In this article we're focused on money. Here are the four things I'm investing in, in 2023, to generate more passive revenue from my life and for my business.
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● Money - Where we talk about passive income, investing, and how to improve your portfolio management
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With January on the out and February coming up, 2023 is still just getting started!
Like most of us you are probably excited and want to crush it this year, making more money than you’ve ever made before.
You may also be worried about how you will make it happen with all the bad news out there about economic conditions, the markets in a slump for over a year now, rising prices in record inflation levels, geopolitical uncertainty, etc.
In all honesty, our business got hit in this last slump. I think everybody’s got hit one way or another. Some people I know are still growing, though. There's obviously some great businesses that thrive in recessions. But personally, I am planning for and expecting a recession in 2023
So take that as the basis for how I'm going to be investing.
Now, your investing mindset should be based on your situation. This is purely informational about what I am thinking and some of my reasons for investing the way I plan to in 2023. This is definitely not financial advice. Do your own research and make your own decisions.
The first thing that I'm investing in in 2023, is I'm going to get my Amazon FBA store up and running with a lot of vigor.
Now, I've put up Amazon automation stores in the past that I operated myself. They are dropshipping stores. I'm definitely not doing that on this go-round. The income from that level of effort is too short-lived. It's just not a great business model in my mind.
But here’s the advantage of building an automated Amazon FBA store: When you're following all the rules of Amazon, you have another team managing it for you. It’s very hands-off, so it's a great way to steadily build up your passive income.
Just to be clear here, there are some key things to know up front about running an FBA store.
One, it can easily take 12 to 18 months to make a profit. Now, I am okay with that. I'm also okay with the fact that it's going to require some inventory investments upfront. I'm going to invest $10,000 at a time and use the profits from sales to buy the next round of inventory.
Let's just say I buy $1,000 in product and I sell it over the next week. I make $2,000. So, I netted $1,000, not a ton of money, but it’s a little over 100% profit margin over the inventory, after ad spend, to get the prospects, for not very much or very hard work sitting at my desk.
That's how FBA stores tend to work well and stay running. You buy a little bit of inventory at a time that you can afford, you sell it off, and Amazon fulfills it. This model is very favorable. Then you can use the profits from your Amazon FBA store to buy your next round of inventory.
When Four Green Houses Equals One Red Hotel
However, I know people who have Amazon FBA stores and complain about them because they're not making enough money. I don’t mind. If I can have a hands off store that's even generating one thousand bucks a month for me, I'm fine with it.
It’s hands off money! A few of those little stores that “don’t make enough money” can start to add up to big passive income streams.
As long as I don't have to touch it and my money is working, I’m happy. When most people think of investing to get wealthy they think of trading penny stocks on Robinhood.
For me, putting your cash into an automated, digital market kind of business is a great investment. The gradual return on that is what’s most likely going to change your life over the long term. After a few years of FBA, I started hearing of and knowing people with stores who were doing like $200,000 per month on their Amazon FBA stores.
Those stores were like one year, or maybe two years old before they got that level of sales. So, it takes time to build. But this is a great investment class that I think is really coming out to the fore in 2023. Keep these automated businesses top of mind.
It can cost a little bit to get started, anywhere from like $30,000 to $50K to buy a profitable Amazon store. Meaning, of course, that you can also sell your store for sums like that as well after you’ve got it running.
People build and flip stores for larger lump sums up front based on the expected future income from the business based on a solid history of results. There have already been digital marketplaces for buying and selling online stores and websites for years.
I'm doing a little more hands-on management than your regular Amazon automated e-commerce provider would do. I do have a partner in a company who's going to be running my store. I like having a little more jurisdiction over my passive income generating digital properties. In the first place, that’s to keep scanning for any sign of problems that need to be fixed. If any of the relevant metrics move in a concerning direction, I can get alerted by someone who I trust to do the job and knows what to look for, based on how the business works.
Another nice benefit is when things aren’t going wrong, there’s time for me to pitch over ideas to guess and test. That way we can keep refining the business and discover more untapped markets, products, ad networks, ad strategies, and all that good stuff for automated e-commerce. I am a little bit more involved in the process in the sense that I'm making some of the strategic decisions as well. I'm regularly adjusting those top level metrics, deciding on budgets and scaling, and things like that, based on whatever’s going on and what I’m trying to do.
There are other automated businesses that are coming to the fore that have a similar trajectory in terms of timeline, like YouTube automation. A channel usually takes about 12 to 18 months to really start making a great profit.
I would love to get a YouTube automation store going. I'm going to first get the Amazon store up and running and profitable before I dive into that. The reason is I’m just excited about how strong Amazon is. I like that the business models I’m using there are very passive for the time they require. I also like that stores like this are easy to flip and sell to another investor later. That gives me more options.
