3 Ways to Earn Extra Income
There are many ways to earn to money and each of them requires effort. There is no such thing as “passive income”. Even Passive Income requires initial work and some running around to maintain the “passive income”.
Here’s 3 ways I have seen millionaires do it.
Number 1 – Warren Buffet Investment Style – Pick Quality Stock
Like many investor, I am a follower of Warren Buffett. And I read profusely the Benjamin Graham investment strategies. Don’t worry if you haven’t heard of any of them, that’s why you are here. Or if you have, here’s a summary to remind you how money is made. Benjamin Graham was an American Professor, who was a wall street investor first with his own firm, Graham-Newman, before he became a professor at Columbia.
Benjamin Graham’s book on Intelligent investor is the bible of many value investors. Of course there are day traders, and a lot of other type of investing. But can we focus on Value investing today, because that’s easiest to follow in my opinion.
“Bible of Investment Intelligent Investor by Benjamin Graham”
Well I must admit, Benjamin Graham wrote a book that is not so easy to read. I wouldn’t expect you to digest it without a tummy ache at the end of it. So here’s basically what it says:
Imagine you are investing but like a business owner. You own the company, you own the business. It doesn’t matter what the share price is today or tomorrow because that’s market sentiment. What you care about is the value of your company the true value of your business. What value your business occupies in the market place, and what are the assets really worth? How much money the business owes?
Graham singled out the passive investor who doesn’t do a lot of day trading, or exceptional analysis, should focus on the business. Is this business generate cashflow, is this business giving customer satisfaction? More likely nowadays, is this business managing tax?
This is in contrast with the active investor who deep dive into insights and analyse the financial state of companies. Value investor invest buy and hold of good value business. Graham profess that the true value of a company will be reflected by the stock price in the long run.
So that said, what are good business that really have a good a business system going?
Decide if you are a trader, that gambles in the stock market or an investor, who buys and hold a good investment over a period of time?
VISA – remember every day when you tap or swipe your card, it is a VISA card. And no VISA technology is not a bank. Some may worry that VISA will lose out to rivals like paypal, or bitcoin, but what makes VISA a S&P 500, is its ability to absorb competition and collaborate with the latest technology. VISA has also collaborated with bitcoin. Basically this shows this giant of a company is not a dinosaur but one that can adapt. What a lot of people like about VISA is capitalisation. At about 400 billions dollars, it has a large capitalisation that makes manipulation of this stock by single party unlikely. There are also a good mix of many institutional investors.
S&P 500 Index fund
The S&P is Standard and Poor, features 500 leading US companies that are public traded companies.
The important point about the S&P 500 is capitalisation. Basically S&P is a floated weighted index.
The S&P is considered by many the best gauge of the large US stock and entire market sentiment, because it has wide enough depth and industries covered.
The way to invest in the S&P is through a fund that is tagged to the S&P as a benchmark.
Because of this indirect ownership of a business, this is not a preferred method but one recommended by many.
I am always for ownership of the shares in a a real business, if you can.
Berkshire Hathaway Class B shares
Good news for those of us who don’t understand everything about Value investing, Warren Buffet got it for you. He has this company that he frequently attends the annual general meeting, in person. The company is named “Berkshire Hathaway”. Berkshire’s secret is really cashflow, from say Geico, an insurance company and other business that everyday americans buy and consume. For example, they own a substantial percentage of Kraft Heinz. That means every time you buy Kraft Cheese or some products owned by Heinz, you are giving a couple of cents of profit to Berkshire.
Berkshire also has ownership in both Visa and mastercards. So everytime you swipe, think of Berkshire, they probably made some pennies off that commission merchants paid.
Every time an American or even someone in Australia using Visa card, drink coca cola or buy Kraft cheese, they are giving money to Berkshire. And who doesn’t love Warren Buffet who play games and address his shareholders?
Here’s a portfolio by CNBC https://www.cnbc.com/berkshire-hathaway-portfolio/
Warren also has the habit of keeping the management that runs the business well, intact after buying the company. Google finance will show you how well the company has performed.
Having said all the good about Warren. He is known to miss out on hot stock like amazon and apple.
He buys grocery items and telecommunication, stock he is familiar with as you would expect with his age, and he does not gamble with his shareholder’s money. If you are looking to take risk and make or lose big, then maybe you need to look at technology stock that he is not. Warren is about stability.
Warren admitted that he missed out on google because he does not have the business insights to certain business. True hero to admit he has flaws and he is not everything. Still Berkshire Hathaway performed well above the market over long run and that’s the branding for Warren Buffett.
Another thing about Berkshire is that, it is all about Warren Buffet and his friend Charlie. They have not been able to or did not want to find a successor. They are well in their late 80s or 90s, so successful succession is a question for me.
Verisign Inc
Verisign Inc. is an American company that operates a diverse array of network infrastructure, including root nameserves, for “.com”, “.net” and backend systems for “.jobs” and “.gov” and “.edu”
Warren Buffet company has investment in Versign Inc.
And like properties, a domain needs to be renewed yearly and usually at or above inflation prices. So this company generates cashflow tagged to inflation.
When a company is available on the market at a price which is at a discount to its intrinsic value, a “margin of safety” exists, which makes it suitable for investment.
Watch out for Part II on 3 Ways to Earn Extra Income, or follow me on Tiktok @iwantyoutoberich