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e_fastlane

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The last part of Unscripted hit really close to home for me, as I have needed to start making money on my money years ago already. The issue is that I have been too busy making money in my business instead (or enjoying my free time). This results in 7 figures sitting in cash and withering away it's value to inflation.

MJ makes everything seem very simple and easy...However I feel like there is a lot glossed. Which is fair considering Unscripted is not an investment book. But to be honest, it left me more lost than when I began.

Some inconsistencies:

1.
On the one hand: We should just be able to follow some simple rules and something like 5% year after year is very easy to get.

On the other hand: Someone must have not told the guys that do this for a living, since all the funds lost their asses during the crash. (Even the "top dogs").​
2.
On the one hand: I need to be in the know enough about the state of the economy and different industries I am investing in so I can manage the money intelligently.

On the other hand: MJ says he just takes a daily "10 second portfolio peek". It seems like this glosses over all the leg work in the background that has to happen for some days to be just a peek.​
3.
On the one hand: I recognize that there is no free lunch and I need to do my own research.

On the other hand: It sounds like "unscripted " means the goal is to go from business owner to professional financial adviser (of myself).​
4.
On the one hand, I believe MJ and how well he has been doing.

On the other hand: The stock market has just been in a crazy rally for almost a decade and most people made money even with poor decisions.​

Now switch gears to my problem. My time is still best spent investing into my business and not figuring out investing. If it was so low risk and easy, then this service would just be offered. To an average bystander, it seems like this exact service is offered. They call themselves financial advisers, portfolio managers or simply the guys that run funds. So where are the guys that are actually competent? Not everyone is the fresh graduate with only book knowledge. They supposedly have the same ideas of diversification (hence why a fund owns so many different stocks). How can I give someone all my money and get a guaranteed 4% back every year and let them keep the rest? I'm begging to give them my money!

The biggest thing I see wrong in the financial industry is there is no Skin in the game. They make money regardless of whether they make me money. Are there any firms or advisers out there that only make a percent of profit? I would be willing to let them make alot of money from me.

On the other hand..... I doubt banks are giving mortgages for 3.5% if they thought they can make 4% somewhere else........So the best I've been able to make of the situation is that unless I want to start working as a hedge fund manager as my 'retirement' job, I have to keep making money till I have enough to amortize over the rest of my life. Which is unfortunately a much bigger number. Can anyone provide any words of wisdom to straighten me out?
 

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The biggest thing I see wrong in the financial industry is there is no Skin in the game. They make money regardless of whether they make me money. Are there any firms or advisers out there that only make a percent of profit? I would be willing to let them make alot of money from me.
...
If I remember correctly (from the little studying I have done for an adviser designation), this is considered unethical as it can lead to investments that are not in the best interest of the client.

If you just want 4% returns every year, consider looking into annuities.
I'm sure quite a few bonds and bond funds would also fit the bill.

ETA: obviously with an annuity, you no longer have access to the principal, just the guaranteed payments.

Edit 2: if you really just want 4% a year, I can think of some real estate transactions that would make sense.
 
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Not the worst of problems to have, but I think expanding on the potential ways you can strategically park your cash could be very high value to someone in your position. Pure reliance on a financial manager to try to eek out a few % points just screams risk to me. Why not look into acquiring real estate? Domestic or abroad. There are many emerging markets out there with higher speculative growth potential.

Cryptocurrencies are also a fairly safe long term bet if you are diligent and diversified. Even taking a bet on a dark horse with a low entry can sometimes yield 1000%+ returns in short time (had a 800%+ return coin that I sold off yesterday).

What I'm getting at is while it may seem like extreme risk to some, educating yourself of the possibilities and finding groups of similar people in similar scenarios can open up the door to much higher potential returns with defined risk.

I've also heard that there are offshore banks with annual returns in the neighborhood of what you're talking about, but I don't know for certain. Maybe @GlobalWealth can weigh in.

Disclaimer: I'm no millionaire, but I'm trending in that direction and am trying to plan for the situation you're in as best as possible.
 

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I just checked, you had the same question a year ago. What steps have you taken since then with all the advice that was given?
 

e_fastlane

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Not the worst of problems to have, but I think expanding on the potential ways you can strategically park your cash could be very high value to someone in your position. Pure reliance on a financial manager to try to eek out a few % points just screams risk to me. Why not look into acquiring real estate? Domestic or abroad. There are many emerging markets out there with higher speculative growth potential.