The second investment class that I'm going after in 2023 is real estate. Why? Real estate markets have tanking interest rates. I’m crazy, right? Well, I like to live by this one philosophy: Be greedy when others are fearful and be fearful when others are greedy.
When everyone is panicking and talking about, “Oh! Interest rates are high, and the markets are tanking, blah, blah, horrible time to buy..” I’m practicing counterintuitive thinking, so I’m considering that this may be one of the better times to buy. It’s not a buyer’s market either, for any other kind of real estate investment, whether it's an office space or commercial real estate or whatever. But, we are going to benefit from less competition. You're not going to pay anything they’re asking. You're going to have a lot less cash offers. Money has gotten too expensive, you know?
It used to be 1 to 3% interest rates. Now it's like 5 to 7%. So, a lot fewer people are going to be buying who would finance their purchase, meaning, less competition. It also means more negotiating power. You might not get a big discount on the house. But, then again, you might. I've seen some housing prices dropping as I’ve been scanning and putting together my investment plans for 2023.
I wanted to buy a property last year. I went all the way through the pre-approval process. I was about to buy this home, it was 2,600-square feet here and in the Hollywood area, but it fell apart. I loved the house. It was perfect for me and my life, but the problem is I just ran into too many hurdles. Intuitively, it didn't feel right. Now, I feel like that was the biggest blessing in disguise.
If you feel like you missed the boat on buying a home in 2022, then 2023 could be a blessing for you. If you look around at the market now, you may find an opportunity to take that same money that you were going to spend on buying a home last year and have it cover a lot more square footage on this attempt in 2023.
That's how I'm thinking about real estate in 2023. Why am I doing it? Well, I want to benefit from the five core benefits of investing in real estate:
One is appreciation for the house value increasing and developing equity. Two is depreciation, because you get to write off the value of the house a little bit more each year for up to five years to cut your tax obligation. Third is the potential income that owning a property creates, if I turn it into a rental or an Airbnb, I can create easy cash flow if I want it or need it.
Right there, that's a whole basket of reasons why a home is a great investment. Now, you may have watched a video I made about two years ago on why you shouldn't invest in real estate. I want to tell you that I still stand by the philosophy I was applying at the time because when I made that video, you needed to put 20% down to buy a home.
Nowadays, you can probably get away with putting less down, meaning your return on invested capital is going to be higher. The actual ROI equation looks much, much better that way.
Keeping more of your money after making the down payment is even good when you're paying a high interest rate. Let’s say I bought a house with a 30-year mortgage. I don't want to put up a million bucks to buy that home. I want to put up $100,000.
That way if the property appreciates $200,000 in equity, then it's not a 20% gain on my million bucks, it's a 100% gain on my $100K invested. So, that is the only way that I'll invest in property these days - if I can get a good ROI— return on invested capital.
What do you do if you want improved ROI for your cash positions? You put the minimum amount down, and you use leverage from the bank. But if you put a lot of money down, like if you buy super expensive property, the return on invested capital ratio is lower. So I don't recommend doing that. Given that things are probably going to get a little bit worse in the economic markets in 2023, I am positioning myself to be ready for that.
If there's a stark drop, that's when I'm going to act. I got my money ready to go, and I have a lender in mind. So, as soon as I'm ready, I'm going to get the pre-approval done and I'm going to strike fast.
The reason I’m so motivated is because I am very confident that five years from now, I'm going to be really glad I bought during a recession.
You may or may not remember back to 2008, that house prices in Stockton literally crashed from $500,000 to $100,000 in a very short window of time.
So, the 2008 housing market crash was a great time to buy real estate, either for your own home, or to invest in rental properties for tenants or AirBNB guests. They say the easier millions are made during recessions. I’m very much in agreement with that statement.
Look at when everyone else is panicking and freaking out. That’s when you want to be calm, confident, aware of what’s going on, have some dry powder and a little warchest of savings to invest. Have a plan that you execute ruthlessly. I’ve kept some cash ready for just those opportunities. Now that the markets are softening up, I can actually activate and deploy that cash and make much better ROI on it.
In a down market you're going to have a lower amount to put down and you're not going to have to pay over the asking price to get around a scrum of other motivated buyers.
Once the interest rates normalize, you can refinance for a lower interest rate, and then your cost of leverage goes down too. So real estate investing is a big category for me in 2023.
Just from a diversification perspective, I want to have some hard assets to build my savings on beyond all the crazy digital assets that I have.
Which takes me to my third investment for 2023.
And that is Bitcoin!
I don't care what anybody else says about it—I'm still a big believer in crypto.
Fundamentally, the technology underlying Bitcoin has not changed or failed in any kind of important way. All that changed in 2023 was market sentiment. Now, is there going to be crypto regulation? Is there going to be more tumult and craziness around crypto? Yes, absolutely.
