00:00Compound interest is the most effective way for ordinary people to achieve financial freedom,
00:06Finance Hacked warmly greets you and our dear friends.
00:11I have never believed in what the majority of people believe.
00:16It is precisely because of it that at the age of 23,
00:19I was able to achieve financial freedom through speculation.
00:23The most meaningless statement in the world is to paint you a picture of 40 years from now,
00:30because by then, you might not even have a chance to regret.
00:3597% of people around the world believe that the best method of financial management is to leverage compound interest.
00:44Why is that?
00:46Because someone named Albert Einstein once said,
00:50Compound interest is the eighth wonder of the world.
00:54And the legendary investor Warren Buffett also affirmed that he became wealthy gradually.
01:00These two sayings have been exploited and continually spread by those with ulterior motives,
01:07causing 97% of people to buy into a flawed financial mindset,
01:12using compound interest to trade the present for the future,
01:16financial business employees hear this over and over again until they start believing it as truth.
01:23They then tell you,
01:24Start saving now.
01:26The interest you earn every day will be added to your principal,
01:30increasing each month and growing more each year.
01:34With such compounded interest,
01:36by the age of 60 you will have millions of dollars
01:39and might even become a rich old man like Warren Buffett.
01:43It sounds wonderful, doesn't it?
01:46But hold on, consider how manipulated this information is.
01:52I only want to talk about the end result.
01:55By the age of 60 I could finally drive a Porsche.
01:59So, what is so interesting about that?
02:03I agree with the idea of exchanging the present for the future,
02:08but if that means using today's money to secure future funds, then I'm not playing.
02:14Vision is important, but that is why I choose to use today's money to create more money in the present,
02:21because without money now, there can be no money later.
02:24Recently, I came across an interesting story.
02:29Someone advised his friend to quit smoking,
02:32saying that if he did not smoke a pack each day,
02:35the money saved over 20 years through compound interest would be enough to buy a Porsche.
02:42But his friend casually asked,
02:44Do you smoke?
02:45The other proudly replied,
02:48I have never smoked a single cigarette.
02:51Then the friend laughed wryly,
02:54Then where is your Porsche?
02:56You see, this is the issue,
02:58and if you are still reading,
03:00I will share with you my understanding of compound interest as a way to truly make money.
03:07As for those financial institutions constantly emailing me with offers to become their agent,
03:12they can stop, because I am not interested.
03:17I want to be direct, without intermediaries.
03:20If you support me, please hit the like button to keep the momentum.
03:24I also want to emphasize that this channel is for those who aspire to be entrepreneurs,
03:30investors, and wealthy individuals.
03:33If you don't want to miss valuable information,
03:37subscribe to the channel and turn on notifications.
03:40First, let us revisit our idol, Warren Buffett.
03:45Did he really become wealthy through compound interest?
03:50The truth is, by the age of 32 he had over $1 million from investing,
03:56and that was more than $1 million was worth several decades ago.
04:00Could he have become rich by earning a salary and relying on compound interest?
04:07At that time, the average income was only about $3.
04:12$0.00 per year, so how could he multiply that into $1 million?
04:19The reason is simple, he did not study compound interest,
04:24he learned how to leverage capital.
04:26At the age of 26, Buffett raised $100,000 from relatives and friends for investments.
04:35Six years later, he had multiplied that money tenfold.
04:40There are two key points.
04:42First, Buffett's investment returns were truly remarkable.
04:46Second, although he always advises others not to borrow money for investing,
04:52in reality he used other people's money from the very start.
04:56He consistently used financial leverage.
05:00With his risk cost being extremely low, nearly zero or even negative.
05:07In other words, he invested using other people's money,
05:11and those people even had to pay fees to him.
05:14No matter whether his investment fund company makes a profit or a loss,
05:20you still pay the management fee up front,
05:23and if the investment yields profit, he earns a percentage of the gains.
05:28Additionally, he owns many insurance companies,
05:31where the funds he mobilises are even cheaper than free money.
05:35In 2002, his company issued the first floating-rate security in history.
05:43In short, what he was truly playing with was not compound interest but financial leverage.
05:50Everyone knows that Jeff Bezos became wealthy through Amazon.
05:55Mark Zuckerberg through Facebook,
05:57and that billionaires around the world have amassed fortunes through their businesses.
