How to Earn More Without Trading Time for Dollars

In his classic book, The Richest Man in Babylon, a slim volume of fiction designed to illustrate the value of personal finance principles, George S. Clason writes a series of parables narrated by Arkad, a poor scribe in ancient Babylon who rose from rags to riches.

While the book offers many gems of wisdom on how to grow wealth, Arkad’s advice in the Five Laws of Gold, a parable on how to invest, is particularly relevant for young entrepreneurs.

In that parable, Arkad suggests two fundamental clues to wealth creation. First, we should use our money to make money by finding a good investment rather than simply relying on our limited reserves of time and effort to make money. Second, when we receive a return on our investment, we should keep reinvesting our profits to multiply our money.

Here are some suggestions on how to put your money to work for you:

Investments Worth Considering

Three investments worth considering are palladium stocks, cryptocurrency, and low-risk investments.

1. Palladium Stocks

When you think about precious metal investments, you probably think about buying gold or silver bullion and finding a safe place to store these assets.

But you don’t have to buy physical metals, you can simply buy exchange-traded funds (ETFs), which are traded on stock exchanges. ETFs are like mutual funds. (A key distinction is that ETFs trade throughout a trading day while mutual fund trades are based on the price at the end of the trading day.)

While gold and silver bullion or stocks are excellent investments, you also can trade rarer precious metals that will have higher market demand in the future.

Buying palladium stocks, for example, offers you a higher return on your investment because palladium could rise in value since it helps carmakers reduce polluting emissions from their automobiles. As the push for more environmental regulations gains momentum, the demand for this rare metal will increase. In 2020, for instance, the price rose from $1,522 to $2,730.

Some palladium stocks worth researching are North American Palladium (PALDF), Sibanye-Stillwater (SBYSF/SBSW), and Palladium One Mining Inc. (PDM).

2. Cryptocurrency

Digital currency may be the currency of the future because it is far more efficient than the world’s current banking system, which relies on a central banking authority.

Cryptocurrency is often referred to as “incorruptible” because it cannot be manipulated since it is encrypted and decentralized. It is a currency that is exchanged between buyers and sellers through the medium of the Internet.

When investing in cryptocurrency, it’s a good idea to buy those that have been around for some time like Bitcoin and Ethereum.

The idea of cryptocurrencies is gaining mainstream acceptance. Bitcoin, for instance, was in the news recently when Elon Musk bought $15 billion worth of Bitcoin. He also took advantage of the publicity his move attracted to announce that he was planning to allow car buyers to use the cryptocurrency to purchase Tesla vehicles.

Although the value of cryptocurrencies has fallen since 2017, it’s still a promising investment.

3. Low-Risk Investments

When investing, the higher the risk you take, the greater the return. While it’s fine to acquire a few investments that offer high returns, you should also balance out your portfolio with some low-risk investments.

Here are 10 low-risk investment classes to consider adding to your portfolio.

1. Preferred stock
2. Dividend-paying stocks
3. Treasury bills
4. Bonds — or instance, corporate bonds
5. Notes — these are legal documents that work like IOUs generated by a consumer who borrows money from a creditor or from an investor
6. Treasury inflation-protected securities (TIPS) — the U.S. government issues these as Treasury security
7. Money Market Funds
8. Certificates of deposit
9. Savings bonds
10. High-yield savings accounts

How to Think Like an Investor

The earlier you invest, the longer you give your money time to mature. Time will also help you to get better at asset allocation, diversification, and rebalancing.

Educating yourself on your journey is also important. Without sufficient education on how the markets work, you will be susceptible to all kinds of clever investment schemes.

If you are disciplined and consistent, then you are highly likely to prosper as an investor, particularly if you understand diversification, understand the financial markets, and understand your own investment biases.

Understanding Diversification

Not all investors believe in diversification. For example, Warren Buffett and Charlie Munger don’t because they can increase the value of their assets through asset concentration.

Still, the difference between the average investor and the folks at Berkshire Hathaway is that Buffett and Munger know exactly what they are doing. So unless you plan on devoting yourself full time to investing and become a seasoned professional, it’s safer to diversify. That way, if you make some bad investments, your good investments will absorb the shock.

Here are three rules of thumb to remember when diversifying:

1. Diversify in the types of investments you make.
2. Diversify in the sectors of the economy you invest in.
3. Diversify within each asset class.

Understand the Financial Markets

Markets are not always influenced by logic. Instead, behavioral finance plays a significant role in market movements. So, you can’t only rely on technical trading to decide how to trade. You must also pay attention to the mass psychological effects created by socioeconomic factors. Watch and listen to the news. When you get your finger in the air, it helps you detect the general direction of the winds of demand and supply.

The stock exchange, money markets, bond markets, interbank markets, and foreign exchange markets are all influenced by the conversations happening in the media.

Understand Your Own Investment Biases

While you might be able to discern the strong emotions, biases, and prejudices that move the public to buy or sell in the financial marketplace, you might be blissfully unaware of your own thoughts, feelings, and impulses. But it's essential to have enough self-awareness to recognize that behavioral finance also influences you. If you don't, then you'll take unnecessary risks when you should be cautious or observe excessive caution when you should be bold and filled with the spirit of adventure.

Many forces have shaped your mindset: business experience, family background, religious beliefs, and cultural conditioning. In themselves, they are neither good nor bad, but they might influence how you respond to the market. For instance, if you come from an affluent family or have enjoyed great business success, behavioral psychologists believe you are more likely to take high risks. Conversely, if you come from a humble background and struggled to reach the pinnacles of success, i.e. working hard for every dollar you earned, then you may lean toward too much caution when the market is bullish.

Recognizing your inclinations will allow you to be more objective about market movement when you are trading.

The Bottom Line

Investments allow you to create multiple streams of income that don’t require your attention all the time. The better you get at managing your income and investing some of it wisely, the more you will flourish in business and in life.

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