Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
I 100% agree with this statement; I only wish I would have paid more attention to it when I was 20. I wish someone would have taught me to pay attention to it…or crammed it down my throat until I figured it out. Unfortunately, this stuff isn’t taught in schools, so somebody needs to step up and teach our youth about this very powerful and simple tool to build wealth.
Since I didn’t pay any attention to this until I was in my 30’s I’m a decade behind the power curve. But…there’s still hope…
The solution: Arbitrage – The 9th Wonder of the World
Why is it the 9th Wonder of the World? Because it helps those who didn’t pay attention to the 8th Wonder of the World catch up.
Here’s the official definition from Investopedia: “Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.”
Now many think this term is specifically used for buying and selling stocks on different trading platforms simultaneously (i.e. buying a stock on the NY stock exchange, then selling it on the Chinese stock exchange), but there are so many other ways arbitrage works and can help you exponentially grow your wealth. Let’s look at how you build wealth using arbitrage in the lending world and in the real estate investing world.
1) How do banks make money?
Answer: ARBITRAGE
Watch this video: How Banks Make Money
2) How do multi-millionaire real estate investors make their millions?
Answer: ARBITRAGE
Watch this video: Using Arbitrage in Real Estate
Then watch lessons 7, 8, and 9.
Is your mind spinning yet? Mine sure was. Did a light bulb go off? Making 700% ROI using other people’s money would be nice…right?
So…if you were like me and didn’t pay attention to the 8th Wonder of the World…take action now and use arbitrage to catch up. Oh…and teach your children about compounding interest, because it is a no-brainer and you will set them up for life.
Written by Stuart Grazier
Great topic, really puts Dave Ramsey’s investment advise to shame, although I do understand the demographic he appeals to.
Agree. I think Dave Ramsey’s advice is great for those that don’t have good financial habits and have a lot of “Bad Debt”. Getting on a budget and knowing where your money is going is incredibly important. However, as you alluded to, buying houses with cash isn’t the best investment decision. Arbitrage is definitely how you grow your wealth and increase the ROI!