Becoming a millionaire is something that's feasible even if you only earn an average income. Becoming a billionaire, however, is a lot less likely.
But just because you may not be or become a billionaire doesn't mean you can't learn from those who are extraordinarily wealthy. And while you may not be able to take the exact same approach to building wealth, there are certain lessons you can learn from billionaires.
The difference between you and billionaires
On a basic level, you might share some of the same traits as people with billions of dollars to their name. Take Warren Buffett, for example. The famed investor and billionaire still lives in the same modest house he purchased decades ago. You might take a similar approach to your finances by opting to keep your housing costs low to free up money for investing, retirement savings, and other things.
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But here are a couple of key differences worth noting between everyday investors and billionaires:
1. Billionaires can take on more risk
If you were to lose $50,000 overnight by taking on a risky investment, it could have devastating consequences. If a billionaire were to lose $50,000 on a whim, it would likely be a non-event. It's this distinction that forces everyday investors to take a more conservative approach to investing -- even if that means potentially missing out on big money-making opportunities.
2. Billionaires can access investments you can't
Some investments have a minimum buy-in that may be out of reach for you financially. Say there's a private investment opportunity that hits your radar with a $100,000 minimum. That's a sum you may not be able to swing, whereas a billionaire would likely manage to write out that check without having to think twice.
Now to be clear, it's more than possible to grow a lot of wealth simply by investing in broad market index funds, which track indexes like the S&P 500 and are available to anyone. But while index funds may deliver solid returns, they're not designed to help you beat the market, whereas the options wealthy investors are privy to may generate much higher returns.
But there's one thing you and billionaires have in common
Billionaires may have certain advantages when it comes to growing wealth. But there's one thing you might both have working for you -- time.
If your goal is to accrue a lot of wealth in your lifetime, time is perhaps the most effective tool you have at your disposal. As an example, say you're able to contribute $50,000 to an investment account that generates an average annual 8% return. Leave that money alone for 30 years, and it'll grow into $503,000.
But watch what happens when you give that money 40 years to grow. In that case, you're looking at close to $1.1 million.
That's why it pays to start saving and investing for the future at as young an age as possible. Doing so may not turn you into a billionaire. But it could make you pretty darn wealthy in your own right.
