This article is a down-to-earth guide on how to get rich quick. Ambitious but realistic. This is an impartial article that won’t recommend you sign-up for a course or buy a product. Using finance theory, business insights and real-life case studies, we’ll examine what it actually takes to get rich quick.
We hope that this balanced view will bring out some examples of what has worked, together with a good idea of the risks involved. The question we will ask at the end is – knowing what you now know. Do you actually want to get rich quick?
Risk warning: This article discusses high-risk investment opportunities as part of a thought experiment. We’re exploring how it could be possible to get rich quick. We do not advocate investing in these opportunities as most have an extremely high risk of a total loss of all of your money. Read this FCA warning about high risk investments in general for advice to consider when assessing a high-risk investment opportunity.
The problematic pitches for getting rich quick
A quick initiation for those of you who aren’t very familiar with the phrase ‘get rich quick’. The phrase is mostly used in a sceptical or derogatory manner. By describing an investment opportunity as a ‘get rich quick scheme’ you are usually implying that it won’t work or is an outright scam.
As long as humans have wanted wealth and freedom, there have been marketing whizzkids with questionable ethics who were determined to prey upon this hopeful demographic.
Initially through books, then infomercials and now YouTube ads, get rich quick gurus have spent the last century explaining to the public how easy it is to create all the money you want… if only you buy their book or course first.
There are many tropes and recurring themes seen across get rich quick pitches of all kinds.
- Ditching your 9-5 job and becoming your own boss
- Earning a high income using only a few hours per week
- Using a ‘secret’ or ‘blueprint’ that the professionals ‘don’t want you to know’
There are some glaring issues with these characteristics which we’ll explore later in this article.
The marketing methods used to entice people to sign up are also taken out of a universal rulebook:
- A free course or ebook that principally exists to upsell you a premium course, which in turn may try to upsell you a very expensive course
- Long-winded sales pages which hype up the opportunity and talk about financial freedom with little information about the opportunity itself
- Artificial time pressure, such as fake ‘live seminars’ which are pre-recorded videos that autoplay for each user, or apparent time-sensitive discounts which will expire in a few minutes.
These techniques exploit simple marketing rules such as reducing the friction to purchase or leveraging the fear of missing out to get people to commit to a purchase on the spot. However, you will often find that get rich quick websites use these tricks in the most aggressive manner.
The bottom line
Most products labelled as a way to ‘get rich quick’ don’t actually work. No, for just $79 you will not learn the secrets to earning $7,900 per month for just 3 hours per week.
We know this because courses promising these results sell in their millions each year. And yet the millionaire class doesn’t find itself being invaded by hordes of newcomers off the back of them.
How to get rich quick
Let’s get to the Financial Expert guide on how to get rich quick, for real.
We’ll assume that you have £5,000 of cash to commit to a scheme and that a six-figure sum would count as striking it rich. Who would say no to a 2,000% return?
Wager on roulette
This might sound ridiculous, but hear us out. This stupid idea is worth considering as we’ll use it as a useful benchmark.
You could walk into a casino and wager your £5,000 on a single number on a roulette wheel. If you’re playing the European roulette variation, this bet will pay out 36x your stake, or £180,000.
There are 37 spaces on a roulette wheel, including the green ‘0’, so you have a 1 in 37 chance of being lucky.
Here’s how we could summarise the opportunity:
Risk: 97.2% of loss
Most likely outcome: £5,000 loss
Average expected return: £250 loss
The reason that you’re baulking at the idea of a casino as a get-rich-quick opportunity is probably not the upside, risk or most likely outcome. It’s that the average expected return is a loss. Due to the house-edge, over many spins, a punter is expected to lose money when betting at the roulette wheel. Therefore we know that engaging with a bet is a wealth-reducing activity rather than being wealth-additive.
However, with a small improvement in the payout for a win to £190,000, the edge would be handed to the punter. The theoretical expected return would now be a small positive outcome. In theory, this would now be an investment opportunity.
But this wouldn’t alter the fact that the vast majority of spins would result in a loss. A small edge might exist on paper, but to a series of gamblers placing all-or-nothing bets, the wheel would still take their lump sum the vast majority of the time.
We’re using the example of a roulette wheel to challenge your perception of what investment means to you. Is it an opportunity that will result in a ‘win’ most of the time, or is it like the roulette wheel which has a theoretical positive return but a high loss rate?
Equity or seed crowdfunding is how some small businesses choose to raise finance to fund their expansion. They use crowdfunding platforms to pitch their business to members of the public, who can spend cash to invest in new shares issued by the company.
The new equity holders must then sit patiently as the business continues to evolve.
Small businesses are not publicly listed on a stock exchange, therefore crowd funders cannot easily sell their shares. Sometimes, the company may arrange for an event that allows equity holders to sell their shares to each other. Otherwise, investors are in for the long haul. The most common way that investors see a return is when the company is finally listed on the stock exchange through an Initial Public Offering or is bought outright by a company or private equity firm, known as an exit opportunity.
