If you had 1 million dollars, how would you invest it?

[AgainstAllOdds]

The business.

If an entrepreneur made his money in a specific industry/business, then the highest return with relatively low risk is by investing in that existing/previous business or industry.

 

[GPM]

You are all wrong. The clear answer is "hookers and blow". Best value-to-return of anything else out there. By far

 

[Kak]

Your money is YOUR'S. There are countless ways to capitalize a business without putting your money on the line. If it was a sure thing, debt would be a way better move. If it isn't a sure thing, why are you risking all of your money?

Every single multimillionaire I know is invested in many things outside of their core businesses. Of course some money is reinvested, but this notion of constant reinvestment is going to get people in trouble.

Law of Diminishing Marginal Returns: Definition, Example, Use in Economics

The law of diminishing marginal returns states that there comes a point when an additional factor of production results in a lessening of output or impact.

www.investopedia.com

The law of deminishing marginal returns. You will hit it one day or run out of finger in the wind guesses for blowing your money on the business. The music will stop.

I like to make money and grow the money I have made. Markets, real estate, and business. Folks, learn to invest BEFORE you make your money. Examine the opportunity cost of various investments against your business.

 

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[MJ DeMarco]

I'm curious about how Fastlane entrepreneurs would invest one million dollars. Would you put it in stocks? Invest in real estate? Bootstrap a business from scratch? Buy an existing business?

I would repeat the same manner in which allowed me to obtain $1M in the first place.

If it was inherited, I'd invest in a business, or buy one with an existing track record of net earnings.

 

[MTEE1985]

$500,000 in TSLA
Place deposit on 5,000 cybertrucks

Wait for 25% jump after Elon tweets about huge fleet order and speculation that it’s the DOD considering replacing all military vehicles

 

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[biophase]

The funny thing is that the people I've talked to that actually HAVE one million dollars in liquid assets seem a lot less enamored by the money. They are much more rational and less emotional. They value the money and are grateful for it, but realize it's not really that much. They are more concerned with investing the capital wisely to create more value.

The millionaires I personally know, all live far below their means, have little to no debt, and only increase their standard of living if their income/net worth increases. So, while they may splurge on a nice car or toys from time to time, it's something they can very comfortably pay for in cash. Most of them actually fly under the radar and like it that way e.g. they drive something like a Toyota Tacoma and don't want to flash their wealth. I think they just love playing the "game" of business, investing, and capitalism and value the freedom and options the money gives them.

And this is why they are actual millionaires. They make informed and rational decisions. They don't just say, let's put everything into real estate! Or let's put it all back into the business! It all depends.

I've been buying real estate cash for the past 4 years now. Other people always ask me, why aren't you leveraging? Why pay $200k for a house, when you can get 5 houses with $40k down on each? Or why not put the $200k back into your business, that would return you much more than 6%.

To put it simply, if I had a plan to grow my business this year, and this plan needed $200k, I would definitely put that into my business. But what if my bank account had $1M? All I need is $200k, what do I do with the extra $800k? Obviously, putting it back into your business is not an option. That's why I buy real estate with it.

 

[biophase]

I don't understand why a lot of you guys would tie up all of your cash investing in real estate if your goal is to start a Fastlane business. And then you'd have a shitload of debt and tenants to worry about!

This is because of the way you asked the question. Everybody has different skills and in different stages of their lives so the answers are based upon them.

Most of the time when this question is asked, it is asked by someone who doesn't know how to invest, else they would not be asking the question.

So by default you are going to get the safer return investment answers. That's why you get answers like real estate, stocks, CD's, etc...

Nobody is going to say that they would trade options with it, as advice to you, because that takes a skill set. Nobody is going to recommend that you open up a restaurant chain, even if that's how they made their money.

For example, I didn't answer that I would invest it all into ecommerce even though that is what I do for a living because you probably don't have the same knowledge as me in this field. That would be a horrible recommendation to you or your friend.

 

[Kak]

Uh???? A bunch of you guys wouldn't have your million dollars for very long! Maybe that's why you don't have it in the first place...

Yep.

This is the phenomenon where people win the lottery and are broke in 5 years. These are people that could have spent 5 or 6 million dollars per year for the rest of their lives and still can't manage to keep it.

Keeping money is just as hard as making it. Everyone likes to think they wouldn't go broke if they won... But the stats don't lie. It is very rare for them to keep their money.

