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1. Money is a people game

Cardone revealed that the biggest lesson he would teach his kids is that “money’s a people game.” This sentiment echoes the adage that “your network is your net worth.”

In 2022, a study published in Nature analyzed data from 21 billion friendships on Facebook and determined that people who grew up in lower-income households, but had opportunities to connect with people from higher income brackets, could end up generating roughly 20% more income compared to those who didn’t meet people from different economic backgrounds.

Put simply, meeting people and expanding your social circle — including those who are wealthier and more successful than you — can lead to more opportunities and, potentially, better financial outcomes.

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2. Don’t lose money

Cardone’s second money lesson is, “once you get it, don’t lose it.” Preserving the money you’ve accumulated is perhaps as crucial as earning it in the first place.

This lesson echoes a famous quote from investing legend Warren Buffett: “The first rule of an investment is don't lose [money]. And the second rule of an investment is don't forget the first rule. And that’s all the rules there are.”

Losing money while investing is difficult to recover from. For instance, if you lose 20% on a $1,000 investment, you’ll need a 25% gain in order to get back to $1,000.

Meanwhile, any dollars you lose investing reduces your ability to take advantage of opportunities that come along. Losing $200 on a bad investment is $200 less that could have been better spent growing elsewhere.

3. Invest with risk in mind

“If you get 7% or 8% on your money every year, you’ll be so rich when you need it,” Cardone said. “If you don’t lose it.”

Investors need to balance risk and reward; however, they’re often susceptible to chasing rewards while exposing themselves to too much risk.

Another study published in Nature revealed that the probability of an investor’s bankruptcy increases with the frequency of their leveraged trades.

Unfortunately, investors have accumulated more than $809.431 billion in margin debt to trade stocks as of May 2024, according to FINRA.

Investors also tend to seek out other relatively risky investments, such as leveraged exchange traded funds and cryptocurrencies. Yet, a (rather vanilla) low-risk index fund has proven to deliver substantial returns.

Vanguard S&P 500 index fund has delivered a compounded annual growth rate of 15% over the past five years with far less volatility than cryptocurrencies or individual stocks.

Investors, especially beginners, should consider the benefits of a boring, yet low-risk, investment strategy. In fact, this is something Warren Buffett also encourages.

The Oracle of Omaha swears by low-cost index funds, such as an S&P 500 index fund. It’s a relatively simple passive income strategy: one simply has to purchase the fund — and then hold onto it.

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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