST $200.00
Now that this person has planned and created his/her budget so that he/she can then set aside $200.00 a month for investment purposes the next step would be for him/her to think about what other expense category he/she could decrease, in order to set aside even more money to invest with every month. Let's say he/she found a way to decrease his/her food expenses by $100.00 a month, maybe by buying most of his/her food in bulk or at discount markets. After he/she decided to implement this change in his/her budget it would look something like this:
MONTHLY INCOME $3,000.00
MONTHLY EXPENSES
Food $700.00
Mortgage $1,000.00
Property Taxes $200.00
Utilities $200.00
Entertainment $600.00
TOTAL EXPENSES $2,700.00
MONEY LEFT TO INVEST $300.00
Finding ways to spend less in order to invest more of one's income every month through planning and creating a good monthly budget. That is how an average worker in America, and all over the world for that matter, can become wealthy and financially independent over the long-term.
When the results of many years of using this method in order to build wealth are shown, anybody can clearly see that it works.
SECTION 4
THE RESULTS OF PLANNING A GOOD BUDGET
To get a clear picture of what the results of planning and creating a good budget in order to compound wealth over the long-term looks like I will show readers how much wealth the person in Chapter 3 would accumulate after 30 years by investing $300 from his/her budget every month with a monthly return of 1% (12% a year) in his/her investment account. Here it is:
YEAR ACCOUNT VALUE ACCOUNT VALUE
(BEGINNING OF YEAR) ( END OF YEAR)
($300 MONTHLY CONTRIBUTION) (AFTER 1% MONTHLY RETURN)
1st $300 $4,220
2nd $4,520 $8,598
3rd $8,898 $13,521
4th $13,821 $19,079
5th $19,379 $25,342
6th $25,642 $32,399
7th $32,699 $40,351
8th $40,651 $49,311
9th $49,611 $59,408
10th $59,708 $70,785
11th $71,085 $83,527
12th $83,827 $97,963
13th $98,263 $113,417
14th $113,717 $130,571
15th $130,871 $150,974
16th $151,274 $173,964
17th $174,264 $199,872
18th $200,172 $229,064
19th $229,364 $261,959
20th $262,259 $299,025
21st $299,325 $340,792
22nd $341,092 $387,855
23rd $388,155 $440,887
24th $441,187 $500,646
25th $500,946 $567,582
26th $567,882 $643,410
27th $643,710 $728,853
28th $729,153 $825,134
29th $825,434 $933,626
30th $933,926 $1,055,877
As anyone can clearly see from this example, compounding really works when it comes to building wealth. The person in this example set aside $300.00 a month from his/her budget every month to invest, with a monthly return on his/her investment of 1%. During the first month of the first year the person in the example started out with $300.00 in his/her investment account, which produced a return of $3.00. This person continued to steadily invest $300.00 every month in his/her investment account, which then produced a 1% profit each month for 30 years. At the end of 30 years his/her investment was worth $1,055,877.00 and produced a profit of $10,454.00 during the last month of the 30th year. This is a great example of the power of compounding. The return on investment in the example is accomplished by investing just $300.00 a month for 30 years.
Imagine if the person in the example invested $1,000.00 every month for 30 years in an investment that produced 1% a month. The person's return on his/her investment would compound at a much faster rate if they steadily invested a larger amount of money every month, especially if he/she invested in investments that produced a higher profit every month than the investment in the example produced.
One can find out how much a certain amount of money invested every month or every year at a certain rate of return and during a certain amount of years will return to an investor by using the investment return calcualators on www.buyupside.com, which is one of the best websites for investment information that I use daily in my investment research.
SECTION 5
TWO EXCELLENT AREAS OF INVESTMENT TO BUILD WEALTH WITH
In this chapter I will discuss two areas of investment that are excellent wealth builders for any person seeking to build his/her wealth substantially.
INDUSTRY LEADERS
The first type of investment, and one of the best types of investment to build wealth with, is industry-leading companies. Of course this type of investment, and any other type of investment, can only build wealth for a person if he/she invest wisely and creates a good budget. If a person creates a good budget and steadily invest increasing amounts of his/her income into excellent companies or excellent wealth-producing investments every month then he/she will then build a significant amount of wealth and become financially independent. One of the best ways to do this, in my opinion, is by steadily investing increasing amounts of one's income every month into industry-leading companies. A company that is a leader in its industry has a competitive moat around its business, controls the largest percent of the market in its industry, has a long history of steadily increasing its dividend paid to its shareholders every year, has little to no competition in its industry, is the lowest-costs producer in its industry, has a strong brand name, produces increasing amounts of net cash-flow, produces steady revenue/earnings growth year after year, has little to no debt, always has a substantial amount of cash on its balance sheet, and the company must be expanding all over the world. Basically industry-leading companies provide investors with steadily increasing dividends, steadily increasing growth, and low-risk. Investing in industry-leading companies is an excellent low-risk way for any person to build wealth. The majority of investors that keep a good budget every month in order to invest increasing amounts of their income in industry-leading companies every month will build a significant amount of wealth over the long-term.
The process of choosing what industry-leading companies to invest in involves listing each industry and choosing which company is a leader in each industry from the industry list. For example, a person might start with the computer software industry. Then he/she would analyze all the largest companies in the computer software industry and invest in the company that is chosen as a leader in the computer software industry. Microsoft Corporation (MSFT) would be a good choice as a leader in the computer software industry. Then he/she might decide to choose a company from the retail industry that is a leader in its industry. Wal-Mart (WMT) would be a good choice as a leader in the retail industry.
