If you have ever worried about how to make enough money in your lifetime to provide for your children and their unborn children, then you have been thinking about generational wealth. Generational wealth is anything you pass down to your children to make their lives easier financially.
Generational wealth transfer is one of the biggest predictors of a person’s social mobility. Anything of financial value you bequeath to your children can give them a head start in life such as expensive jewelry, artwork, intellectual property rights, or life insurance.
But the three most trusted methods for building and transferring wealth are:
- Owning and bestowing profitable stocks to your children
- Starting a business and passing it down to your children
- Or buying real estate and leaving it to your children
Each of these strategies has its advantage. For the best results, you may want to combine all three. But at the same time, you should also make one of them your primary instrument for building wealth. Which strategy is preferable for building generational wealth?
Stocks investing as a generational wealth-building strategy
Of the three methods, the easiest to get into is buying company shares. For as little as $20, you can start investing in stocks. But this is not the level of investing that will help you build the kind of wealth you can hand down to your grandchildren.
Owning stocks as a strategy for generational wealth is not the most reliable because stocks are highly vulnerable investments. The most profitable way to invest in stocks is to find a promising company and buy into it before it goes public. But not everyone can do this.
Entrepreneurship as a generational wealth-building strategy
Entrepreneurship as a strategy for building generational wealth gives you more control than stocks. That is because, with stocks, you buy the shares of a company you don’t control. But entrepreneurship lets you control the company.
However, as an entrepreneur, you are exposed to the impulses of the economy. The growth of the business also depends on your know-how and how much money you invest in it. But regardless of these, owning a business is still a time-tested way to build generational wealth.
Real estate investing as a generational wealth-building strategy
Owning land and properties is the favorite way for the world’s wealthiest people to secure and grow their wealth. Most of the world’s richest families and individuals – how they made their money and from what industry – are heavily invested in real estate. Why is that?
1. Real estate is a tangible asset
When you buy company shares, you buy an intangible asset that can dissolve with the fortunes of the company. Although your own business is more tangible than stocks, it is less tangible than a building. But when you buy real estate, you acquire assets that will be there regardless of what the economy does tomorrow.
2. Land is finite in supply
Land is a limited resource that people will always need. There is no guarantee that the services or products your company or another company sells will always be in demand. But people will ways need land; therefore, you can be sure of the continued value of a real estate investment.
3. Properties retain their value
Real estate is easily the asset type that is least vulnerable to economic shocks. The value of stocks can rise or fall sharply within a matter of hours. Property values, on the other hand, move very slowly. Even when they fall in the short term, they will usually trend upwards in the long run.
4. Real estate is a great source of passive income
Although stocks are a source of passive income, that income, or dividends, is occasional. This is unlike real estate which can generate monthly income. Also, unlike your own business, income from real estate does not depend on you being present at work.
Unleashing the potential of your real estate investments
However, as Upkeep Media agency advises, to reach the full potential of real estate investment as a means of building generational wealth, you need a structure for managing these investments. A proper framework for managing real estate assets will do these three things for you and your family:
- Make the asset truly passive
Real estate is not a passive investment until you hire a property management company to manage it. Hiring a management company for your property investments will give it the passivity of stocks along with the steady income you get from running a business.
- Make it failure-proof
Without a property management company to look after your properties, the assets are exposed to the same issues that plague people who inherit wealth. As much as 70% of individuals who inherit wealth lose it because they are unable to manage it.
- The chance to grow your portfolio with ease
One rental property purchased in the right location and managed properly can become the foundation for building a vast portfolio of properties. But to do this you need access to people who know how to navigate the rental property landscape.
Finally, real estate is the only asset class you can fully control by paying only 5%-25% of its purchase price. There is no reason not to take advantage of this to secure your family’s future today.
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