Monday, December 1, 2014

Dynastic Wealth

Described as "monetary inheritance that is passed on to generations that didn't earn it," dynastic wealth gets a bad rap. It is so "burdensome" that most billionaires feel compelled to increase it and disperse it via a number of nonprofits controlled by their heirs to maintain it without having to "pay their fair share." Please. Let's be honest, dynastic wealth is an enviable goal and one which most investors strive to obtain, if not fully in their lives, then at least in the lives of their children and grandchildren.

Dynastic wealth, in terms of monetary abundance, offers many significant advantages to poverty; better access to health care, education, safety, etc. It has, and will always be, one of the primary goals of our species. It is fundamentally Darwinian. In many ways, dynastic wealth is the American Dream; an increasingly better quality of life for generations to come with the ability to pursue one's own happiness.

Those who wish to Invest Like A Farmer are particularly well-suited to accomplishing this goal. It is a worthy goal and one that is obtainable. Here are the basic elements that I have seen succeed:

1) Longevity is key as both time and health are vital assets to establishing dynastic wealth.
2) Self-Discipline to repeatedly contributing to compounding investments, rarely taking distributions.
3) Financial Savvy; a lifetime hunger for knowledge about investing in a number of asset classes.

That's the quick 3-step process; there are undoubtedly thousands of ways to become wealthy. But mastering the above elements are always a significant part of the equation when establishing initial education, income, passive income, starting a business, owning equity, leveraging equity, tax-advantaged investing, developing multiple cash flow streams, strategically passing along assets to heirs, and ultimately establishing dynastic wealth.

Very few of us (suspiciously enough, probably around 1%) have privileged connections. And although that definitely matters, particularly the influence which can be wielded by those connections, almost anyone can lay the seeds for dynastic wealth in his or her own generation. 

There is an old adage of "From shirt sleeves to shirt sleeves in three generations," implying that many a family struggles, builds a some wealth, and it is subsequently lost by the third generation. There is a flip side to that coin though, dynastic wealth creation that is lasting. Strive for the latter.