06:02But why is it that only Warren Buffett is considered to have gotten rich through investing?
06:09Many think that simply buying stocks makes you like Buffett,
06:13and then they consider themselves superior to those who are not familiar with stock investing.
06:19I can only laugh because a small investor buying stocks is merely buying stocks,
06:25whereas when Buffett buys stocks, it is a takeover of the business.
06:29He gains complete control of the company.
06:34For example, take the insurance company Berkshire Hathaway,
06:38which originally was just a textile company.
06:42When Buffett acquired it,
06:45he initially intended to invest for a while and then withdraw.
06:49However, the company unexpectedly incurred heavy losses,
06:54causing him to unintentionally become the largest shareholder.
06:57The problem was that Buffett did not know how to weave fabric,
07:02so he used that company to take over another insurance company
07:06and then transformed Berkshire Hathaway into an insurance conglomerate
07:10under his management and restructuring.
07:14The share value of Berkshire Hathaway multiplied,
07:17turning it into one of the greatest financial conglomerates in the world.
07:22Buffett holds a large number of shares in the company.
07:25So how could he not be wealthy?
07:30Clearly, his capital management strategy resembles that of an entrepreneur
07:34deftly handling cash flow rather than that of a mere investor,
07:39and most importantly,
07:40all his investment activities were based on an unshakable foundation,
07:45the principal capital.
07:47This is also why the book Rich Dad Poor Dad teaches
07:51that one should become an entrepreneur before transitioning into an investor.
07:56When you have a solid foundation like Buffett's,
07:59owning a business that generates steady cash flow and passive income,
08:04then investing truly becomes effective.
08:07First, by that point your capital is large enough.
08:11If I invest a few million dollars,
08:15my rate of return need not be very high.
08:19Nor does the investment period have to be long,
08:22but I still make a lot of money.
08:25Meanwhile, if you work for a salary
08:27and set aside a portion of your earnings to invest,
08:31even if you achieve a better rate of return
08:33and investment period than I do,
08:36you might never earn in your entire life
08:38what I make in a single year.
08:41Second, I can invest in areas that you cannot.
08:46You can only buy stocks or investment funds,
08:49but I can invest in real estate
08:51or even take over small companies.
08:54Third, and most importantly,
08:57we invest without pressure.
08:59If we incur losses,
09:01our business still generates cash flow,
09:04whereas if you lose money from investing
09:06while solely relying on your job income,
09:09you might lose everything.
09:12Many people have even committed suicide for this reason.
09:16Previously, I tried everything to narrow the gap
09:19between the rich and the poor,
09:21but in the end I realized that I was too naive.
09:25The capital market operates according to a brutal law.
09:29The poor can join the ranks of the rich,
09:31but it is very difficult for the rich to become poor.
09:34I have studied this issue in great depth.
09:40Many say that before the age of 60,
09:42Buffett did not have much money,
09:44that 99% of his wealth was created after 60,
09:48but that is a misconception.
09:51In reality, at the age of 52,
09:54Buffett already had $370 million.
09:57He was very wealthy early on,
10:02and thereafter he used compound interest
10:04only to amplify his wealth.
10:07If you understand compound interest well,
10:09you will see that it has three core elements.
10:12First, the principle,
10:14the money you invest,
10:16second, the rate of return,
10:18essentially, the profitability of the investment,
10:21and third, time.
10:24Among these factors,
10:25which is the most important?
10:28It is still the principle,
10:30because interest rates and time
10:32are merely tools to multiply your initial capital,
10:35which is then reinvested.
10:38However, the risk in this process is extremely high.
10:43With every investment,
10:44you reinvest both the principle and the interest.
10:47I wonder if your math teacher
10:50ever taught you this simple rule,
10:53if you earn a 100% profit this year.
10:57$10,000 becomes $20,000,
11:00but if you lose 50% the next year,
11:03that money drops back to $10,000.
11:07In other words,
11:09if you lose 50% today,
11:11you must earn 100% tomorrow
11:13just to break even.
11:14I want to ask you,
11:17in the stock market or investment funds,
11:20is it easier to incur a 50% loss
11:22or to find an investment that can double your assets?
11:27An investment that doubles in value these days
11:30is very hard to find,
11:32whereas a stock that loses 50% of its value
11:35is all too common.
11:37This is the reality.
11:40Most stocks are influenced by the overall market.
11:43Many claim that Tesla's stock plummeted
11:47because Elon Musk was busy with Twitter,
11:49but that is just an excuse.
11:53Look at Tesla's price chart
11:54compared with the market index.
11:58Do they not resemble each other?
12:01Then look at the stocks of Facebook and Amazon.
12:03They too plunge sharply along with the overall market.
12:07These top stocks all follow the general market trend.
12:11When you buy an investment fund,
12:15examine its portfolio,
12:17most hold these major stocks.
12:20And every so often,
12:21the market undergoes a significant correction.
12:25If you only know to wait for prices to rise before buying,
12:29how will you invest?
12:31Buffett excels because he has an enormous amount of capital to invest.
12:36He not only achieves a 22% return per year,
12:41but also reinvests the following year.
12:45As for me,
12:45although my gains from speculation are higher
12:48and I make money faster,
12:50it is because I only dare to use a small portion
12:53of my capital and leverage for trading.
12:56My approach is completely different from his,
12:59I withdraw my profits as soon as I earn them,
13:02while he sticks to a strategy of earning modest yet stable profits over the long term.
13:09Apart from real estate,
13:10most of my assets are allocated to investments.
13:15In my view,
13:16real estate not only appreciates in value,
13:18but also generates cash flow from rental income,
13:22and over the long term,
13:23its returns surpass most other investment channels.
13:26This is the only area where I can effectively apply compound interest.
13:33If you understand what I am saying,
13:36you will see that I invest in a more stable way
13:39than simply reinvesting principal and interest in stock investments.
13:44When we talk about stream value,
13:47what does that mean?
13:49Suppose today you study English vocabulary,
13:52learning 10 words each day.
13:54According to the theory of financial experts,
13:58after 3 days you would remember all 30 words without forgetting any.
14:04But that is impossible.
14:07In reality,
14:08by the 4th day,
14:09among the 30 words you learned,
14:11you may have forgotten a third,
14:13leaving you with only about 20 words,
14:16the stream value you can maintain.
14:19The more you learn,
14:21the more you forget.
14:22In the stock market filled with experts,
14:26why do most people lose money?
14:29If you have ever gambled in a casino,
14:32you understand,
14:34when your capital is too small,
14:36you are not qualified to play this game,
14:38or if you are,
14:40you'll merely pray for others.
14:43And what about the real estate market?
14:46Are there no experts?
14:47In fact,
14:49the government is the greatest expert.
14:53Even the top Wall Street traders
14:55cannot guarantee that annual returns will always grow,
14:59they will surely experience losses,
15:01and once you lose,
15:03losses compound according to the rules of compound interest.
15:07If you always reinvest both principal and interest,
15:11even a slight loss can result in a very significant setback.
15:18Buffett has more capital than you,
15:20and his annual returns are higher,
15:22but throughout his early decades of investing,
15:25he could not afford any serious losses.
15:29Just one major loss could wipe out most of his accumulated gains.
15:33Therefore,
15:35the first rule when dealing with compound interest
15:38is to remember Buffett's words,
15:41number one,
15:42never allow a loss,
15:43number two,
15:45never forget rule number one,
15:47in fact,
15:47in 2020,
15:49Buffett also lost tens of billions of dollars
15:52when he bought stocks in the airline sector during the pandemic.
15:56He could afford to take the loss,
15:59but what about you?
16:01Do you have the ability to invest
16:03by risking both principal and interest?
16:07Do you own any assets that generate cash flow to cover losses?
16:12Why is compound interest said to be even more powerful than an atomic bomb?
16:18Quite simply,
16:19your math teacher once taught you the compound interest formula, right?
16:24For example,
16:25if you invest $100,000 in a stock and earn 10% in the first year,
16:31you gain $10,000.
16:34If every year you earn $10,000 by investing only $100,000 anew,
16:41after seven years you will have earned just $70,000.
16:45But if you understand compound interest and reinvest both principal and interest,
16:51it changes entirely.
16:53In the first year you invest $100,000 at 10% interest, ending up with $110,000.
17:02The next year, you invest the entire $110,000 and earn 10% again, making $121,000.
