Debt Views

Understanding money comes back to understanding investing itself. Money is numerical in nature and is an incremental representation of value. If this sounds a little foreign to you, bare with me. This article will reveal some entirely new concepts to you.

Money and investing are closely connected because they both have mathematical applications. Money represents the value of a commodity while investing increases value all by itself. These three things, money, investing and value can be used to create wealth.

The most powerful secret you can learn about wealth creation is that money can be controlled through investment by controlling value. Let me explain.

When you invest seed capital into an investment, you deal with risk and reward. How much will you make and how likely is it that you will even get your money back, much less make a return. This risk analysis is relevant when you hand over your funds to another without getting a corresponding asset of equal or better intrinsic value.

What I mean by that, is if you buy shares or other exotic financial instruments like options or futures, you get a credit acknowledging that you own shares, however the actual “thing” you receive is worthless. The bit off paper that tells you that you own shares is not worth 2 cents.

When you buy a tangible asset like a house or other objects with intrinsic value, then you swap your cash for a new type of value. This type of investment is superior to the type of investment where you get a paper acknowledgment because you get to work with value that can be controlled. What I mean by that, is that you can paint a house and increase its value. Another example, because real estate has high entry costs, you can clean and detail a mountain bike and give it a new value through controlling how it appears and functions. This type of tangible investment allows the investor to control the value of an investment and therefore control the incremental monetary value of that investment.