The majority of people that keep a good budget and invest increasing amounts of their income income in industry-leading companies will build a significant amount of wealth over the long-term. Of course it is better not to overpay when purchasing shares of industry leaders. A good rule-of-thumb is to only purchase shares of industry leader companies when the shares are trading below 10 times cash flow. I will discuss this method of building wealth in the next section and I will profile a portfolio of companies that are leaders in their industries. Also, I will explain how the portfolio of industry-leading companies can build a significant amount of wealth for any person no matter what his/her income level is.
RENTAL PROPERTIES
The second area of investment I will discuss in this section that is an excellent way for any person to build a significant amount of wealth is rental properties. Of course, a person must buy a rental property at the right price and at the right location in order to build a significant amount of wealth. In other words, a person must invest in rental properties that produce increasing rental income, produce a good yield on his/her investment, and steadily increase in value every year. I will now discuss what criteria makes a rental property an excellent investment for building wealth.
The first criteria a rental property must have in order to be a good investment for building wealth is the property must be located in an area with steady or growing economic growth, because a property must be in an area where jobs are being created in order for the rental demand on the property to be strong or at least stable. Basically, the property must be in an area that businesses and people are attracted to over the long-term.
The second criteria a rental property must have in order to be a good investment for building wealth is a good dividend yield, and a dividend yield that is higher than the interest being paid on the property's mortgage. Also, the property must produce an increasing dividend that will keep up with the rate of inflation. Basically, the rental income must at least be as high as the interest being paid on the mortgage plus the yearly inflation rate. For example, if a rental property was bought for $100,000.00 and the yearly interest paid on the mortgage is 5% and the inflation rate for the year was 3% then the property must produce a yearly rental dividend of over 8%. In other words the property would have to produce at least $8,000.00 a year in rental income. Also, the rental income from the property would have to increase at least by the average inflation rate for any given number of years in order for the property to be a good investment.
The third criteria a rental property must have in order to be a good investment for building wealth is the property must produce net-positive cash flow from its rental income. This means that the yearly dividend yield must exceed the yearly interest rate paid on the mortgage, plus the inflation rate, plus all of the other yearly expenses of the property. In other words, deciding if a rental property is a good investment depends on whether or not the property produces net-positive cash flow every year. Determining whether or not a rental property produces net-positive cash flow is done by analyzing all of the yearly expenses on the property plus the inflation rate and subtracting that from the property's yearly rental income. If the number is positive the rental property produces net-positive cash flow and the property is a good investment. If the number is negative it is a bad investment. Determining whether or not a rental property produces net-positive cash flow year after year is key to determining if the property is a good investment for building wealth.
The great thing about investing in rental properties that produce net-positive cash flow is that investing in good rental properties doesn't require that much capital investment on the part of the person purchasing the property. This gives a person, no matter what his/her financial situation or income level is, the ability to purchase excellent rental properties with a very little amount of up-front investment on the part of the buyer. This makes investing in excellent rental properties an excellent way for any person, no matter what his/her income level is, to compound his/her wealth at an excellent rate. Investing in excellent rental properties that produce net-positive cash flow and keep up with inflation year after year is an excellent way for any person to build wealth over the long-term.
Industry-leading companies and rental properties are two excellent areas of investment that can build a significant amount of wealth for any person over the long-term.
SECTION 6
INDUSTRY-LEADING COMPANIES
Investing in companies that are leaders in their industry is one of the best ways for any person to build wealth over the long-term, and in this section I discuss a portfolio of industry-leading companies that I put together. I named the portfolio "Industry Leaders Portfolio."Lets start with the first company, which is a company that just about any person in the world has shopped at at least once.
WAL-MART (WMT)
The first company in the "Industry Leaders Portfolio" that I will profile is a leader in the retail industry. Wal-Mart is a true leader in the retail industry and fits all of the criteria that I discussed in section 5 that make a company an industry leader. Wal-Mart has a competitive moat around its business, controls the largest percent of the market in its industry, has a long history of steadily increasing its dividend year after year, has little to no competition in its industry, is the lowest-costs producer in its industry, has a strong brand name, produces steadily increasing amounts of cash-flow, produces steady revenue/earnings growth year after year, has little to no debt, its business is growing all over the world, and Wal-Mart always keeps a large amount of cash on its balance sheet. I will go over each of these criteria and why Wal-Mart fits all of these criteria.
Wal-Mart's competitive moat around its business? Wal-Mart is so large in the retail industry that its massive distribution network and its massive economy-of-scale operations give Wal-Mart a competitive moat around its business. There is no retail company that can sell goods as cheap as Wal-Mart can because Wal-Mart's distribution network is so massive and efficient it is simply impossible for any retail company to compete with Wal-Mart on price.
Wal-Mart's market share? Wal-Mart's market share in the U.S. retail industry was 11.5% in 2009, by far having the largest share of the market in the U.S. retail industry. Wal-Mart also dominates the world in sales. Wal-Mart's sales of $410 billion in 2010 exceeded the combined sales of the second, third, and fourth largest retailers in 2010. The second, third and fourth largest retailers being Carrefour Group of France, the Kroger Company, and Metro AG of Germany.
Wal-Mart's dividend history? Wal-Mart has a very long history of increasing its dividend year after year. Indeed, Wal-Mart has increased its dividend steadily every year by 24% for the past 35 years and increased its dividend 16% a year during the last 5 years, as of 2010.