17:14The following year, you reinvest all of it, and so on.
17:19By the seventh year, your money has nearly doubled,
17:22you initially invested $100,000 and now you have almost $200,000,
17:29meaning you have broken even with a significant profit.
17:33That is why your math teacher drilled into you this truth,
17:37with simple interest you'd earn $70,000,
17:40but with compound interest you'd earn $100,000.
17:44They will tell you, the longer you compound, the greater the profit.
17:51If to date you invest $10,000 and apply compound interest,
17:56after 40 years that money could grow to $450,000.
18:02More importantly, if each year you also take $10,000 from your salary
18:07to continue investing using compound interest,
18:10your profit would be even more formidable than an atomic bomb.
18:16This investment strategy is completely sound
18:18because it is based on a perfect mathematical model.
18:23But if it were that simple, and we had known it since childhood,
18:27then why are there still so many people riding the bus
18:30instead of driving a supercar?
18:33The answer has already been mentioned.
18:36First, steady profits are not always easy to achieve.
18:40Second, as Buffett said, compound interest requires time.
18:46And most importantly, you must learn how to protect your health and extend your life.
18:53Without time, what use is compound interest, right?
18:57If Buffett had died before the age of 60,
19:01he wouldn't have earned 99% of his wealth,
19:04and if that were the case, who in the world would know him?
19:07Now, I will tell you a truth that might make you dislike entrepreneurs and business owners.
19:13If you are a salaried worker, after your 30s,
19:17if you remain merely a loyal employee,
19:20it will be very difficult for you to advance further.
19:24Why?
19:25Because everything you accumulate before the age of 30 comes to a halt,
19:30unless you are a natural genius or extraordinarily lucky.
19:35Otherwise, your career progression will be limited.
19:40This is common, typically by this age your position in the company is almost fixed,
19:45managers remain managers, department heads remain department heads,
19:49the higher you go, the fewer there are.
19:52When your position is limited, your salary becomes almost fixed.
19:59You might argue, that's not true, the company still gives annual raises.
20:05Yes, your salary on paper increases.
20:10In the past, hiring a college student might have cost only $1,000,
20:15now it might cost $2,000.
20:18But why is that?
20:20Is it because today's students are better?
20:24Is it because the quality of labour has changed?
20:29No.
20:30The salary increase is due to inflation.
20:35Nominally, your income is higher,
20:37but in reality, the actual value of that money remains the same.
20:42You can verify this by simply checking prices at the market.
20:46Many countries use this method to adjust the minimum wage to appease the majority.
20:54They tell you, we have increased your wages,
20:57but what they don't mention is that prices have also increased.
21:00On the surface, you feel like you are benefiting,
21:04but in truth, you gain nothing.
21:07Therefore, I want to speak directly to you,
21:10when you are young and do not have much capital,
21:13and you cannot control interest rates,
21:16do not dream about compound interest,
21:18it simply does not matter to you yet.
21:21I always advise young people to focus on finding ways to increase their income.
21:28Yet most worry only about saving every single penny.
21:32That is a way of self-consolation,
21:35they think that as long as they save,
21:37they will have a stable and happy future,
21:40but the result is that they become part of the 97%
21:43whose savings are wiped out by inflation and economic recession within 10 years.
21:49This is what I call shearing the sheep.
21:54Buffett can work with compound interest
21:56because he uses other people's money to create leverage.
22:00I invest in real estate using a similar approach,
22:04but we do not accept an investment method
22:07where you put in $10,000 every year
22:10and wait 60 years to exchange it for a million dollars.
22:14Our goal is to use the initial capital
22:17as a foundation to expand our assets.
22:21Not to win small by playing big.
22:24Can you see the difference?
22:26Now, here is my heartfelt advice,
22:29which those who have experienced life will understand,
22:32when you have nothing in hand,
22:34no capital,
22:35instead of wasting time trying to win small,
22:38why not focus on investing in yourself?
22:41Because you are the only asset you can control
22:45and you are the most valuable investment.
22:48Do you know how much a true genius is worth?
22:53Are exceptional talents hard to find?
22:56They must be competed for.
22:59I asked a colleague in investment banking,
23:01and he said that when they invest in outstanding startup teams,
23:07they must go directly to plead for an opportunity to invest.
