Reasons why people are not wealthy

1. Lack of discipline

To be wealthy, you need the discipline to save and invest. If you contribute every month to your 401(k) or your discretionary brokerage account and invest in stocks, mutual funds or ETFs, over time you will build wealth.

2. Inability to delay gratification

Buying a luxury car that you can barely afford provides instant gratification. But real wealth is built by putting off such pleasures and saving for the future so that you can easily afford to buy such things. A dollar saved today can be worth several dollars in the future.

3. Lack of education

It takes money to make more money. People with advanced degrees make more money. This in turn allows them to save and invest more and reach financial freedom early.

4. You play the status game

You buy luxury cars and the latest gadgets to keep up with your friends, colleagues, and neighbors. It feels good to stay in the circle with your peers. If you play the status game, you will never win the wealth game.

5. You don’t understand compound interest

Compound interest is the secret to getting wealthy. Time in the market matters. The longer you invest, the more wealth you can build. People who don’t understand compound interest wait until later in life to invest, which reduces their chances of reaching financial freedom.

6. Lack of basic knowledge about investing

You need basic knowledge about stocks, bonds, ETFs, and mutual funds. You don’t have to be Warren Buffett to be a good investor but you need to know enough to play the investing game. You can learn by reading books but will learn faster by doing. Start a brokerage account, invest small amounts to learn faster.

7. Analysis paralysis

Even the best traders only make money on 50% of the trades. There is no point in overthinking your trades. For most folks, ETFs and mutual funds are the way to go. This means fewer decisions to make and you will at least make market returns.

8. Procrastination

When it comes to saving and investing, people put things off. Whether it’s starting a new brokerage account or contributing to an existing account, take action.

9. Fear of losing money

The stock market is volatile. Your portfolio goes up and down with the market. Making money involves sitting tight when the market moves against you. To be a good investor, you need to overcome the fear of losing money.

10. Lack of a growth mindset

Some people believe that the world is stacked against them and that they can’t make money. You need to have a growth mindset to build wealth.  Millionaires think positively and follow through on their ideas.

11. Unrealistic expectations

Investors are impatient and want to compound their money quickly. But building wealth is slow and takes time. Stock market on average only returns 10% (with a lot of ups and downs)

12. Pay too much in taxes

Find ways to minimize your taxes. Investing in your 401(k) or investing in real estate are legitimate ways to reduce your taxes. Invest the tax savings to grow your wealth.

13. Not having mentors

Hanging out with people with similar goals greatly increases your chances of becoming wealthy. Having a mentor who has done it before helps your wealth-building journey immensely. When investing, you will inevitably run into a rough period at some point. Having a mentor will keep you on track and increase your odds of success.

The episodes are crash courses on the topics and explain complex topics in an easy-to-understand way. Each podcast is about 25 to 35 minutes.

NPR’s Planet Money Summer School Podcasts

Who is the podcast for?

Teens and people getting started with investing will benefit the most from these podcasts. If you have been investing for 20 years, the podcasts may be a good refresher but you will be easily bored because they cover only the fundamentals.

Planet Money Summer School Season 2: Investing (2021 season)

• Planet Money Summer School 1: The Stock Market
• Planet Money Summer School 2: Index Funds & The Bet
• Planet Money Summer School 3: Smooth Spending & The 401K
• Planet Money Summer School 4: Bonds & Becky With The Good Yield
• Planet Money Summer School 5: Bubbles, Bikes, & Biases

Planet Money Summer School Season 1: Microeconomics (2020 season)

• SUMMER SCHOOL 1: Choices & Dating
• SUMMER SCHOOL 2: Markets & Pickles
• SUMMER SCHOOL 3: Profit & Cocaine
• SUMMER SCHOOL 4: Scarcity & Pistachios
• SUMMER SCHOOL 5: Trade & Santa
• SUMMER SCHOOL 6: Taxes & Donald Duck
• SUMMER SCHOOL 7: Advertising & Race
• SUMMER SCHOOL 8: Risk & Disaster

Where can you listen?

You can listen to these podcasts directly on the NPR Planet Money Summer School website. You can also listen to it on Sticher, Apple Podcasts, Overcast, and many other apps. Many of these apps allow you to listen at 1.25 to 2 times the speed saving you time.

Bottom Line

NPR’s Planet Money Summer School podcasts are a great way for teens and new investors to learn about investing and economics. You can get through most episodes in about 20 minutes if you listen at 1.25 to 1.5 times the speed.

The cheapest subscription available is the Motley Fool Rule Breaker for $99 + tax. With a $99 statement credit from Amex, you will just be paying taxes to get a year’s worth of subscription. Motel Fool Rule Breaker covers growth companies that are poised to be tomorrow’s stock market leaders. There are other subscriptions available that are more than $99. Whichever subscription you choose, Amex will only give you a statement credit for $99.

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Not every stock in your portfolio is going to be a multibagger, especially if your holding period for stocks is short.  But multibagger stocks can make a big difference to your portfolio.

What to look for in multibagger stocks

A Wide Moat

Moat refers to the sustainable competitive advantage the company has in the marketplace. A wide moat allows the company to grow or maintain market share without its competitors eating away its profit margins.

Market size

The company should be in a market that has the potential to be huge in the future, even if it is not big today.

Capex needs are low

Capital intensive industries are oil and gas, mining, etc. These companies need a lot of capital to expand their business. On the other hand, a company like Facebook spends relatively a small portion of their cash flow in capex. Companies that have lower capex needs can grow their operating margin as the business grows.

Best industries to find multibaggers

SaaS

Instead of installing software on their PC, SaaS users subscribe to the software, which runs in the cloud. This business model allows SaaS companies to generate monthly revenue rather than one-time revenue by selling the software.  SaaS companies tend to have high margins and customers usually stick around, which improves profitability long term.

Technology

Technology companies introduce new technologies that disrupt entire industries. As such, technology stocks are good places to find multibaggers.

Healthcare/Biotech

Healthcare is an industry that is known for innovation. New drugs and treatments are released every year. In many cases, companies get patents that give them a monopoly over the market for a period of time.

Social Media

Social media platforms such as Facebook, Twitter, and Linked in have changed how people interact with others in their personal and professional lives. These platforms have billions of users, which the companies can monetize and grow.

Managing Multibaggers

Buy and Hold

To have multibaggers in your portfolio, it is key to hold the stocks for a long time. Time in the market matters. You can’t trade in and out of them to make big gains. Buy the right companies and sell them rarely. Buy and hold will also allow you to keep your taxes low compared to trading these stocks.

Drawdowns

No stock goes up 10 times in a straight line. These stocks encounter drawdowns – sometimes 50% or more. Multibaggers such as Apple and Amazon have had several 50% drawdowns. During these drawdowns, it felt like these companies have big challenges ahead and their path ahead is difficult. But you need conviction to stay with them and not sell these stocks during these drawdowns.

Bottom Line

Multibaggers are stocks that return more than 100% of your investment. A few multibaggers can make a huge difference to your portfolio. Multibaggers have a competitive advantage in their space and can grow over time while keeping their margins intact.  Holding these stocks long term is key to getting big gains.