Wal-Mart's competition? Wal-Mart has little to no competition in the retail industry due to its massive size, massive distribution network, and its massive economy-of-scale operations.
Wal-Mart, the lowest-costs producer in its industry? This goes hand in hand with Wal-Mart's massive size. Having a massive size, massive distribution network, extremely efficient operations, and massive economy-of-scale operations allows Wal-Mart to be able to buy their supplies at very low prices, which then allows them to sell at extremely low prices compared to the rest of the retail industry.
Wal-Mart, a strong brand name? Wal-Mart's brand name is very strong all over the world. Practically any person in the world knows the name Wal-Mart and practically any person in America either shops at Wal-Mart or has shopped at Wal-Mart.
Wal-Mart's steadily increasing revenues, cash-flow and earnings? Wal-Mart has steadily increased its revenues, cash-flow and earnings every year since its inception. During the last 5 years Wal-Mart's sales grew by 7.5% per year and its earnings/cash-flow grew by 15% per year, as of 2010. This is excellent growth considering the fact that 2006 to 2010 was during the worst recession since the Great Depression.
Wal-Mart's debt? Wal-Mart carries some debt but it is a very small amount relative to Wal-Mart's massive revenues, earnings, and cash balance. Wal-Mart's total debt was $49 billion and its debt/equity ratio was 0.76 in 2010. This is very manageable debt considering Wal-Mart produces yearly revenues of $410 billion, yearly cash flow of $27 billion, and yearly earnings of $15 billion. Also, Wal-Mart holds $10.2 billion of cash on its balance sheet.
Wal-Mart, expanding worldwide? Wal-Mart continues expanding all over the world. As of 2010 Wal-Mart operated a little over 4,100 stores in the U.S., 43 stores in Argentina, 434 stores in Brazil, 320 stores in Canada, 370 stores in Japan, 370 stores in the U.K., 250 stores in Chile, 280 stores in China, almost 60 stores in Puerto Rico, nearly 60 stores in Nicaragua, nearly 1,500 stores in Mexico, 170 stores in Costa Rica, about 80 stores in El Salvador, almost 170 stores in Guatemala, nearly 60 stores in Honduras, and 1 store in India. Wal-Mart still has a lot of room for growth in the countries it operates in and the countries that it doesn't operate in.
Wal-Marts meets all of the criteria for being a company that is a leader in its industry. This makes Wal-Mart an excellent long-term investment that can build a significant amount of wealth for any person that steadily invest in Wal-Mart year after year.
MCDONALD'S CORPORATION (MCD)
The next company I will profile from the Industry Leader Portfolio is a leader in the fast food industry. Lets see if McDonald's Corporation meets all of the criteria to be a leader in its industry.
Does McDonald's Corporation have a competitive moat around its business? Yes, McDonald's is so large and efficient that it is very difficult for any other fast food restaraunt to compete with McDonald's on price. Also, McDonald's Corporation's brand name has become so strong and so widespread that it is very difficult for any other fast food restaraunt chain to compete with it on branding. It took McDonald's a lot of time and money to build its brand name. McDonald's massive economony-of-scale operations and its strong brand name give it a large protective moat around its business.
Does McDonald's Corporation control the largest percent of the market in its industry? Yes. McDonald's Corporation has opened 32,500 restaraunts in 110 coutries, as of 2009. McDonald's has the largest sales and earnings of any fast food company. In 2009 McDonald's had sales of $22.7 billion and net profit of $4.5 billion. Yum Brands Corporation comes in second place, with sales of $10.8 billion and net profit of $1.1 billion in 2009. Also as you can see, McDonald's Corporation has an excellent profit margin compared to Yum Brands. McDonald's net profit margin is 20% compared to 10% for its closest competitor Yum Brands, as of 2010.
Does McDonald's Corporation have a long history of steadily increasing its dividend year after year? Yes, McDonald's Corporation has raised its dividend by 21% every year since its first dividend payment in 1976. Also, McDonald's raised its dividend by 30% a year during the last five years. This means that McDonald's dividend doubles every 3 to 4 years. McDonald's is a dividend achiever and an excellent investment for compounding one's wealth.
Does McDonald's have little to no competition? Yes and no. McDonald's does have international and domestic competition from Yum Brands but Yum Brands would have to double its sales and profit margin to catch up with McDonald's, and that would be while assuming McDonald's sales stays flat. McDonald's continues growing its sales by 10% to 15% a year though, so it would be difficult for Yum Brands to compete with McDonald's on sales and profits. So although McDonald's does have some competition from Yum Brands it is not going to lose its dominant position in the fast food industry anytime soon.
Is McDonald's Corporation the lowest-costs producer in its industry? Yes, it is hard to find a cheaper restaraunt for a family of four to eat at than McDonald's. With that said given McDonald's Coporation's size, economy-of-scale operations, massive supply network, and low-costs labor it is very difficult for any fast food restaraunt to compete with McDonald's on price. McDonald's Corporation is #1 in the fast food industry at producing quality meals with a strong brand name at a very low cost.
Does McDonald's Corporation produce increasing amounts of cash-flow year after year? Yes, McDonald's Corporation has steadily increased its cash-flow every year since the 1970's by an average of 15% to 20% a year. During the past five years McDonald's has shown its investors that it can still increase its cash flow at the same rate. In 2005 McDonald's cash flow from operations was a little less than $4 billion. In 2010 McDonald's cash flow from operations was $6.5 billion. This shows that McDonald's continues to steadily increase the amount of cash flow it produces year after year.
Does McDonald's Corporation have little to no debt? Yes, McDonald's Corporation has a total debt/equity ratio of 0.81 and $10.6 billion in total debt as of 2010. With total sales of $21 billion, total profits of $5 billion and a total cash balance of $2 billion in 2010 McDonald's has no problem servicing its debt.
Does McDonald's Corporation always hold a substantial amount of cash on its balance sheet? Yes. McDonald's produces a lot of cash every year and its expenses are minimal, being that a little over 80% of its restaraunts are franchised. Another thing that helps McDonald's Corporation produce a lot of cash is its high profit margin of 20% and its ROE (return on equity) of 36%. This makes McDonald's the most profitable company in the fast food industry. Indeed, McDonald's produces so much cash that it doesn't know what to do with it. McDonald's produced cash flow of $5 billion and held about $2 billion of cash on its balance sheet in 2010. All of this cash that McDonald's produces supports increasing dividend payments and increasing share buybacks. McDonald's is truly a company that produces a lot of cash and holds an increasing amount of cash on its balance sheet that is then used to support shareholder benefits, such as dividend increases and share buybacks.
Is McDonald's Corporation growing its business worldwide? Yes, McDonald's has opened a total of nearly 34,000 restaraunts in over 110 countries, as of 2010. Just about any person on the planet knows the name McDonald's. McDonald's has built a very strong brand name worldwide during the last few decades and is expanding to every corner of the earth year after year.
McDonald's Corporation meets all of the criteria that make a company a leader in its industry and is an excellent investment for any person seeking to build wealth.
COCA-COLA CORPORATION (KO)
The next company from the Industry Leader Portfolio is a leader in the non-alcoholic soda & beverage industry. Coca-Cola Corporation meets all of the criteria to qualify as an industry leader. Take a look.
Coca-Cola has a competitive moat around its business. Its the largest non-alcoholic soda & beverage company in the world with a market-cap of roughly $160 billion and revenues of roughly $26 billion, as of 2010. So its size automatically gives it an economy-of-scale advantage that is very difficult for a smaller beverage company to compete with. Also, Coca-Cola's brands have become very strong during the past few decades. Brands such as Coca-Cola, Sprite, Fruitopia, and Fanta are reconized worldwide by most people. The strong brand that Coca-Cola has built costs a lot of money, time, and effort. It is very difficult and takes a long time for a beverage company to build a strong brand like Coca-Cola Corporation has built during the last few decades. This also provides a moat around Coca-Cola's business.
Coca-Cola Corporation still controls the largest share of the market in the non-alcoholic beverage industry, at around 43% as of 2010. Pepsi Corporation is Coca-Cola's closest competition in the non-alcoholic beverage industry with a worldwide market share of 31% but Pepsi still has a long way to go in order to catch up with Coca-Cola's market share. So as long as Coca-Cola's sales continue growing at least at the same pace as Pepsi's sales Coca-Cola will continue to have the largest sales in the non-alcoholic beverage industry.
Coca-Cola Corporation has a long history of increasing dividends steadily every year. Coca-Cola has increased its dividend every year by 8% since its first dividend in March 1962. Coca-Cola's dividend grew by 10.4% a year from 2005 to 2010, which is excellent dividend growth, especially considering that it was during the worst recession since the Great Depression. Coca-Cola is truly a dividend achiever.
Coca-Cola Corporation does have a significant amount of competition from Pepsi Corporation but Coca-Cola's sales have been growing at the same pace as Pepsi Corporation's sales, so as long as this continues to be the case Coca-Cola will continue to control the largest share of the market in the non-alcoholic beverage industry. Also, it is hard for any beverage company to compete with Coca-Cola's very strong brand name, its excellent profit margin of nearly 24%, its massive economy-of-scale operations, and the fact that Coca-Cola produces the most products in the non-alcoholic beverage industry. Coca-Cola Corporation produced 2,800 different products as of 2010.
It is very difficult for any non-alcoholic beverage company to produce the volume of beverages at the same costs and sell beverages for the same prices as Coca-Cola does given its size, its economy-of-scale operations, premium brand name, and its massive supply networks. Also, it would be very difficult for any company to do this and still make the profit margin of 24% that Coca-Cola Corporation makes. Coca-Cola is truly the lowest-cost producer in its industry.
Coca-Cola Corporation has the strongest brand name in its industry. This is proven by Coca-Cola's worlwide market share of 43%. Its brands such as Coca-Cola, Sprite, Fanta, and Fruitopia are recognized by people all over the world.
Coca-Cola Corporation is a company that produces steadily increasing amounts of revenues, cash-flow, and earnings year after year. Coca-Cola has produced steady yearly revenue and earnings growth of 10% to 15% since its creation. And from 2005-2010 Coca-Cola grew revenues by 7.3% per year and grew its earnings by 15% a year. Coca-Cola produced excellent steady growth from 2005 to 2010, especially during a time when the worst recession since the Great Depression occured. This is proof that Coca-Cola is a recession proof business and an industry leader.
Coca-Cola Corporation has little to no debt. Coca-Cola's total debt/equity ratio is only 0.46 and its total debt outstanding is $11.7 billion, as of 2010. Coca-Cola's full net income was $7.5 billion and its cash balance was $10.2 billion in 2010. Given these numbers Coca-Cola Corporation has no problem servicing its debt and would have no problem paying it off.
