A 'Rich Man' Investment to Consider Right Now

How to get rich... A piece of 'Rich Man, Poor Man'... Start early, win in the long run... Is compounding dead?... Take a look at Crypto 2.0... A 'rich man' investment to consider right now...

Rich man, poor man...

The words might make some folks feel bad and others good... But either way, they're as true today as when the late Richard Russell wrote them decades ago in his Dow Theory Letters newsletter.

For the uninitiated, Russell was considered the dean of financial-newsletter writers for about four decades. He was prolific. He wrote every day. And he had remarkable, often contrarian insight about the markets.

Russell notably started recommending gold in the 1960s... called the bottom of the great bear market of 1972 to 1974 almost to the day... and said a bull market was finished two months before the 1987 stock market crash.

But in his most iconic essay "Rich Man, Poor Man," Russell said that while predicting the direction of the stock or bond markets can certainly help you make money, truly wealthy investors know about a few more important fundamental secrets to getting rich...

Specifically, he talked about why it's so important to make money on the money you have already... how best to do it... and why this idea makes the difference between being a "little guy" and a "rich man." As Russell wrote...

Because the little guy is trying to force the market to do something for him, he's a guaranteed loser.

The little guy doesn't understand values so he constantly overpays. He doesn't comprehend the power of compounding, and he doesn't understand money.

He's never heard the adage, "He who understands interest – earns it. He who doesn't understand interest – pays it." The little guy is the typical American, and he's deeply in debt.

The little guy is in hock up to his ears. As a result, he's always sweating – sweating to make payments on his house, his refrigerator, his car, or his lawn mower. He's impatient, and he feels perpetually put upon. He tells himself that he has to make money – fast.

And he dreams of those "big, juicy mega-bucks." In the end, the little guy wastes his money in the market, or he loses his money gambling, or he dribbles it away on senseless schemes. In short, this "money-nerd" spends his life dashing up the financial down-escalator.

But here's the ironic part of it. If, from the beginning, the little guy had adopted a strict policy of never spending more than he made, if he had taken his extra savings and compounded it in intelligent, income-producing securities, then in due time he'd have money coming in daily, weekly, monthly, just like the rich man. The little guy would have become a financial winner, instead of a pathetic loser.

First of all, if you've never read Russell's classic essay in full, please do it now.

Yes, I'm urging you to click off this e-mail or webpage and go read it right now. We don't mind at all. It's that good. But then, please come back...

Because in today's Digest, we're sharing a piece of little-known, new information that can be used to be more like the "rich guy" in Russell's essay... and less like the pathetic loser.

In short, Russell's famous essay is really about the 'power of compounding'...

The concept of "compound interest" – making a percentage on your capital, then making another percentage on your larger amount of capital, including the interest – is old hat to longtime Stansberry Research subscribers and experienced investors.

But we know we have a lot of new Digest readers with us, too. And Russell's essay is always worth a read for anyone who wants to understand (or could use a refresher) on the fundamentals of becoming rich.

Way back in 2009, our founder Porter Stansberry cited Russell's essay in our flagship Stansberry's Investment Advisory newsletter...

To explain the power of compound interest, Russell notes that if a 19-year-old put $2,000 each year into his IRA for seven years in a row and then never contributed another penny to his retirement, he'd have $1 million by the age of 65, assuming he earned 10% a year on his account on average.

If another investor started saving for retirement at 26 – the same age the first investor stopped contributing – and he put $2,000 into his IRA every single year until he was 65, he still wouldn't catch up to the first guy.

At age 65, the young man who started (and finished) investing earlier had more than $930,000 on a $14,000 investment. The other had about $894,000 on $80,000 invested.

I didn't believe this math the first time I read it either, but it's true.

Incredibly, the first "rich man" amassed a larger fortune than the second "poor man" – once you subtracted the initial investment... despite the fact that the second young man invested nearly six times as much money over a much longer period of time.

It's why we muttered to ourselves after reading Russell's essay for the first time years ago... "Compounding is the key to life."

