Chapter 1: The Illusion of Passive Investing

The year 2022 could serve as a pivotal moment in your financial journey. Many individuals set resolutions at the year's start, only to abandon them within a few months, often postponing their goals until the next year rolls around.

One prevalent piece of advice in the finance realm is to save 10% of your income, invest it in passive funds monthly, and patiently wait for four decades to see your wealth grow to over $1 million. Sounds like a solid plan, right? But who can actually wait 40 years for that payoff? If you’re 20, you’d be 60 by the time you reap the benefits. At 30, you’d be 70, and if you’re 50, your grandchildren might be the ones to inherit those funds.

The financial advisors promoting this strategy often flaunt their lavish lifestyles, showcasing luxury cars and beachfront properties. It’s important to recognize that such riches typically came before wealth was attained, and for many, their true income stems from selling courses rather than from investing in a retirement plan.

So, how do individuals achieve early and significant wealth without relying on passive funds? The answer is surprisingly simple: leverage. Unless you’re born into wealth, making a steady 10% return won’t suffice for financial independence.

To amass wealth, you need to strategically manage and leverage the elements of your financial plan. Lacking control over your finances often leads to a mere hope-based strategy, filled with uncertainty:

• "I hope I don’t get laid off!"
• "I hope my stocks recover!"
• "I hope I get that promotion!"

As Robert Kiyosaki aptly put it, "Leverage is the reason some people become rich and others do not." However, it’s crucial to heed Warren Buffett’s advice: leverage resembles driving a car at high speeds. It may feel perfect until a single misstep leads to disaster.

Today, we have the opportunity to leverage with minimal risk, particularly through financial derivatives. Crafting a portfolio that balances a few high-risk assets with numerous low-risk investments can significantly increase your chances of success.

Imagine adhering to the traditional advice of investing all your savings in passive funds, only to face a market downturn like in 2008 when half of your savings could evaporate in mere months. How would you cope with such a loss?

Conversely, if you allocate only 20-30% of your portfolio to risky assets, as we do, you might see a staggering 1,000% return in a volatile year, allowing you to invest in passive funds at reduced prices.

Currently, the market is highly inflated, with unprecedented price-to-earnings ratios and other concerning indicators. Additionally, interest rates are projected to increase three times this year and again three times in 2023. Historical data suggests that rising interest rates can have disastrous consequences for inflated valuations.

It’s essential to follow those who have genuinely built their wealth through practical examples, rather than empty promises. We transparently share our portfolio strategies every week, demonstrating our commitment to informed investing.

While we cannot predict exactly when the next market downturn will occur—be it in one year or ten—we are confident that we will emerge stronger. This approach is undoubtedly more appealing than waiting four decades for uncertain outcomes.

This article serves only as a resource and should not be construed as financial or legal guidance. Always consult with a financial expert before making significant financial decisions.

Chapter 2: The Value of Strategic Leverage

Section 2.1: Understanding Financial Derivatives

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Subsection 2.1.1: Managing Risk in Your Portfolio