Coca-Cola Corporation always keeps a substantial amount of cash on its balance sheet. Coca-Cola Corporation produces so much cash that they don't know what to do with it. Coca-Cola produced revenues of $26 billion and net earnings of $7.5 billion in 2010. Coca-Cola keeps a lot of this extra cash it produces on its balance sheet, which provides excellent insurance against recessions. Coca-Cola's increasing amounts of cash flow that it produces and its large cash balance of $10.2 billion in 2010 are excellent for its shareholders. This supports increasing dividend payments to Coca-Cola shareholders and increasing share-buybacks by Coca-Cola management.
Coca-Cola Corporation continues growing all over the world. In 2010 Coca-Cola Corporation was producing and distributing 2,800 different products in just about every country in the world and its brand name is recognized by the majority of the world's population.
Coca-Cola Corporation meets all of the criteria to be a leader in its industry and is an excellent investment for any person that desires to build a significant amount of wealth. Investors of Coca-Cola Corporation will continue to see their investment and income steadily grow year after year after year. Coca-Cola Corporation is a dividend achiever and a true leader in its industry.
MICROSOFT CORPORATION (MSFT)
Microsoft Corporation is a leader in the software industry and has a monopoly in the operating software industry. Take a look.
Does Microsoft Corp. have a competitive moat protecting its business? Yes, Microsoft has a monopoly in the operating system and supporting software market. Roughly 90% of the world's computers still operate using Microsoft's Windows operating system and its supporting software. It is very difficult for any other company to compete with Microsoft's Windows operating system because Microsoft has already monopolized the operating system market, which has created a world in which almost all of the world's computer software & hardware is only compatible with the Windows OS. This creates a barrier and moat around Microsoft's business, thus protecting its business from any competition.
Does Microsoft Corp. dominate the market in its industry? Yes, about 90% of the world's computers operate using Microsoft's Windows OS and its supporting software.
Does Microsoft Corp. have a long history of steadily increasing its dividends every year? Yes, Microsoft Corp. started paying a dividend to its shareholders in 2003. Microsoft's first quarterly dividend payment was $0.08 a share paid to shareholders on February 19, 2003. Also, Microsoft paid a special dividend of $3.08 a share on November 15, 2004. Microsoft's quarterly dividend was $0.16 a share on September 21, 2010. This was a 23% increase from its quarterly dividend payment of $0.13 during 2009. So from 2003 to 2010 Microsoft increased it dividend payment to shareholders by 100%, from $0.08 a share to $0.16 a share. That represents average yearly dividend growth a little over 10% from 2003 to 2010. That is excellent dividend growth.
Does Microsoft Corporation have little to no competition in its industry? Yes, Microsoft dominates the Operating System industry. 90% of the world's computers operate using Microsoft's Windows Operating System and its supporting software. And because most of the world's software and computer hardware are made to only be compatible with Microsoft's Windows Operating System Microsoft Corporation will continue to dominate the Operating System Industry, thus keeping Microsoft Corp. in a monopoly position.
Is Microsoft Corp. the lowest-costs producer in its industry? Yes, but this isn't a big issue for Microsoft Corp. since it has monopolized its industry and has no significant competition. If a company did try to take over market share from Microsoft and compete with Microsoft on pricing it would be extremely difficult for that company to do so because 90% of the world's computers already operate using Microsoft's Windows Operating System and its supporting software, thus most of the world's computer software and hardware are only compatible with the Windows Operating System. So as far as competition on pricing goes, Microsoft has no competition on pricing because Microsoft has monopolized the OS industry.
Does Microsoft Corp. have a strong brand name? Yes, most of the world's PC users depend on the Microsoft Windows OS, so this monolopy position automatically gives Microsoft Corp. a dominant strong brand name in the software industry.
Does Microsoft Corp. produce increasing amounts of cash flow year after year? Yes, Microsoft's cash flow and earnings have grown between 15% and 20% every year since its inception in 1986. During the past 10 years Microsoft's cash flow and earnings more than doubled. Microsoft Corp. is a company that produces massive amounts of increasing cash flow year after year after year.
Does Microsoft Corp. produce increasing revenues and earnings? Yes. In 1990 Microsoft's revenues were $1billion and its earnings were about $250 million. In 2010 Microsoft's revenues were $62 billion and its earnings were nearly $20 billion. That is 20 year revenue growth of over 6,000% and 20 year earnings growth of over 8,000%. Microsoft Corp. is no longer growing as much as it was during the 1980's and 1990's but its revenues and earnings are still steadily growing by 10% to 15% a year.
Does Microsoft Corp. have little to no debt? Yes, Microsoft's total debt/equity ratio is 0.11. Microsoft produced $20 billion in earnings in 2010, had a total cash balance of roughly $45 billion in 2010 and had a total outstanding debt of $5.9 billion in 2010, so Microsoft's debt is very manageable.
Does Microsoft Corp. always keep a substantail amount of cash on its balance sheet? Yes, Microsoft produces so much cash that they don't know what to do with it. Microsoft produced revenues of $62 billion, produced earnings of $20 billion, and held nearly $40 billion of cash on its balance sheet in 2010. All of the increasing amounts of cash that Microsoft produces each year and holds on its books is excellent for Microsoft's shareholders because it supports increasing dividends and increasing share buybacks.
Is Microsoft Corporation's business steadily growing all over the world? 90% of the world's computers operate using Microsoft's Windows OS and its supporting software. So given Microsoft's monopoly position in the OS industry Microsoft Corp. will continue growing at least at the same pace as the world's PC market, which still has a lot of potential growth since the majority of the world's population still don't own a personal computer.
Microsoft Corp. is truly an industry leader and is an excellent builder of wealth for any investor.