Even if we update the math to account for a more reasonable return of 5% a year, the first young man would only have to contribute each year until he's 32 to still come out on top of the second investor.

No matter how you slice it, the lesson is clear: Start early, win in the long run...

The sooner you invest in stocks that will pay you back and give you more shares, the more that money can work for you during the rest of your investing life...

At this point, we know a lot of folks may be thinking, "It's too late for me. I don't have enough time to compound my wealth." True, you can't go back in time and force your younger self to invest.

But there's no time like the present. That's the only place to start, after all. As Porter said in the Investment Advisory over a decade ago...

What it really means is that you have to start now. You have to learn to be a saver. You have to make sure your money is earning interest all the time.

Most of all, Porter said, you must realize if you're borrowing money for a house, a car, or anything else (unless, on balance, you're making more in interest in investments than you are paying in interest on the loans), you will never, ever be rich.

Today, with interest rates near zero and negative 'real' yields almost everywhere in the world...

You may think the idea of meaningful interest is dead... And in a lot of cases, you'd be right.

In other words, folks today have fewer traditional ways to generate the kind of interest that can outpace debt payments... or higher inflation in the years ahead.

But while decent yield might be harder to find, the idea is still alive and desired – in old and new places...

As we've said, there's no surer way to get rich in stocks than owning shares of high-quality companies over the long term... Porter says that. Russell did, too.

And lately, in just one other example, Retirement Millionaire and Income Intelligence editor Dr. David "Doc" Eifrig has been recommending under-the-radar income-producing stocks that will keep growing your nest egg ahead of inflation.

In Income Intelligence specifically, Doc's goal is to show you how to safely earn above-average income... no matter what the market is doing. And his portfolio consistently beats a basket of conventional income investments.

But these aren't the "rich man" investments we want to bring to your attention today.

If you look closely in other places, you'll find a relatively little-known, largely untapped area to generate the type of interest that many investors came to expect and enjoy before the era of rock-bottom rates.

These rates blow away any yield that you'll find pretty much anywhere else. And you might be surprised to hear that it's happening in the cryptocurrency world.

Our cryptocurrency experts call this idea 'Crypto 2.0'...

As Crypto Capital editor Eric Wade and analyst Fred Marion wrote to subscribers in their June issue...

You see, cryptos have always been a speculative investment. With their volatility, you could make life-changing gains – or suffer big losses.

For example, bitcoin rose from $5,800 to more than $18,000 in just three weeks in late November into early December 2017. It went on to peak near $20,000 before falling back down to $6,000.

Just recently, we've again seen incredible volatility in bitcoin. It's down from above $12,000 to near $10,000 today... after trading for less than $6,000 during March's sell-off. But as Eric noted, the crypto space involves much more than just the price of bitcoin...

Cryptos have steadily been moving away from pure speculation. Now, many of them are income-producing assets. Bitcoin, stablecoins, and many other cryptos can create cash flows for you.

It's a concept as old as successful investing itself, and a "rich man" idea applied to a new era. And it's a compelling part of the battle for "the soul of money" – as Eric puts it... By that, he's referring to the battle between manipulative central bank policy (with little to no yields) and decentralized technology (with more generous yields, and yes, more risk).

As he wrote in the June issue of Crypto Capital, you can use these yield-generating ideas to grow your crypto holdings no matter what the market does on a day-to-day basis.

Now, a lot of people get the 'scarcity' argument about bitcoin...

There will only be a certain number of bitcoins (21 million) ever mined.

So in a world where the value of the U.S. dollar has declined 95% over the last several decades and the Fed creates money from nothing (with more stimulus possibly on the way soon), we can see the appetite and use for a currency whose entire framework and code is designed to protect against inflation.

Now, add the ability to generate interest – earning more of that scarce asset – into the equation by doing a couple of simple, specific actions and paperless keystrokes... and we're left with what sounds like a compounding story for the next century.

It's called "DeFi," or decentralized finance.

Eric says investors can earn interest on their cryptocurrency holdings in a few big ways...

The simplest way is to simply lend it out.

