Never Selling: The Secret Weapon of Rich People

Getting rich and staying rich requires a different mindset than most people have. 

The average person looks at assets as things to be bought, sold, and traded frequently. 

They may sell an investment property when the market is hot to cash out a profit. 

Or they may sell stock when the price jumps to lock in gains. 

This mindset makes sense for the average investor.

But the super wealthy don't think this way. 

They accumulate assets but rarely sell them, even when offered massive profits. 

Their mindset is to buy and hold forever. 

This strategy allows the rich to build enormous wealth over time without paying huge tax bills. 

Let's explore why the wealthy never sell and how you can adopt this strategy.

The Power of Appreciating Assets

The rich focus on buying assets that will appreciate significantly over long periods of time. 

They favor real estate, stocks, businesses, royalties, licenses and other investments they believe will go up in value. 

By holding appreciating assets indefinitely, they allow time and compound growth to work their money magic.

Consider a simple example. 

You buy a $500,000 rental property that appreciates an average of 5% per year. 

In 20 years, it will be worth over $1.3 million. 

By never selling, you allowed time and compounding to more than double your net worth. 

The rich use this powerful concept by holding assets forever and letting them appreciate to build enormous wealth over time.

Avoiding Capital Gains Taxes

One of the biggest reasons the wealthy never sell assets is to avoid capital gains taxes. 

The United States has one of the highest capital gains tax rates in the world. 

Federal long-term capital gains tax rates are either 15% or 20% depending on your income. 

In addition, most states tack on another 5% to 10% in state capital gains taxes.

By never selling, the rich can avoid paying these taxes and compound more of their returns over time. 

If you sold the rental property in the example above, you may pay over $260,000 in capital gains taxes. 

That's a huge loss compared to holding and letting the property value compound tax-free for decades. 

The rich would rather borrow against assets than sell them and incur large tax bills.

Benefits of Borrowing Over Selling

Instead of selling assets and paying capital gains taxes, the wealthy often borrow against their assets. 

For example, they may take out a mortgage on a paid off rental property or get a securities-backed line of credit using stock as collateral.

The benefits of borrowing against assets rather than selling them include:

• Keeping assets invested and appreciating
• No capital gains taxes triggered
• Interest rates on loans are low right now
• Interest payments may be tax deductible

This strategy allows the rich to access cash without selling assets. 

They can use the loan proceeds for spending or to reinvest and diversify into other appreciating assets. 

As long as the return on assets exceeds loan interest, this strategy enhances wealth.

The Snowball Effect

By never selling assets, the rich put in place a snowball effect. 

The longer assets are held, the more they appreciate. 

In addition, assets produce cash flow via dividends, rents, royalties etc. 

This income can be invested into buying more assets which then also appreciate and produce more income.

Over decades, this snowball effect leads to exponential growth. 

Even if you start with modest assets, buying and holding for long periods can compound your wealth. 

The wealthy take full advantage of this to get richer over time.

Taking Advantage of Churning Assets

While the rich don't sell their bedrock portfolio of long-term assets, they do take advantage of churning other shorter-term holdings. 

For example, they may buy distressed real estate properties, renovate them, and then sell within 12 months. 

Or they may invest in certain stocks aiming to sell when prices spike. 

Churning these types of shorter-term assets allows them to realize gains more frequently.

However, the wealthy reinvest these gains back into assets they never intend to sell. 

This allows them to build their portfolios of long-term, buy and hold assets. 

They see churning assets as a way to increase their holdings of long-term assets rather than as a way to fund lavish lifestyles.

Adopting the "Never Sell" Mindset

While getting rich quick is tempting, lasting wealth is built through patience, discipline and an abundance mindset. 

To adopt the "never sell" approach yourself start thinking long-term. 

Identify appreciating assets you want to hold indefinitely like real estate in growing areas.

Commit to buying and holding quality assets even when tempted to take profits. 

Avoid panic selling during market corrections. Instead use downturns as a buying opportunity. 

With an abundance mindset of never selling assets, you can steadily build wealth over time like the richest amongst us.

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