EXXON MOBIL (XOM)
Exxon Mobil is a leader in the oil and gas industry. Lets see if it passes all of the criteria to be considered an industry leader.
Does Exxon Mobil have a competitive moat around its business that protects the company from competition? Yes, Exxon Mobil is one of the lowest-costs oil and gas producers in the world. Its full costs to produce a gallon of gasoline was about $2.60 in 2010 and gasoline sold for an average price of $2.80 in 2010. With an enormous $400 billion market cap and total sales of $320 billion in 2010 Exxon's enormous size gives it an economy of scale that makes it very difficult for any other oil and gas company to produce oil and gas at the same, or at lower costs, than Exxon Mobil.
Does Exxon Mobil control the largest percent of the market in its industry? Exxon Mobil is the largest oil & gas production corporation in the world when measured by market capitalization, revenues, and earnings. Exxon Mobil's revenues in 2010 were $317 billion, its market capitalization was close to $400 billion, and its net earnings were $25 billion. The only oil & gas production company that came close in 2010 was Chevron Corporation with a market capitalization of $170 billion, revenues of $285 billion, and net earnings of $17 billion.
Does Exxon Mobil have a long history of steadily increasing it dividend year after year after year? Yes, in 2001 Exxon Mobil's quarterly dividend payment to shareholders was $0.23 per share and in August 2010 Exxon's quarterly dividend payment to shareholders was $0.44 per share. That represents dividend growth of roughly 10% per year. That is excellent steady dividend growth, and the best thing about it is Exxon shareholders get steady dividend growth from a company that is one of the most well-managed companies in the world. Exxon Mobil's shareholders receive dividend payments that double every few years when reinvested. And not only did Exxon Mobil increase its dividend by 10% a year from 2001 to 2010 but Exxon Mobil has also increased its quarterly dividend payments to shareholders steadily every year by 7% since it paid its first quarterly dividend of $0.03 in 1970.
Does Exxon Mobil have little to no competition? Yes, Exxon Mobil's size and economy-of-scale make it very difficult for any oil & gas production corporation to compete with Exxon Mobil. And the type of business that Exxon Mobil is in guarantees that there is very little competition because the oil & gas production business is very capital intensive. That provides a big barrier to entry. But there are a few big oil companies that can compete with Exxon Mobil such as BP, Royal Dutch Shell, and Chevron Corporation. Even these big oil corporations have a long way to go in order to catch up with Exxon Mobil's massive size, its revenues, and its earnings though.
Is Exxon Mobil the lowest-costs producer in its industry? Yes, Exxon Mobil can produce and refine oil at a costs that can compete with any oil company in the world. I will use gasoline as an example of this. The average price for a gallon of gasoline was about $2.80 in 2010 and Exxon Mobil's profit margin on gasoline was roughly 7% in 2010. So Exxon Mobil's costs to produce 1 gallon of gasoline from start to finish was about $2.60. It cost Exxon Mobil's closest competitor, Chevron Corporation, about the same price to produce a gallon of gasoline in 2010. But this is understandable because oil production and refining is a very price competitive business. And given Exxon Mobil's size, productivity, and economy-of-scale operations it can very easily compete on price with Chevron or any other big oil company.
Does Exxon Mobil have a strong brand name? Yes, according to Exxon Mobil's website Exxon Mobil is "the world's largest publicly traded international oil and gas company. We are the world's largest refiner and marketer of petroleum products. And our chemical company ranks among the world's largest." Exxon Mobil sells refined products, transports oil, produces oil, and produces natural gas throughout the world. Given its size and quality of products Exxon Mobil's brand name is recognized by any person in the U.S. and a big portion of the world's population.
Does Exxon Mobil produce increasing amounts of revenues, cash flow, and earnings year after year after year? Yes. Exxon Mobil has grown revenues, cash flow, and earnings every year since 1955. In 1955 Exxon Mobil's revenues were $5.6 billion. In 2010 Exxon Mobil's revenues were about $320 billion. In 1955 Exxon Mobil's net income was $584 million. In 2010 Exxon Mobil's net income was $25 billion. Exxon Mobil will not experience the very fast growth that it experienced many years ago when it was a smaller company but Exxon Mobil will continue to grow its revenues and earnings steadily year after year after year. Most likely Exxon Mobil will grow revenues and earnings steadily every year by at least 10% to 15% beyond 2010. This is great for shareholders because it means that shareholder dividends will continue to increase steadily by 7% to 15% every year along with earnings growth.
Does Exxon Mobil have little to no debt? Exxon Mobil's total debt/equity ratio was only 0.15 in 2010, and its total debt outstanding was $20.4 billion. This is a very small amount of debt for a company that produced revenues of $320 billion and net income of $25 billion in 2010. Given this, Exxon Mobil has no problem servicing its debt.
Does Exxon Mobil always keep a substantial amount of cash on its books? Exxon Mobil is a very large company that grows slowly but steadily every year, much like most industry leading companies. Because of this Exxon Mobil does not waste a lot of its earnings on growth since it does not grow fast anymore. Given this fact, Exxon Mobil produces a lot of free cash flow. This cash is not needed as much for growth like it was when Exxon Mobil was a fast growing company, so it is put in Exxon Mobil's cash reserves. All of this extra cash is then used every year to support buying back its own stock and increasing dividend payments to Exxon Mobil shareholders year after year after year. Exxon Mobil produces so much extra cash that they don't know what to do with it, other than give it to Exxon Mobil's shareholders. Exxon Mobil's cash flow from operations was $39 billion and Exxon held $14 billion in cash on its balance sheet in 2010.
