Anyone can get lucky and win the lottery. Anyone can pick a winning stock from time to time. But if you want to achieve lasting financial success, you need more than just the occasional lucky break. What I’ve found over almost four decades of studying success is that the most successful people in any field aren’t just lucky. They have a different set of beliefs. They have a different strategy. They do things differently than everyone else. I see this in every area of life, whether it’s sustaining a happy and passionate marriage for more than a half century, losing weight and keeping it off for decades, or building a business worth billions. The key is to recognize consistently successful patterns and to model them, using them to guide the decisions you make in your own life. These patterns provide the playbook for your growth and success.
When I embarked on my journey to find solutions that could help people financially, I studied the best of the best, ultimately interviewing more than 50 investment titans. I was determined to crack the code—to figure out what explains their stunning results. Above all, I kept asking myself one question: What do they all have in common? I discovered what I call the Core Four patterns that can powerfully influence your ability to achieve financial freedom, whether you’re investing in the market, or considering a new business venture.
- Don’t lose. The best investors are obsessed with avoiding losses. They understand the simple fact that the more money you lose, the harder it is to get back to where you started. If you put $100,000 into an investment and lose 50 percent the first year, you now have $50,000. If you then make a 50 percent return on that $50,000, you still only have $75,000. You’re down $25,000.
- Understand risk and reward. Conventional wisdom suggests you need to take big risks to achieve big returns. But the best investors don’t fall for it. Instead, they hunt for opportunities in which the rewards vastly outweigh the risks.
- Manage your tax burden. There’s only one number that truly matters: The net amount you actually get to keep.
- Diversify. In investing, everything comes down to owning an array of attractive assets that don’t move in tandem. In business, it’s important to be able to serve your clients or customers in multiple ways. Not many successful restaurants have only one item on the menu.
When it comes to these principles for healthy financial growth, execution is everything. These principles make for a simple, invaluable checklist. Whenever I’m speaking with my financial advisors about a potential investment, I want to know whether or not it meets the majority of these four criteria. If not, then I’m simply not interested.