To the OP, you are creating a hypothetical lottery with way less money. Asking what you would invest in if you had a million dollars implies that the person answering doesn't have a million dollars. They are the worst people to ask. Why? Because they haven't tested their confidence yet. They have not proven that they wouldn't be a broke lottery winner. Their advice is worth what you paid for it.

Wealth is what you have in your possession. Tossing it back into the business mindlessly makes it not your's again. Business puts money into your net worth pile. While business can expand and contract, your net worth should only grow via adding to it and investments. I am NOT suggesting one shouldn't scale their businesses. On the contrary, I believe in scaling as large as possible, but putting money back in again and again just because is playing Russian roulette with your personal net worth and lifestyle.

To answer this question literally, I'm in the markets at 80/20 stocks and bonds. Moving to a more real estate heavy portfolio in the first of the year. At this stage in the market I plan to be very conservative and defensive in real estate, choosing deals with some sweat equity. Hope my literal answer to the question helps someone... But as @biophase said, literally answering the question is crap advice. The answer is almost always "it depends."

 

[EvanOkanagan]

$4m worth of Real Estate

 

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[WJK]

I'm curious about how Fastlane entrepreneurs would invest one million dollars. Would you put it in stocks? Invest in real estate? Bootstrap a business from scratch? Buy an existing business?

Aren't you curious about how millionaires on the forum are invested? People who don't have the money can only project what they would MAYBE do -- but, they haven't earned and grown that pot of money. And, what about people who have more than just one million? I figure it takes 3 million in order to retire comfortably. Most millionaires do a little bit of all of your list of investments. It's called balancing their portfolio.

 

[WJK]

What?

If the real estate cash flows at 20% down and they understand how to operate the asset they would be fine.

You're wrong on the property needing work and not being able to put 20% down too. It depends on the lender and what you define as needing work. As long as it's not condemned I cant see a lender not loaning to you unless you're completely incompetent or the property needs to be torn down in which they may still lend on the land.

If you buy an ugly property for cash, you lose the ability to leverage your capital on the asset and improve your return. You make money in real estate in the spread, cash flow, and equity appreciation.

You may think that by paying cash your return is increased but thats not true, your return is decreased but so is the risk. There is a balance in debt and equity that everyone needs to pick for themselves, but without contest having debt on property is one of the primary methods of wealth creation.

We see it completely differently. I started in real estate in 1976 -- 43 years ago. I was doing flips in the Los Angeles ghetto when we still called them Equity Purchases and it was an unknown business. So, I have a LONG perspective on things. Yes, you can use leverage. You can also lose your whole nut in a heartbeat. I have seen several business cycles come and go over the years. I watched friends go from owning fortunes to standing with their hat in hand, in bankruptcy court. I lost a huge amount during a riot one time. No, fire insurance doesn't work during civil unrest -- and the banks still came after me for their money... But, who am I to give advice????

 

[Bryan James]

If you managed to make $1 million doing something, do it again. Scale. Exponential growth baby!

 

[Envision]

Raise another 2M with my 1M in the pot and buy underperforming assets - ecommerce companies, apartments, self storage.

Turn the 3M into a diversified 10-20M portfolio through repositioning the assets.

Pull my money out of the real estate and pay back the investors.

Now you have secured real estate and a business that makes cash flow to scale your REI.

 

[biophase]

I make ~ $1k per month doing software consulting on the side. I've been working on a SaaS idea for small/mid-size construction companies for a couple of years off and on. I built an MVP that a couple of companies are using internally right now. I'm going to buckle down on marketing/sales this year and see what happens...

I was just curious because you said you offered this to your friend and he declined. But if you are making $1k a month, his investment would have been tiny. What would you have asked for? It makes no sense for him to invest now.

There's nothing to invest in but a crap shoot at this point. You would have to offer him something like $20k for 50% which makes no sense to you or him.

It's better to wait until you actually have a business and it is making $50k or $100k a year. Then you go offer him $100k for 30%. He sees that he can get a 30% return and you actually get some money that means something.

 

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[Walterbl]

Real state and commodities if your objective is not to lose money.

A small business, if you know what you are doing and the objective is to make money.

 

[SEBASTlAN]

#landfill

 

[BlueMoon]

I have a friend who made it working as a software developer in someone else's startup, but he is tired of being an employee and wants to start his own business. He doesn't feel like the 1 million is enough money to leave his job to work on his biz full-time, so he is working on the biz part-time to get traction. The job + his family is taking up the majority of his time though, and he's also not interested in raising money and giving up equity in his business.

I'm not sure how to advise him. I think he should invest most of the money in stocks, stay at his job until he proves that he can get paying customers and validate his business idea, then leave his job and use ~$100k to work on his business full-time for a year. If it doesn't work out he has the skills to find a great programming job.

Thoughts?

lol is this a joke? this guy doesn't dare to make the proverbial jump with $1m and with probably an excellent background to always go back to a six figure job? people like this are not entrepreneurs nor will they ever be. Ive know people, including myself, who started out on a $5k creditcard withdrawal with no safety net whatsoever. Shows again that money provides security but it can't buy taste nor courage.

 

[biophase]

I think he should invest most of the money in stocks, stay at his job until he proves that he can get paying customers and validate his business idea, then leave his job and use ~$100k to work on his business full-time for a year. If it doesn't work out he has the skills to find a great programming job.

If this is where he's at, he should not be investing any of it. Imagine he invests $1m in stocks and the market hits a small downturn and now it's worth $800k. No way he's ever quitting his job now. He's too risk adverse.

Basically he should keep it all in cash, use some of it to fund his start up and keep working until his business is making some money. He will never take that leap without alternative cashflow if he can't do it with a $1m cushion.

 

[biophase]

$4m worth of Real Estate

If going this route, I would say $2m maybe up to $3m real estate with 20% down. He needs cash reserves. At $4m worth, if a couple units are empty he will be hurting. Start at $2m, until he gets comfortable or rents go up, then expand.

 

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[BlueMoon]

I think he would have jumped a long time ago if he didn't have a family to support. I think that being young and broke with no family may be more of an advantage for an entrepreneur starting up than many realize. Unfortunately, most young people don't realize this. They have nothing to lose!

I agree but still, unless he lives in one of the premier metropolitan areas and has his kids going to private school and a wife with a particularly expensive taste in designer handbags is still a lot of money as a back up. Could give numerous examples of people who had families to support with less than 25k in the bank. This guy is just making excuses which emphasizes my point once more, if you are not an entrepreneur in his comfy position, he most likely never will be and should stick to his job.

 

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[WJK]

Uh???? A bunch of you guys wouldn't have your million dollars for very long! Maybe that's why you don't have it in the first place...

 

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[allen0879]

Yep.

This is the phenomenon where people win the lottery and are broke in 5 years. These are people that could have spent 5 or 6 million dollars per year for the rest of their lives and still can't manage to keep it.

Keeping money is just as hard as making it. Everyone likes to think they wouldn't go broke if they won... But the stats don't lie. It is very rare for them to keep their money.

To the OP, you are creating a hypothetical lottery with way less money. Asking what you would invest in if you had a million dollars implies that the person answering doesn't have a million dollars. They are the worst people to ask. Why? Because they haven't tested their confidence yet. They have not proven that they wouldn't be a broke lottery winner. Their advice is worth what you paid for it.

Wealth is what you have in your possession. Tossing it back into the business mindlessly makes it not your's again. Business puts money into your net worth pile. While business can expand and contract, your net worth should only grow via adding to it and investments. I am NOT suggesting one shouldn't scale their businesses. On the contrary, I believe in scaling as large as possible, but putting money back in again and again just because is playing Russian roulette with your personal net worth and lifestyle.

To answer this question literally, I'm in the markets at 80/20 stocks and bonds. Moving to a more real estate heavy portfolio in the first of the year. At this stage in the market I plan to be very conservative and defensive in real estate choosing deals with some sweat equity. Hope my literal answer to the question helps someone... But as @biophase said, literally answering the question is crap advice. The answer is almost always "it depends."

I completely agree!

I regret the way I asked the original question. A lot of the answers remind me of my middle class grandparents talking about what they're going to do when they win the lottery "someday". I should have targeted people that HAVE at least 1 million dollars and how they invest it. And how they invest it definitely depends on their age, business goals, ambition, etc

The funny thing is that the people I've talked to that actually HAVE one million dollars in liquid assets seem a lot less enamored by the money. They are much more rational and less emotional. They value the money and are grateful for it, but realize it's not really that much. They are more concerned with investing the capital wisely to create more value.

The millionaires I personally know, all live far below their means, have little to no debt, and only increase their standard of living if their income/net worth increases. So, while they may splurge on a nice car or toys from time to time, it's something they can very comfortably pay for in cash. Most of them actually fly under the radar and like it that way e.g. they drive something like a Toyota Tacoma and don't want to flash their wealth. I think they just love playing the "game" of business, investing, and capitalism and value the freedom and options the money gives them.

 

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[Kevin88660]

I'm curious about how Fastlane entrepreneurs would invest one million dollars. Would you put it in stocks? Invest in real estate? Bootstrap a business from scratch? Buy an existing business?

Everything in liquid financial market securities

Mainly Value and yield play with emerging market focus, with a small north American oil and gas exposure and a small inflation hedge

-Emerging market etf with exposure to Chinese A shares. ( 50 percent)
-Emerging market debt etf (20 percent)
-Master Limited Partnership etf (20 percent)
-silver mining stocks/etf (10 percent)

 

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[Kevin88660]

You are all wrong. The clear answer is "hookers and blow". Best value-to-return of anything else out there. By far

It wont cost you a million.

 

[sparechange]

Angel investing would be a neat idea. Shark tank without the cameras.

 

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[allen0879]

lol is this a joke? this guy doesn't dare to make the proverbial jump with $1m and with probably an excellent background to always go back to a six figure job? people like this are not entrepreneurs nor will they ever be. Ive know people, including myself, who started out on a $5k creditcard withdrawal with no safety net whatsoever. Shows again that money provides security but it can't buy taste nor courage.

I think he would have jumped a long time ago if he didn't have a family to support. I think that being young and broke with no family may be more of an advantage for an entrepreneur starting up than many realize. Unfortunately, most young people don't realize this. They have nothing to lose!

 

[BellaPippin]

Can you elaborate on this? That seems like a risky thing to do. You'd tie up all of your capital in an illiquid asset and take on a ton of debt.

Not if it cashflows and gives you income every month

 

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[minivanman]

I think he would have jumped a long time ago if he didn't have a family to support. I think that being young and broke with no family may be more of an advantage for an entrepreneur starting up than many realize. Unfortunately, most young people don't realize this. They have nothing to lose!

That was me..... I had nothing to lose and luckily I gained everything! I didn't even have a goal or any type of experience. I have no clue how I did it but I just kept pushing forward not knowing what my goal was or what my next step would be. My best tool was that I am a whiz at math.

 

[Bones81]

I'm actually about to be in this situation. Leaving my slow lane banking job to take some time to travel, relax, and focus on health and happiness. Once my house sells, I'll be sitting on about this much in liquidity.

Presently almost all my net worth outside the equity in my house is in the stock market in various diversified ETFs.

The plan at present is to buy an established profitable business (e.g. a baby boomer owner looking to cash out and retire). It needs to be large enough to have leadership and processes already in place so I'm not replacing one job with another. I know the business will require some time commitment but I'd like to minimize that as much as I can. Goal would be to grow it with the intent to flip it in a few years with enough money to ride off into the sunset.

In the meantime, during my time off, I'm going to take a small amount of capital and explore option trading as a potential fastlane as others here have done. This is appealing on many levels, particularly as it's much less cumbersome than owning a business. That being said, I have no delusions of grandeur given the risk involved and the discipline it takes to do it smartly.

 

[Envision]

I never recommend 20% down real estate deals unless it's your personal home... and that's all the down you can scrape up. I've seen too many people drown in all of that debt and go down in flames. If the property needs work, you can't do 20% down anyway. I would like to see him buy an ugly property for cash, fix it up and rent it or sell it. It's amazing the deals you can get with wads of cash.

What?

If the real estate cash flows at 20% down and they understand how to operate the asset they would be fine.

You're wrong on the property needing work and not being able to put 20% down too. It depends on the lender and what you define as needing work. As long as it's not condemned I cant see a lender not loaning to you unless you're completely incompetent or the property needs to be torn down in which they may still lend on the land.

If you buy an ugly property for cash, you lose the ability to leverage your capital on the asset and improve your return. You make money in real estate in the spread, cash flow, and equity appreciation.

You may think that by paying cash your return is increased but thats not true, your return is decreased but so is the risk. There is a balance in debt and equity that everyone needs to pick for themselves, but without contest having debt on property is one of the primary methods of wealth creation.

 

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