Is Exxon Mobil's business steadily growing worldwide? Exxon Mobil is the largest publicly traded oil and gas company in the world as of 2010. Exxon Mobil does business in almost every country in the world.
Exxon Mobil is truly a leader in its industry and a great investment for any person seeking to steadily build his/her wealth.
INTEL CORPORATION (INTC)
Intel Corporation is a leader in the semi-conductor chip and micro chip industry. Intel Corp. is a leader in its industry indeed, Intel sold about 80% of the world's micro-processors in 2010. Let's put Intel Corp. through the list of criteria and see if Intel Corp. is truly a leader in its industry.
Does Intel Corp. have a competitive moat or barrier-to-entry around its business that protects the company from any significant competitor taking market share from Intel Corporation? Yes indeed. Constantly advancing and developing better micro-processors takes massive research & developement facilities. In order for a company to be competitive in the semi-conductor and micro-processor industry a company must invest massive amounts of capital year after year because the semi-conductor industry is a very capital intensive industry. The company that already has the most advanced and developed R&D facilities, and the company that produces the most cash flow that can then be used to constantly advance these facilities year after year has the competitive advantage in the semi-conductor industry. Intel is that company. Intel produced revenues of $43 billion and cash flow of $20 billion in 2010. The semi-conductor and micro-processor industry is very very capital intensive, much too capital intensive for the majority of Intel's competitors to compete with Intel Corporation's size. Intel already controls 80% of the semi-conductor/micro-processor market and already has built the most advanced semi-conductor R&D facilities in the world. This provides a very big competitive moat around Intel Corporation's business.
Does Intel Corporation control the largest percent of the market in its industry? Yes, 80% of the world's personal computers operate using semi-conductors/micro-processors made by Intel Corporation, as of 2010.
Does Intel Corporation have a steady history of steadily increasing its dividend year after year after year? Yes, Intel Corp. has steadily increased its dividend every year since 1994 when Intel was paying an inflation-adjusted quarterly dividend of about $0.02 per share. In 2010 Intel Corp. was paying a quarterly dividend of $0.16 per share, so from 1994 to 2010 Intel Corp. increased its quarterly dividend to shareholders 8 fold. Intel Corporation's dividend growth has slowed down from the time when it first started paying a dividend to shareholders but Intel Corp. still increased its dividend by 15% to 20% a year during the last 5 years and Intel has increased its dividend every year by 24% since its first dividend in 1992, as of 2010.
Does Intel Corporation have little to no competition in its industry? Yes, Intel Corp. sold 80% of the world's semi-conductors/micro-processors in 2010 and Intel's size gives it an economy-of-scale that is very difficult for any other company to compete with.
Is Intel Corporation the lowest-costs producer in its industry? Yes, it is very difficult for any micro-processor producers to compete with Intel Corp. on price because Intel Corporation has an economy of scale that makes it very efficient. One of Intel's competitors, American Micro-Devices, tried to compete with Intel Corp. on price and ended up taking on a lot of debt. AMD's debt/equity ratio was nearly 4 in 2010, whereas Intel's debt/equity ratio was only 0.05.
Does Intel Corporation have a strong brand name? Yes, 80% of the world's personal computers operate using semi-conductors made by Intel Corporation. This dominace in the semi-conductor/micro-processor industry, and Intel's very high quality semi-conductors, gives Intel Corp. the strongest worldwide brand name in its industry.
Does Intel Corporation produce steadily increasing revenues, cash flow, and earnings year after year after year? Yes. In 1983 Intel Corporation's revenues topped $1 billion for the first time. In 2010 Intel's revenues were $42 billion. Intel's net income in 1992 topped $1 billion for the first time. In 2010 Intel's net income was $4.3 billion. Intel Corporation is a steadily growing company that will continue to dominate its industry. Intel will continue increasing its sales, cash flow, earnings, and its dividend by 10% to 20% a year, year after year after year.
Does Intel Corporation have little to no debt? Yes, Intel Corporation's total debt/equity ratio was only 0.05 in 2010, and Intel Corporation's total debt outstanding in 2010 was only $2.3 billion. This amount of debt is very easy for Intel to service, being that Intel Corporation produced $15 billion in cash flow and held $20 billion in cash on its books in 2010.
Does Intel Corporation always keep a substantial amount of cash on its balance sheet? Yes, Intel Corporation produces so much cash every quarter that management doesn't know what to do with it. So they use all of this cash that Intel Corp. produces to build up cash reserves, buy back shares on the open market, and to increase its dividend every year. In 2010 Intel Corporation held $20 billion on its books, increased its dividend by 28%, and bought back about $13.5 billion worth of its own stock.
Is Intel Corporation steadily growing its business all over the world? Yes, Intel Corporation now sells 80% of the world's micro-processors and will continue to dominate the world market in the micro-processor industry. This will allow Intel Corporation to continue to grow along with the growth in the world's PC market, which has a lot of growth potential. Four billion people in the world still do not have a personal computer, as of 2010, but will eventually buy one. This provides a lot of future growth potential for Intel Corporation. So given the number of people in the world that still don't have a PC Intel Corporation's worldwide growth is just getting started.
Intel Corporation is truly a leader in its industry and is an excellent investment for any person that wants to build a significant amount of wealth.
