INVESTMENT STRATEGY

According to the Alpha Strategy by John Pugsley, there are three levels that make up a whole of economic well being. Most people do not think in terms of levels when it comes to economics. The first level of any budget is to take care of necessities. This is the foundational level. This level is where you earn an income. This means doing all you can to increase your skills. Being a student of your particular industry will go far in helping you to advance and increase your earning capacity.

The foundational level is something that you can never get beyond because you will always need to earn an income to meet your daily needs. This should be an ongoing process. Learning is not static, but progressive. The more you learn and apply, the more income potential you have at your disposal. Increasing your earning potential helps you to get to the other two levels of economic well being.

The next step in the process is to keep records of what you earn and what you spend your money on. You must keep track of inflows and outflows. The key here is to make sure that you have more income than expenses. This will give you a surplus. A surplus is the same as profit for a business. It is a residual and a reward for being frugal. With your surplus, you are able to live above subsistence level and able to avoid being in debt. This process takes what most people lack, self discipline. You must control your spending. You must never spend more than you earn. This is the key to any investment strategy and the failure of most people in becoming wealthy.

When you have a surplus, you are not living from paycheck to paycheck. When people live

paycheck to paycheck, they lack planning and are living in the immediate moment. They lack understanding of how finance works. With your surplus, you will need to stock up on things for future use. Your house should be well stocked up, so that you are not endlessly running to the store to get things that you need. Buying in the largest quantity is usually wise because there is usually a saving to be gained over buying a smaller quantity. Most stores have a price per unit and you can compare prices of the larger and smaller quantities of a given product.

Having a surplus allows you to buy many items of a product that are on sale. This allows you to enjoy the savings of a product over an extended period of time. The more that you can buy of that product, the more the savings. When you do this over a vast array of your purchases, you can multiply your savings and have more of your surplus left to begin on the next level of budgeting.

The highest level of this strategy once you have secured your income stream and stocked up, is to use your extra funds to invest. Noah Webster’s 1828 Dictionary, for our purposes, defines invest as, "to clothe money in something permanent or less fleeting." Investing is looking for something that will not disappear over night. Investing is not gambling nor speculative. Investing is well thought out and requires planning on the part of the investor. The question is what should I invest my surplus in? I will leave that for next time.