Since agreeing to start this web site on getting wealthy by investing for income I’ve been thinking about how I – and the wealthy people I know – made their money. I’ve come up with four ways:

· Saving more
· Increasing your acumen
· Investing in real estate
· Creating a second stream of income

Of the four, creating a second income stream will have the greatest long-term affect on your wealth. Not only will it give you extra money to save, and to invest in real estate, but, it will also give you the best chance of making the serious bucks – the million dollar plus years.

A part-time, second income business will also give you a very good chance of becoming a full-time entrepreneur – and that can mean a better, richer,
more independent and generally happier life for you.

I’m writing to you today about a good way to get started. It’s a simple business that anyone can do. And it’s a business that is likely to boom in the years ahead – because of all the layoffs that are taking place and the aging of the baby boomers.

 

All you need to work at this business is a home computer connected to the Internet and a margin account with a discount brokerage like TD Waterhouse. You will also need the discipline to read quarterly and annual reports. This is not as difficult as you think. You can start with as little money as you wish but I recommend starting with about $2,000 (all prices quoted in Canadian Dollars).

 

The first investment you should make if you are a beginner is to purchase 1,000 units of Enervest Diversified Income Fund. It trades on the TSX with the symbol EIT.UN.

With $2,000 invested and the rest covered by a margin loan from you broker. Now all you do is sit back and watch the cash flow into your account month after month. You will be so amazed how easy it is that every cent you can save and scrounge up you dump into your account. With a combination of distributions and savings you keep buying more units. The more money you start off with the better of you will be. This is the compounding way to creating a second stream of income. This is not a get-rich-quick scheme. This is the slow road. To put more icing on the cake, the interest expense on the margin loan will almost offset the taxable portion of the distribution. Therefore your money almost compounds tax-free. For best results I recommend you do this outside of your RRSP or IRA so you can get the full benefit of the tax efficiency and because you cannot have margin loans within RRSP or IRA accounts.

Compounding is the royal road to riches. Compounding is the safe road, the sure road, and fortunately, anybody can do it. To compound successfully you need the following:  perseverance in order to keep you firmly on the savings path. You need intelligence in order to understand what you are doing and why. And you need knowledge of the mathematics tables in order to comprehend the amazing rewards that will come to you if you faithfully follow the compounding road. And, of course, you need time, time to allow the power of compounding to work for you. Remember, compounding only works through time.

But there are two catches in the compounding process. The first is obvious — compounding may involve sacrifice (you can’t spend it and still save it). Second, compounding is boring. Or I should say it’s boring until (after seven or eight years) the money starts to pour in. Then, believe me, compounding becomes very interesting. In fact, it becomes downright fascinating.

This excerpt is the key to riches and wealth using companies with monthly distributions. These companies pay dividends every month, month after month. If you reinvest these dividends then voila…..compounding!

Its so simple that you will wonder why you never though of this before!  If you re-invest the dividends  then the magical effect of compounding will kick in. After a few years you will notice that your passive income level is beginning to reach significant levels. Conventional stocks say buy me now and maybe in the future I will give you back more money then you started.

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