In the early days of crypto, that meant connecting directly with a borrower and agreeing on a loan term and rate. Today, several platforms make it simpler.

You can deposit your crypto and instantly earn yield, up to 6% in some cases, without having to find or interact with borrowers. And, as Eric says, demand is growing for this concept right now...

First, users may want to tap their crypto equity without selling it. That's because when you sell your crypto, you're taxed on the capital gains – just like with a stock.

For example, you could borrow some money against your bitcoin holdings and pay back the loan without selling your bitcoin. You've tapped the "value" of your bitcoin without spending or selling it (and without generating a tax bill on your capital gains).

Second, a borrower might need a specific token for a short period of time. For example, a user could borrow tokens that they need for an online game, or they might want to hold a token to participate in a governance vote.

Finally, borrowing platforms offer a way to leverage trades. Folks who own Ethereum (ETH) can borrow against their holdings to buy tokens in another project without selling their ETH tokens, for example. Or they can borrow a token they want to bet against, then sell that token with the hopes of buying it back cheaper in the future. This is a popular strategy for hedging and short selling.

The second way to make income with cryptos is through something called "staking."

We won't get into all the details here, but it's kind of like renting out your house on Airbnb. You still own the house, but you're giving up control over it for a short period of time in exchange for a financial reward.

The third way is by owning and lending "stablecoins," like the collateral-backed DAI or USD Coin ("USDC"), which were created to mirror the value of the U.S. dollar. They are less volatile than bitcoin, hence the name.

You can convert U.S. dollars to stablecoins directly on platforms like Crypto.com and begin earning double-digit yields on them without getting exposure to more volatile cryptos.

Check out the rates in the following table, which Eric first shared in the June issue of Crypto Capital and re-shared last month in Dr. Steve Sjuggerud's free DailyWealth newsletter. They're the maximum yields you can expect to earn on various platforms like Crypto.com, Compound, and Aave, for a handful of stablecoins...

In a yield-starved world, we know these numbers look almost eye-popping now.

But please... don't put your entire nest egg into stablecoins – or any other crypto investment for that matter. We do not recommend that. We simply want you to be aware of these investments today... and consider allocating a portion of your wealth if you're interested.

Eric will be the first to tell you that investing in the still-maturing crypto market comes with risk... But he'll also walk you, step by step, through a process that's new for most folks. We don't recommend you go at this alone.

But at the same time, this is an exciting space to learn about and take advantage of. The broader investing world "hasn't recognized this amazing opportunity yet," Eric says...

But with shrinking yields in virtually every other major asset class, they will. Until then, stablecoins are a compelling way to grow your wealth. Take advantage of it while you can.

For example, if you hold 1 BTC today and you earn a compounding 8.2% on it over the next four years, you would have nearly 1.4 BTC. If bitcoin surges to, say, $100,000 over the next four years, your holdings would be worth $140,000 instead of the $100,000 they would have been worth otherwise.

That's a "Rich Man" idea for a new, zero-rate era... perhaps even for the next century.

For more details, check out Eric and Porter's "Capitalism In Crisis" presentation if you haven't already. You can hear them talk about this concept and much more.

We can't think of a better time to sit down and watch than right now...

Just two Fridays ago, in their weekly update, Eric and Fred revealed a brand-new way to take advantage of the Crypto 2.0 movement, and shared it with subscribers in their latest monthly issue. Existing Crypto Capital subscribers can find that research right here.

Why You Need to Invest Overseas

International editor Kim Iskyan makes the case for why Americans need to invest overseas today more than ever before.

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and follow us on Facebook, Instagram, and Twitter.

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In today's mailbag, a note about yesterday's Digest. Let us know what's on your mind... E-mail us at feedback@stansberryresearch.com.

"Most informative piece I've read in a long time. Didn't smack me in the head at first but after the read, it sinks in. I have a much clearer understanding of the what's and why's in markets." – Paid-up subscriber Karl T.

All the best,

Corey McLaughlin
Baltimore, Maryland
September 9, 2020