Five Levels of Financial Advice #4: Private Banking
When you borrow money to spend, you create debt.
When you borrow to invest, you capitalize on leverage.
Archimedes said, "Give me a lever and a place to stand and I will move the earth."
Typical wealth management focuses on protecting and growing assets you own.
Private banking introduces the strategy of financing, or borrowing to invest in order to make a profit.
This strategy involves risk.
In the words of Warren Buffett, risk comes from not knowing what you're doing.
When it came time to expand my father's business, he refinanced his home to raise capital.
Definitely risky, but it was in a business he understood and he had a plan and the plan eventually paid off.
Leverage is not for everyone.
But for those who understand it, private banking is a powerful tool.