The process is therefore quite simple. You perform research on the best companies to invest in, buy shares, and then wait and see. Either the company will flounder and you’ll own shares in a worthless entity (or perhaps even a bankrupt one), or you’ll eventually see a cash return at an exit opportunity.
Successful crowdfunding campaigns have included:
- Brewdog, the craft beer brewery & bar chain
- Robinhood, the US broker
- Monzo – the banking app
- Revolut – the banking app
Crowdfunding campaigns are very high-risk ventures which are more likely to fail than to succeed. That’s because a company typically crowd funds at a very early stage in growth, whereas exit events usually only occur if a company has grown many multiples of its original size.
AltFi Data and law firm Nabarro performed a review of crowdfunding investments back in 2015. They looked at over 300 fund-raisings that took place between 2011-2015 and noted that:
20% of investments had gone bust
22% of investments had proceeded to raise further funds at a higher valuation or completed a successful exit opportunity for investors at a later date.
This review didn’t cover a long enough period to provide robust information about the long term returns of crowdfunding, but this nonetheless gives a sobering reminder of the difficulties of picking the right company to invest in.
You could diversify across many crowdfunding opportunities to increase your chances of choosing one of the projects that go on to generate a positive return. If you could invest in every single reasonable opportunity, Forbes suggested in 2016 that the return could be as high as 40% over three and a half years.
Investing in this way would reduce risk, but would crush our dreams of getting rich. A 40% return on £5,000 would leave us with £7,000 after three years. This doesn’t come close to our six-figure target.
By dividing your capital into small chunks of investments, you’re increasing the odds of striking it lucky, but also reducing the amount of cash attached to the winner. It’s a frustrating trade-off.
Therefore, to keep the dream alive of getting rich quick, you’re left with little option but to pick one or two companies to invest your £5,000 in.
Risk: 80% of loss
Most likely outcome: £5,000 loss
Average expected return: 40%.
Become an entrepreneur
Founding and owning your own business appears to be a very common way to get rich.
After all, when you start at the top of the global rich list and work your way downward, it takes some time to not hit a successful entrepreneur.
- Elon Musk helped to found Zip2, X.com, Tesla and SpaceX.
- Jeff Bezos launched Amazon
- Bill Gates built Microsoft
- Mark Zuckerberg founded Facebook
However, the reality of running a business is much harder than many realise.
Most UK markets are competitive, therefore in the modern day there is no low hanging fruit. To earn a profit, you need to genuinely do something better than everyone else to attract customers and charge enough to generate a reasonable profit. You’ll also have to continue to evolve and innovate to maintain that position.
Small business owners often work some of the longest hours – a function of the harsh competitive environment and the motivation of knowing so much is on the line.
The Telegraph reports that 60% of new UK businesses go bust in their first three years, with 20% disappearing before reaching their first anniversary.
Risk: 60% of loss in first three years
Most likely outcome: £5,000 loss
Average expected return: ??%
Leveraged trading/contracts for difference
If all that sounds like too much hard work, why not turn to the stock market instead?
Rather than create a business with your bare hands, you could simply invest in a business that you think will perform well over the short term.
By borrowing money or using leverage to magnify the overall size of the trade, you could make an outsized return compared to your original starting capital.
Short term day traders often use chart-reading as the basis of their trades, rather than information about the underlying fundamentals of the business. By examining trends, price action and the pattern of prices, traders can attempt to predict future movements by applying rules of thumb and theories about the momentum of prices.
However, quantitative and technical analysis is extremely hard to practise in real life. It all seems so easy when reviewing case studies and charts with the benefit of hindsight of knowing what happened next.
However when you’re staring at a terminal and the share price of a company is flicking up and down, that prediction feels much like guessing a coin flip.
When trading with leverage, it’s possible for even a small fall in an investment price to wipe out your full investment amount. And when that occurs, you’re naturally out of the game. If trading over the long term, it’s more a question of when and not if this scenario will unfold.
This is why CFD brokers are all required to disclose to investors the average rate of losses that their clients experience. This % is usually between 70% and 90%.
Risk: 70-90% of traders lose money when trading CFDs
Most likely outcome: £5,000 loss
Average expected return: Negative
Knowing what you now know. Do you actually want to get rich quick?
After reviewing the real-world opportunities for getting rich quick, you’ll notice a recurring theme:
High profits are only possible when you don’t diversify, and therefore chances of loss is high
In most scenarios, you would lose money.
This might be factually how one could become rich quickly… but this doesn’t mean that these are attractive investments in their own right.
If you knew that most of the time you will lose your entire investment, is that a sensible choice if your objective is to grow your wealth?
On reflection, you may come to understand that many high-risk investments are only subtly different from the roulette wager that we discussed at the start of this article. The odds might be slightly in your favour, but you’re still spinning a roulette wheel, hoping that your lucky number comes up.