People at the top of the corporate structure have reached that position due to their ability to understand basic economic fundamentals. There is a natural progression for any monetary creation. Production also requires a gradual advancement of raw materials into finished goods. The wealthy remember the investment fundamentals and analyze data to determine future trends.
Cause and Effect
A wise financial expert said that all economic activity is based on income levels. Housing, automobile and groceries cannot increase at rates higher than income level increases. This is just one fundamental law that governs the investment of the top corporate elites.
Consumer spending accounts for two-thirds of any economy. The people are the power. They do the work and buy the goods that make the corporations the profits. If they have more money to spend, they will go out to eat at restaurants. They might buy a new television. Their disposable income is what is left after paying for basic expenses.
Adhere to Economic Fundamentals
There are many investing fundamentals that should not be forgotten. Billionaires continue to repeat the mantra:
“Buy Low, Sell High”
Surprisingly, most people don’t do this. Few people maintain the discipline required to be wealthy.
Lead the Trends
The people at the top are used to leading the pack. They eat the first piece of cake. They are not left with the crumbs.
When people anticipate future trends, they invest on the ground floor. After the trend becomes popular, they make money. This is the long and short of investment success. Those who invest badly, wait until an investment is already popular. At that time, the investment is only crumbs. But salesmen will offer the crumbs at high prices. This is a common mistake of investing.
Value of Unit Investment
The wise look at the bottom line. Investments are about making money. It doesn’t matter the currency, country or age – it is always the same. If you have 100 units, what is the best return you can get on that 100 units?
Some may call this Return on Investment (ROI). They look at the PriceEarnings ratio of a business. They might also consider the break-up fee for all of the company assets. The goal is the same: make as much money for your investment as possible.
Production is the combination of labor, capital, land and intelligence to create products and services that people need and want. In early stages of development, people just need food, shelter and clothing. As they progress, they need more transportation options.
The people at the top of the corporate structure understand where the society is in terms of development. The Internet requires electricity. Travel by airplane requires fuel. Jewelry requires gold, silver and diamonds.
There is a chain of raw materials moving up the production cycle to gain value until it is a finished product. The successful business leaders know how each sector influences the next stage. This is the wisdom of investment.
Wealthy people invest in scarce resources at low prices. These are eventually coveted by the business cycle. Then the wealthy sell their investments to earn great profits. This one of the secrets of successful investing.
This has been a guest post from Naked Business Consulting, a consultancy firm doing good things down under. If you’d like to stay up to date on the latest in the consultancy world, check out their website.