13 June 2024
1300 794 893

Our billionaires show us how to get rich.

Peter Switzer
31 May 2024

The AFR’s annual show and tell of our rich listers is always fascinating and for my spot on 2GB’s breakfast show this morning, Ben Fordham wanted me to explain why Gina Rinehart had done so well. And in doing so, I decided reveal the pretty simple method all of our billionaires have used to get rich, and it gives clues to how all of us can get richer.

In my book Join The Rich Club, I focussed on how normal people can get richer using what the legends of wealth-building have taught us. And that’s because the same processes that underpin how Gina got very rich with assets worth of around $40.6 billion, can work on a smaller scale for those not born into wealth and courageous enough to start or grow a business.

I will sum it up in a nutshell after I look at Gina and the top 10 billionaires of Australia right now. Thanks to the AFR, I will show who’s got what and link it to their different yet similar starting points for their money collection ‘magnificence’, to put it a little too glowingly.

From top to bottom the names of these businesses are different. They are in different industries from mining with the likes of Hancock Prospecting to Fortescue, to construction with Meriton, to the packaging of Amcor and to the tech businesses of Atlassian and Canva.

But the common starting point for these billionaire wealth-builders is that they have businesses and that’s what the history of legends of income have taught us. That said, there is an even deeper lesson you can use to get richer, even if you don’t want to risk owning a business, employing people, dealing with government red tape and banks, as well as the many curve balls that competition throws at you.

You see someone like Gina has focussed on collecting assets that grow in value and that deliver income. Sure, she was given a great starting point from her father, Lang Hangcock, but she has wiped him under the table when it has come to building and growing a big business.

He was good, but whether you are a Gina fan or not, when it comes to business and wealth-building, she is great! By the way, she is in the top 10 richest women in the world coming in at number 8 behind the owners of L’Oreal, Walmart, Mars, global shipping lines and US casinos.

Once again worldwide, you see that businesses are the source of billionaires’ wealth and the collection of great assets that grow in value and deliver income. By the way, many successful businessowners often ply their wealth into quality property. Atlassian’s Mike Cannon-Brookes and his ex-wife Annie have become property collectors on a grand scale with news.com.au valuing their haul at $300 million in July of last year!

But how come Gina has done so well in recent years, apart from her astute business decisions? Well, she has benefitted from something that even the nation’s latest run of Treasurers have benefitted from — the price of iron ore!

US$                Iron Ore Price

This has not only helped our governments create bigger than expected budget surpluses, but has assisted in delivering the recent tax cuts, while also making Gina richer.

The chart above shows how the iron ore price has been huge ever since China became a superpower and a big user of iron ore in the 2000’s. Meantime, the chart below shows recent prices have been over $200 a ton.

And over that time our governments have been creating budgets guessing the price of iron ore would be $54 or $60, but because the iron ore price has been much higher, Treasury tax collections and Gina’s profits and wealth have been a lot higher too!

She also would pay a lot of tax and so some of our tax cuts could have indirectly come from Gina!

So, what’s the lesson for normal people? It’s simple,

buy great assets like quality stocks when the market wants to smash them. Remember, when you buy a stock, you are a co-owner of a business and if that business delivers profits, capital gain and income, you are, in effect, a mini-Gina!

Back in 2020, when the Coronavirus came to town, the CBA stock fell to $58. It is now more than double that in value at $117. If you bought that stock then, you’ve had capital gain of over 100% and your dividend is around 8% a year, before franking credits makes it even more!

Okay, Gina has done better than the CBA shareholder, but the process of buying quality assets and pocketing the capital gain, as well as the income, is something all of us can learn and earn from.

And if you learn another lesson from the likes of Gina, who recently has been buying into lithium stocks, it’s good to be diversified. Owing say 10 or 20 great companies reduces the risks of one company going rogue and losing the plot.

Those who owned only AMP over the last 25 years will agree with me, as the chart below shows.

AMP

Buying a diversified group of quality businesses or stocks, especially when the stock market is crazy, scared is a great way to get richer, but like businessowners such as Gina, you do have to be prepared to take a bit of risk, albeit on good assets.

 

PS: If you want a signed copy of my book, email us at [email protected]. I will discount the cost of the book down to $22 but we will pay for the postage.

Comments
Get the latest financial, business, and political expert commentary delivered to your inbox.

When you sign up, we will never give away or sell or barter or trade your email address.

And you can unsubscribe at any time!
Subscribe
1300 794 893
© 2006-2021 Switzer. All Rights Reserved. Australian Financial Services Licence Number 286531. 
shopping-cartphoneenvelopedollargraduation-cap linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram