So when you were thinking about retiring or becoming a millionaire before 60, you probably have heard of the basic concepts of an income stream. So in this video, we're going to go through a foundational concept of how money works and how to make money using active and passive income streams. And this is basically the most ground level world few I have when it comes to making money online in general, and also investing as well. So we're going to go through a lot of examples and let's dive right into it. So the first kind of income stream you want to have is a high paying job. Now, when you're thinking about a job, you're really looking at nine to five, maybe even more including overtime and at this stage, you're trading time for money. So usually you measure your success by how much dollar per hour you get from your employer and the higher, the dollar per hour, the better you are.
And that's what a high paying job is focused on. And I would say 99% of the people in this world focuses on getting a job. And some of them will focus on getting a high paying job, but there are actually two more categories in terms of income stream. Now, the second category is starting your own business. Now this can be a side hustle. This can actually be your full-time job, which is actually a business or you're, self-employed a good example would be, let's say I used to be an accountant and I work for a company as an accountant, but now I'm starting my own accounting business where I do bookkeeping for people. So now I have more control over my time. I don't necessarily change my hours for time, even though I still work, I actually have a higher ability to send my prices. So if I want to charge the clients based on an hourly charge of $500 an hour, I can do that.
If I want to charge my clients a $5,000 fixed fee, I can do that as well. So that is really the benefit of running a business, where you get more control and the rewards you get is dependent on how good you are. Of course, when you are running a business, there are certain risks that you encounter. Like what if your business fails? What if you need some capital requirements to start your business, like an e-commerce business will require inventory. And that means you need to put money to buy the inventory, ship hits, you know, get a locked in, uh, and then sell it for a profit. The third category is investing and that's really, you buy stocks or shares in the public markets. And in this channel, we talk a lot about stocks and how to invest and how have a systematic way to approach investing instead of just relying on your friend's recommendation or another YouTuber's recommendation.
So we really focus on the knowledge and the approach here. Now, when you look at these three buckets, they're actually connected. And for every person's life cycle, you will go through these three buckets. You will start off with a job, a high paying job, and then you realize that you can turn that into your own business if you want to expect. Because to be honest, there's only so much you can go in terms of what you can get from a job, trading your time for money until you hit a ceiling. And then you start your business where you have more control. You can actually expand by hiring people. You can set your own prices, and then you can choose to invest and you're buying shares. And that is really unlimited, you know, share price can go up every single year for the next 20, 30 years.
So the sky is really the limit when you're looking at investing. And when you're looking at your lifetime, you probably have gone through stage one and you're looking to develop stage two and three as well. So if you have this foresight's early, you know, you're younger, you'll realize you need all three early on. So you get prepared to acquire the knowledge to run off of the early on, or you realize that you need to do some catching up because you didn't learn these skills early on in your life. So now you're finding some YouTube video to teach you how to do it. So next slide, I'm going to talk about the difference in pay. So this is really to help you understand why some jobs are higher paying than the other jobs. And it all comes down to a very simple concept called specialization. The more special or specialized you become, the higher pay you generally get.
So of course, this is a generalization, but if you head in this direction, you would generally get a higher pay. So first let's start with the general replaceable, low skill job. You know, this might be a cashier where a high school students can do it. It might be just washing dishes. It might be, um, just pushing, shopping carts around. It might be just doing retail or a waitress where the turnover can be quite high. The amount of training needed. It's not that much. And a lot of people can do it. It's kind of like working at McDonald's, you get minimum wage or close to minimum wage. So if you're in this position, then what do you want to focus on is to first move yourself to a more strategic and specialized position. And that brings me to step two. So you want to be specialized in jobs that require licenses.
So this is really just an example. You can specialize with photo license, of course, but it's just easier to understand if there's a license in place. So here I'm talking about nurses, doctors, engineers, lawyers, accountants, CPA, I'm a CPA. So I have a license, um, so on and so forth, of course you can specialize without a license, like getting a master's degree in something, getting a PhD in something, or you just learned a lot about a very specific field. For example, if you are a programmer and you specialize in specific programming languages or a specific software types, then that's also a specific, uh, specialization where your employer will pay you more for it. So you need to look at your work and ask yourself, are you a Jack of all trade? And you're not focused on the one that your strongest suits and making the most money.
And if you are focusing on a strongest suit, then that's great and you have a license to protect you. That's great. And then you can move on to the next stage. So the next one is really specialized skillsets that can achieve an extraordinary results. So that is really where you're honing your skills so much. That's you can achieve a level of results that is not normally achievable with the regular license. So for example, even within a group of accountants, there are bad accountants and good accountants. You know, they are accountants that know tax, how to save money on tax. And there are accountants that don't know how to save money on tax. So there is a separation even within a particular industry or niche. So generally the direction you're trying to go is to becoming more and more narrow, because the more concise niche down you are, the higher you can charge, which means you can make more money.
And I can use doctors as an example. You know, let's say you start out as a family doctor, you know, it might not be very specialized. You can actually address a lot of common questions, you know, like the flu fever, so on and so forth. And you have the foundational training, but if you compare a family doctor to a brain surgeons and you can see the difference in skill, obviously the brain surgeons specialize in very specific body parts, the brain. And because of that, it is more complex. It's more challenging. A regular family doctor is not trained to do brain surgery. It probably requires years of practice to do that. And by having that years of practice experience and skill, a brain surgeons can charge a lot more money than a regular family doctor. So that is just a very simple example to show you how specialization can lead to higher income.