23:12Founders don't even need to search for investors
23:15because investment funds are always in need of good projects.
23:19So what is the essence of the lack of good projects?
23:22It is simply the lack of people
23:25who have the capability to make a project successful.
23:30Therefore, talent is the most important factor.
23:34When you are young,
23:35if a nice suit can increase your chance of getting a job,
23:39buy it immediately without hesitation.
23:42If an evening party or a meal can help you advance,
23:46you must participate.
23:48Your life still has a long road ahead.
23:51I despise hearing about saving or cutting expenses.
23:57People only worry about saving
23:59when they fear they cannot earn more.
24:02That is why I want to point you in one direction.
24:05While the whole world does the same thing,
24:08you must find a different path,
24:10a road that even large corporations overlook.
24:14Take the money you would invest in financial products each year
24:18and use it as seed capital,
24:20combined with investing in yourself
24:22to carry out small projects that the big firms ignore,
24:26I will give you an idea for you to consider.
24:30You could pay an upfront fee to buy a Mercedes,
24:33not to show off,
24:34but to become a personal driver
24:36for senior managers at foreign companies
24:38or wealthy entrepreneurs.
24:41Because you own the car,
24:43your income is not just your driver's fee.
24:46You can include the car rental fee,
24:50fuel, parking fees,
24:52and other expenses in your service package.
24:55You only need to tell your clients,
24:58each month,
24:59pay me a fixed fee,
25:01and I will take care of everything
25:02except my own salary.
25:05In just a few years,
25:07you could recoup the cost of the car.
25:09I am not speaking hypothetically,
25:13a friend of mine did exactly that.
25:16In addition to his main job,
25:18he used the car to earn extra income
25:20during his free time.
25:23As a result,
25:24after a few years,
25:25he achieved a 100% profit.
25:29Then he hired additional drivers,
25:31expanded his investment to buy more cars,
25:34and soon became a small business owner.
25:39By then,
25:40he had capital at hand.
25:43Of course,
25:44this is just an idea,
25:46there are many details to consider,
25:48and you do not necessarily
25:50have to follow it exactly,
25:52since many candidly say
25:53they would rather die than work as a driver.
25:57Moreover,
25:58this profession has its income limitations.
26:02Although I did not follow that route,
26:04if someone can make it work,
26:06it would be great,
26:07in my opinion,
26:08in the first 20 or even 30 years of life,
26:12interest rates and time
26:14are not as important
26:15as how much capital you have.
26:18In the first 20 years of investing,
26:20the returns from interest
26:22and the effect of compound interest
26:24over time are not significant.
26:27What is crucial is that your capital
26:29must be sufficiently large.
26:31Without ample capital,
26:34it will take you an exceedingly long time
26:36to generate significant profits.
26:40When you are young,
26:41do not be overly concerned
26:42with financial investments,
26:44because the most important asset
26:46is yourself.
26:48Only when you enhance your own value
26:50will you never lack money in the future.
26:53This is what you need to focus on right now,
26:56clearly distinguish between
26:58what is important and what is urgent.
27:01That is the way you should act.
27:05However,
27:05I am not saying that compound interest
27:08is unimportant,
27:09it is indeed crucial
27:10because if you maintain profits,
27:12the effect of compounding
27:14becomes ever stronger over time.
27:17There is a principle called
27:19the lotus effect,
27:20on the 30th day,
27:22the lotus covers only half
27:24the water's surface.
27:25But by the 31st day,
27:28it covers it entirely.
27:31This is exponential growth,
27:33the power of compound interest.
27:36That means in the first 20 years,
27:38time and interest rate
27:40do not have a major impact.
27:42The most important factor
27:43remains your initial capital.
27:45Due to time constraints,
27:47I will stop here.
27:48We share free information
27:51on how to become wealthy,
27:53an entrepreneur,
27:54an investor,
27:55and achieve financial freedom.
27:58If you do not want to miss out,
28:01follow our channel,
28:02turn on notifications,
28:04and share this video.
28:05I sincerely wish that those
28:08who have supported this video
28:10will soon achieve financial freedom.
28:13If even one or two sentences
28:15from this video benefit your life,
28:18I will feel fulfilled.
28:20Goodbye and see you next time.
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