In fact, I can see Bitcoin going even lower than it did by the end of last year.
That doesn't mean I don't believe in it. All the markets are tanking, I mean, a whole slew of tech companies are down like 80% from their stocks’ peak prices over a year ago. Or, they were at one point, before the new year relief rally in January.
That doesn't mean that companies like Salesforce are just going to evaporate. Same thing with Bitcoin. It's not going to evaporate and disappear tomorrow.
Even if the government puts more regulation around cryptocurrencies, again, it's an autonomous software program. There’s only so much regulation that can go to protect consumers. Ultimately, they cannot ban, wreck, or undo something like Bitcoin. They can only have regulation around it. You could just hold it offshore. Then you would not be subject to any of that regulation. It’s very decentralized and borderless.
I know a lot of people are bearish on Bitcoin at the moment. Again, that is why I want to be greedy when others are fearful because, like Warren Buffett has proven, that’s a perfect time to buy.
Here’s the open “secret” I know from experience: BItcoin price always comes back up. So, these big drops, I've seen them all before. They’re normal for cryptocurrency and the technology and the network is not going anywhere. Fundamentally, it still has the same value today as it did when markets were going crazy for it a year ago.
The only difference is that market sentiment has soured and that is an opportunity for investors who see the value in Bitcoin and disagree with the negative sentiment in their evaluation of its potential future returns.
I’ve heard people say that 80% of stock and equity pricing is speculation. So only 20% is the fundamentals. This means the actual company valuation, not traders anticipating and copying each other’s moves, with 80% of the equity’s market capitalization.
Run the math on, say Salesforce— it is only worth 20% of what its market cap is if you use financial thinking. Check its balance sheets and financial reports. The excitement, the forward looking speculation, and so on, that’s what gets people to overbuy shares. That drives up the stock price. Stocks and crypto are all something like 80% speculation, we're really looking at the 20% fundamental value.
It's not really going to drop below a certain support level or a certain price per share on most entities, because they have the fundamentals of enduring value.
The math works out like a formula. Does it make sense to invest in this company based on its fundamentals? The fundamental financial equations don't change like the whipsaw of market sentiment. Another I'm investing in Bitcoin, and specifically Bitcoin (BTC), is because Bitcoin isn’t going anywhere. “Rich Dad, Poor Dad” author, Robert Kiyosaki, has been saying the same thing for some time now.
I think Bitcoin and Ether are both solid. The other cryptocurrencies are probably going to be up against a lot more opposition from the government. Established cryptos, like Bitcoin, LiteCoin and Ethereum, are here to stay. Therefore, I'm putting most of my portfolio into Ether (ETH) and Bitcoin. This is a decentralized payments and financial technology.
The network is impossible to take down. Even if you take down a few nodes, there's still tens of thousands of nodes left of this peer-to-peer financial infrastructure.
The reason the government doesn't like it, is because it's hard to control, and it gives more power to the people. The centralized bank doesn't have as much of a grasp on everyone's money flow with crypto. They can't print more Bitcoin, whereas they can print more US dollars. So the US dollar can become massively inflated, like it is right now. Bitcoin is a limited quantity, it is quite literally the opposite of the US Dollar. It is deflationary. They're not minting any new Bitcoin after they hit the supply limit of 21 million.
Above all, I just like that crypto doesn’t come from some big umbrella government who just is being forceful with how they make people use their money. I think for that reason, everybody who is in this camp is going to continue investing in crypto. Most of those people are generally entrepreneurial, as well. They have money and they want to make more of it to invest in it and keep their returns safe in a forward-thinking vehicle. They don't want to be losing value by putting savings in the dollar, losing it to inflation.
Enough said? That is why I'm investing in Bitcoin.
The last, and most important, thing I will be investing in this year is my mind! I'm going to be investing heavily in coaching courses, mindset books, and (etc.). This will show up in more material on my Zen Business Podcast.
For instance, this book, “The Almanack of Naval Ravikant,” by Eric Jorgenson really inspired me in a lot of ways. The most direct implication that I can share with you is that now, I read for an hour a day. You can find it on Eric’s website (There’s a free version).
The book gives so many good reasons to read more. This might motivate and effect you in numerous ways. Go invest in your mind. It's a philosophy book at the end of the day, but I am investing heavily. You're never going to get bad ROI from reading. The top 20% of income earners in America read 60 books a year (about four a month). The bottom 20% reads zero.
Secondly, this is most of what course creators, coaches and luminaries of all days past and present, got their knowledge, and put their knowledge, in books. You get a huge competitive edge by reading. I've committed myself to reading an hour a day, and once you get past a certain point of stir craziness and discomfort sitting still - you’ll find it becomes super pleasurable. I heartily recommend Naval’s book to you!