Here is a list of other companies that are all leaders in their industries and are some of the best companies in the world: Proctor& Gamble (PG), Altira Group (MO), Johnson & Johnson (JNJ), Heinz (HZ). All of these companies meet all of the criteria that determine if a company is truly a leader in its indutry, and all of these companies are dividend powerhouses. Proctor and Gamble (PG) has increased its dividend every year by 10% since its first dividend in January 1970. Altria Group (MO) has increased its dividend every year by 13% since its first dividend in June 1970. Johnson & Johnson has increased its dividend every year by 14.5% since its first dividend in February 1970. Heinz (HNZ) has increased its dividend every year by 7.5% since its first dividend in December 1984.
All of the companies I have listed and profiled in this report are excellent companies to invest in for any person desiring to build a significant amount of wealth, as long as these companies' shares are purchased at the right price. A good rule-of-thumb is to only purchase a company that is a leader in its industry when its shares are trading for under 10 times cash flow. Indeed, any person investing in companies that are leaders in their industry can build a significant amount of wealth during their lifetimes.
SECTION 7
THE RESULTS OF INVESTING IN INDUSTRY LEADERS
Here is an example of how much wealth a person would accumulate after 40 years of investing in a company that is a leader in its industry. I will use Wal-Mart Corporation as an example.
Let's say a person bought 200 shares of Wal-Mart at $50.00 per share, with a present dividend yield of 3%. And let's say Wal-Mart's share price and dividend grew by 15% per year for 40 years, which is probable because Wal-Mart's dividend has grown by 24% per year during the last 35 years (as of 2010). Here are the results, courtesy of www.buyupside.com, assuming this person re-invested all of the dividends:
Principal investment: $10,000.00
Annual dividend & share price growth: 15%
Total dividends re-invested: $2,173,815.00
Account value after 40 years: $10,402,400.00
Annualized return: 19%
www.buyupside.com
As one can see, investing in a company that is a leader in its industry and provides its investors with 15% dividend and share price growth can build a significant amount of wealth over the long-term.
Let's say that a person invested $10,000.00 in an industry leader that provided 20% dividend and share price growth for him/her. It is amazing how much more wealth one can accumulate with a little extra annual return. Take a look:
Principal investment: $10,000.00
Annual dividend & share price growth: 20%
Total dividends re-invested: $10,742,081.00
Account value after 40 years: $63,483,938.00
Annualized return: 24.3%
www.buyupside.com
As one can see, investing in an industry leader that offers 20% dividend & share price growth with dividends re-invested can build a significant amount of wealth for any person willing to invest in the company. And it can be done with a relatively small initial investment.
These two examples give readers a clear picture of the type of wealth one can accumulate over many years simply by investing a modest amount of money in a company that is a leader in its industry and re-investing the dividends every year.
Let's say that a person initially invested $10,000.00 and continued to invest $10,000.00 every year in an industry leader, while re-investing all of the dividends. Also, let's assume that this person was provided with 15% yearly dividend & share price growth from the investment. Here is what this person's investment would be worth after 40 years of doing this:
Principle investment: $10,000.00
Annual dividend/share price growth: 15%
Yearly contribution: $10,000.00
Account value after 40 years: $78.3 million
Annualized return: 19%
www.buyupside.com
Here is what the investment would look like if it provided the investor with 20% dividend & share price growth:
Principle investment: $10,000.00
Annual dividend/share price growth: 20%
Yearly contribution: $10,000.00
Account value after 40 years: $382.1 million
www.buyupside.com
All of the investment performance numbers in the examples were calculated using the dividend re-investment calculator and other investment performance calculators from www.buyupside.com, which is an excellent website to use for calculating how much wealth one can build with any particular investment whether it be stocks, bonds, rental property, or a small business.
The industry leader companies that were profiled in the last section have historically returned between 15% and 20% per year to investors during the last 30 to 40 years, with dividends re-invested. And as the performance calculations in this section have shown, investing in companies that are leaders in their industries can build a significant amount of wealth for any person.
SECTION 8
CONCLUSION
Planning and creating a good budget in order to invest more of one's income every year can build a significant amount of wealth for any person, no matter what his/her income level is. When this techinique is combined with the practice of investing in investments that are very profitable year after year and re-investing the dividends produced by those investments every year one can build a tremendous amount of wealth over the years through compounding.
I have written about two types of investments in this report that are excellent investments for any person seeking to build a significant amout of wealth, when used properly, but there are many other types of investments that can build a significant amount of wealth. Planning and creating a good budget is the most important thing to focus on for any person seeking to build wealth though. A good budget is the foundation for building wealth. Without a good budget one cannot steadily compound and build wealth over the years. So it is important that one steadily invest in profitable investments every year to build wealth with, but it is more important that one plans, creates, and follows a good budget every month of every year.
Planning, creating, and following a specific budget in order to invest more of one's income every year is the foundation for building wealth. Doing this is key to compounding and building wealth. Once one decides in his/her mind that they are ready to plan, create, and follow a specific budget every year in order to invest more of one's income every year in investments that perform well year after year one will accumulate a significant amount of wealth through the years. All it takes is persistence and will-power to follow through.
I thank you for reading this report. Feel free to read any of my other reports or articles on building wealth at the Building Wealth website, www.goldindicator.com
Walker
REFERENCES
www.yahoo.com
www.scottrade.com
www.buyupside.com
www.walwart.com, Investor Relations
www.mcdonalds.com, Investor Relations
www.cocacola.com, Investor Relations
www.microsoft.com, Investor Relations
www.exxonmobil.com, Investor Relations
www.intel.com, Investor Relations
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