Cryptocurrencies are also a fairly safe long term bet if you are diligent and diversified. Even taking a bet on a dark horse with a low entry can sometimes yield 1000%+ returns in short time (had a 800%+ return coin that I sold off yesterday).

What I'm getting at is while it may seem like extreme risk to some, educating yourself of the possibilities and finding groups of similar people in similar scenarios can open up the door to much higher potential returns with defined risk.

I've also heard that there are offshore banks with annual returns in the neighborhood of what you're talking about, but I don't know for certain. Maybe @GlobalWealth can weigh in.

I agree with everything you said. But you literally just described a lifestyle and/or job.

I just checked, you had the same question a year ago. What steps have you taken since then with all the advice that was given?

None. I've used my business to put even more ridiculous sums of money into my bank account.

It's possible that my current post came off wrong. My post from a year ago was "how can I put my money to work". The result was clear and confirmed my thinking. I need to become a part time investment manager. The current post is highlighting inconsistencies between that and MJ's portrayal of investment in his book.

Here is a simplification of my thoughts: Money is NOT a rare commodity. Bank's can loan it out from the fed for very cheap rates. Why would the bank hand out 3.5% mortgages if 5% is easy to get elsewhere with that same money. Everything described by the guys in this thread (and partially in the book) is just alot of hand waving and misdirection from what seems like the reality. Yes you CAN make X% returns. But thats because there is also risk in it. If the person is loaning money from you instead of the bank for real estate, it's because the bank ran the numbers and the risk is likely higher than the projected returns. There's no magic involved. You are just crossing your fingers that your choice of deity smiled on you this year. Same with cripto currencies and all the other things.

The only way I see this as a winning game (balancing out luck) is either by having insider knowledge (illegal), accepting the average returns by investing into something like s&p 500 and just sitting on the money for decades, or taking on a part time job as an investment manager so you can built extensive intuition into what you are investing in.

I do want to stress the following: I am NOT putting down the choice to discuss and do these things. It's obviously a great way to make money. My concern is that everyone seems to ignore that this is in fact just another job. You guys might just call it a hobby since you love doing it.
 

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Here is a simplification of my thoughts: Money is NOT a rare commodity. Bank's can loan it out from the fed for very cheap rates. Why would the bank hand out 3.5% mortgages if 5% is easy to get elsewhere with that same money. Everything described by the guys in this thread (and partially in the book) is just alot of hand waving and misdirection from what seems like the reality. Yes you CAN make X% returns. But thats because there is also risk in it. If the person is loaning money from you instead of the bank for real estate, it's because the bank ran the numbers and the risk is likely higher than the projected returns. There's no magic involved. You are just crossing your fingers that your choice of deity smiled on you this year. Same with cripto currencies and all the other things.

The only way I see this as a winning game (balancing out luck) is either by having insider knowledge (illegal), accepting the average returns by investing into something like s&p 500 and just sitting on the money for decades, or taking on a part time job as an investment manager so you can built extensive intuition into what you are investing in.

I do want to stress the following: I am NOT putting down the choice to discuss and do these things. It's obviously a great way to make money. My concern is that everyone seems to ignore that this is in fact just another job. You guys might just call it a hobby since you love doing it.
Ah, gotcha. Here are some thoughts, in no particular order:
Stock market gains are averages. It's very easy to beat 5% over the long run (or at least has been historically). To get a guaranteed 4-5% per year is more difficult. There are bonds that pay this amount.

Banks do not invest in the stock market because their business model cannot withstand the fluctuations. They have minimum cash-on-hand requirements that they must meet. This means if the stock market was down one year, they would be in violation of those rules. I'm guessing there may be fed restrictions on what they can do with that cash as well. Banks lend out at 3.5% (not currently) because they have an appraisal report in hand saying the asset is worth that much. There is no such appraisal report for a stock.

People borrow money from other individuals all the time. Not because the bank deems it risky, but because they have certain underwriting requirements.
For example, I can't get a new mortgage right now because I've given up the full-time job, and am transitioning to self-employment. I can give them my current Income Statement, but that's not enough comfort for them. Therefore, I don't meet the debt-to-income ratio they need to check the box.
If I find an investor who looks at the value of the asset and cash flow, and not my personal financials, then they may decide it's a good deal that they want to invest in. I'm sure @JScott has people throwing money at him, and doesn't need to go to a bank.

