To win at a game, you have to know the rules.
It has been said that Money has no value in itself; it is only a way to keep score. If that is so, then this must be a game. Shouldn’t you know the rules?
Development of Money
Money is a token to aid in barter. Before physical money existed, you traded things you had for things you wanted. Lets say you have cheese you don’t need. If you wanted a loaf of bread but the baker wanted new shoes, then you would have to hope the cobbler wanted cheese. Otherwise you’d be running all over town trying to conduct a bunch of trades so that you can get the bread.
With money, you can trade someone their money for your cheese. You can then trade the baker your money for their bread, and they can trade the cobbler the money for the new shoes. BENEFIT: you (and everyone else) don’t have to make a whole bunch of trades to get the 1 thing they wanted.
Wealth versus Money
Money isn’t wealth. As we saw above, it is a way to simplify trade but it doesn’t provide you in and of itself.
True Wealth would be having the resources granting you the freedom to do what you want when you want.
You can convert Wealth into money, but converting money into wealth is more difficult. And every time you convert it back and forth you lose some value due to friction (i.e. fees, exchange rates, etc).
Places to Grow Wealth and Money
There are a number of asset classes where you can convert your money:
- Cash and like cash (e.g. GICs or Money Funds)
- Bonds
- Company ownership -i.e. Stocks (both publicly traded and private ownership)
- Real Estate (On title, or partnerships, or REIT)
- Mutual Funds
- Exchange Traded Funds
- Segregated Funds (a mutual fund wrapped in an insurance policy)
- Whole Life and/or Universal Life Insurance
- Foreign Currency (FX)
- Precious Metals (Gold, Silver, etc)
- Art
Most of the asset classes need to/can be held in an investment account.