So if you look at yourself and you gotta be very honest with yourself, are you specializing? Are you addressing a very painful demand in your industry that you're getting more money for? So if you want to make more money with your job specialize, that's the easiest way to get there. Once you specialize and you hit a very comfortable salary. Usually I think that's around a hundred K to 200 K or so then you'll be looking into expanding, but it's difficult because you only have so many hours within a day. So even if you work overtime, you only have 24 hours a day. Eventually you will burnt out and you can't work any more hours anymore. And that's when you would think about starting a business. Now, when you're starting a business, there are also three main stages of starting a business. The first stage is to create a product, one product that help one specific group of people.
So that's very straightforward. If you look at a lot of businesses that are big, they always starts with one product for one group of people, and then they expand from there. So that is kind of like having a fairly specialized skillset. So you can see how this is actually a natural progression. Once you hit a ceiling in terms of your high paying job, and you would want to monetize that skill by having more people to work for you. So once you have a product and offering that works, then you would want to create a family of products. So that's when you launch different flavors, different colors, different sizes to address that little markets you're focusing on. So you want to dominate that market. So you're not trying to be a generalist. You're trying to be a very focused business. And as we go through the rest of the video, observed this pattern, because I keep repeating this pattern.
So you need to understand it. And once you have this specialized business, the third stage is actually quite interesting. The third stage is to acquire different companies that are usually in the same industry or in nearby industries. So for example, if you are starting a winery, you might start off with a very specific kind of grape and you developed a very specific kind of alcohol, like let's say red wine, a very specific kind of red wine. You dominate that market. And then you create red wines with a lot of different flavors. So that's stage two. And then you start acquiring other companies in the wine business. You might acquire more brands. You might acquire more vineyards. You might acquire a distributor. So those are really the three directions you can head into to further expand your business. Now, before we even head into investing, using the first skill, which is high paying job, a loan should be able to get you to a millionaire using the second skill, which is building your own business and specializing in expanding should also be able to get you to a millionaire before 60 and the third one investing.
Of course, this also gets you to a millionaire before 60 and retire, and this is more passive. It requires a lot less time and it is more generic as well. So if you're looking for generational wealth money that can be passed on money, that will work for you without you working for money, then investing is what you're looking for. Now. Typically the first stage is when you walk into a bank and a financial advisor will help you set up a moderate risk portfolio that usually ranges around 5% to 7%. Have you told your advisor, you want an aggressive portfolio, then you will probably get 10%, perhaps 15% return. So that is really the range you're looking at. So when you're looking at investing is not about time that you put into it. It's about the percentage return you get per year. Because most of the time you're pretty passive.
When it comes to investing. If you are day trading, then you're actually back into second category where you're running your own business. Now the second stage here is really the self-select index. So that's when you start to manage your portfolio a little bit more, you're trying to be smarter, making more educated decisions, and this will usually allow you to pick better neutral funds, better indexes. So this will allow you to get around 10% to 15% return. Now, if you're looking to make an even higher return than at this point to actually require more financial knowledge, you will need to have a more advanced strategy and you need to do something different than what everyone else is doing. So that's when you can target 20% to 30% return. So a good example is let's say you went to the bank, you start off with a 5% portfolio.
Okay? So it has a mixture of different mutual funds. Some of them have a high fees, some of them have low fees, and then you decide that you want to manage yourself. So you put your money into S and P 500, which is stage two and S and P 500 for the last couple of years has been giving you 10% to 15% return. You might even think of some of the more riskier technology to the ETF funds, which can give you 15% return as well. And then you learn more about investing and you realize that, Hey, perhaps I can pick some stocks. I can use some options. That's what we teach in investing accelerator to further improve our return. So that's when you step in to the third category and that's when you use more advanced strategies. So that's where you target 20 to 30% return.
Now what's interesting that you want to observe here when you're looking at these three income streams, is that when you're starting a business, there's actually a very strong resemblance with investing in the first stage. You start off with an offer that is based on your skill, but in the second and a third stage, you're starting to build a portfolio, a portfolio of products that are dominating within an industry, a portfolio of companies within a specific sector as well. And what is investing. If you go look at your investing portfolio, you're going to be having a portfolio of stocks that you think will grow over time. So when you're looking at big companies like apple, Google, Amazon, they are really a combination of many companies together. For example, apple is a combination of a hundred plus startups altogether, and they have a very streamlined product offering, same for Amazon Google and all these other tech giants.
So when you're looking at your portfolio, you're really building a portfolio on the investing side, you're building a portfolio on the business side and for the high paying job, it's just a matter of your skillset. So that is really my world view on how I think about active and passive incomes. Of course, when you look at each category, you can further narrow it down. Like, do you want to start an e-commerce business? And what kind of e-commerce business are you starting? Which industry is it in? And you can always narrow it down, but this is really the foundation. And once you understand these three stages, the real question now is how fast does it take you to go through all three stages? Because you know, the end game now the end game is you need a high paying skillsets ability to start some business if you want to and investing.
So, you know, you need investing knowledge, you know, you need some business skills and you also know that you need a very high paying skillset. So if you know what you want, then you can get there a lot faster than trial and error. So that's really the purpose of this video. And if you are able to obtain one of the three, then usually should be able to become a millionaire before 60 and retire early. Uh, if you acquire two or even three, you will get there a lot faster. So you might even be able to achieve an early retirement at 40, 50 as well. So that's really the gist of this video. And I'll see you in the next one.