Once you gain the base knowledge for investing, the ongoing time requirement is minimal. The fundamentals of real-estate don't quickly change. Bond and stock valuations don't substantially change. There may be market overreactions and corrects, but on the whole, the techniques don't evolve too much.
 

e_fastlane

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Ah, gotcha. Here are some thoughts, in no particular order:
Stock market gains are averages. It's very easy to beat 5% over the long run (or at least has been historically). To get a guaranteed 4-5% per year is more difficult. There are bonds that pay this amount.

Thank you for the reply. I appreciate the time.

I agree with this statement and thats what I meant by one of the strategies being just socking away $$ into the market for decades. But that's not the same as getting paid every quarter. MJ's example of "can you live off $40,000 in dividends a month" is missing this. I doubt companies are giving these same dividends during the crash, and for that matter you might not even be invested during the crash because you will lose alot more than whatever dividends you are getting. To me, this is the equivelent of financial advisers showing their best clients portfolio from a market rally as their "proof" of being able to make money for you.


Banks do not invest in the stock market because their business model cannot withstand the fluctuations. They have minimum cash-on-hand requirements that they must meet. This means if the stock market was down one year, they would be in violation of those rules. I'm guessing there may be fed restrictions on what they can do with that cash as well. Banks lend out at 3.5% (not currently) because they have an appraisal report in hand saying the asset is worth that much. There is no such appraisal report for a stock.

Completely understood. I know they have to use the money for specific things. My example was a simplification. But you can substitute bank for other lenders.

People borrow money from other individuals all the time. Not because the bank deems it risky, but because they have certain underwriting requirements.
For example, I can't get a new mortgage right now because I've given up the full-time job, and am transitioning to self-employment. I can give them my current Income Statement, but that's not enough comfort for them. Therefore, I don't meet the debt-to-income ratio they need to check the box.
If I find an investor who looks at the value of the asset and cash flow, and not my personal financials, then they may decide it's a good deal that they want to invest in. I'm sure @JScott has people throwing money at him, and doesn't need to go to a bank.

Why do you think they have "certain underwriting requirements.". For risk purposes. Giving money for Joe Bloe to start his business is much riskier than for him to buy a home.

Your personal mortgage example is understandable. However, you literally ARE a riskier bet because of no employment. They have ran the numbers out of a much bigger pool than what you or the little guy see. Without knowing you personally (the insider knowledge I mentioned in my last post), you could just have that money temporarily and actually owe it to someone you aren't disclosing. Or whatever other possible scenario. Some bank will deal with you, but that's because they specialize in it and ran their own numbers and will likely charge you more. Since you ARE more risk....... I don't know your actual situation, so I might have missed the mark, but the principles apply.

There is no magic. You charge a % that will on average make you money, but in most scenarios, I don't think that spread is 5%. (But I don't know all industries).

Once you gain the base knowledge for investing, the ongoing time requirement is minimal. The fundamentals of real-estate don't quickly change. Bond and stock valuations don't substantially change. There may be market overreactions and corrects, but on the whole, the techniques don't evolve too much.

I agree with this thought process. I have been ready to invest in the "well known" vehicles like real estate during a recession for a long time now. I missed the last buying frenzy as I was still building my business, but this time I am ready.
 

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Not the worst of problems to have, but I think expanding on the potential ways you can strategically park your cash could be very high value to someone in your position. Pure reliance on a financial manager to try to eek out a few % points just screams risk to me. Why not look into acquiring real estate? Domestic or abroad. There are many emerging markets out there with higher speculative growth potential.

Cryptocurrencies are also a fairly safe long term bet if you are diligent and diversified. Even taking a bet on a dark horse with a low entry can sometimes yield 1000%+ returns in short time (had a 800%+ return coin that I sold off yesterday).

What I'm getting at is while it may seem like extreme risk to some, educating yourself of the possibilities and finding groups of similar people in similar scenarios can open up the door to much higher potential returns with defined risk.

I've also heard that there are offshore banks with annual returns in the neighborhood of what you're talking about, but I don't know for certain. Maybe @GlobalWealth can weigh in.

Disclaimer: I'm no millionaire, but I'm trending in that direction and am trying to plan for the situation you're in as best as possible.
I know a couple of banks that pay 3-5%

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The current post is highlighting inconsistencies between that and MJ's portrayal of investment in his book.

There are no inconsistencies other than your lack of understanding.

Just because you don't understand something, doesn't mean it is inconsistent.

In other words, you've interpreted what I've written it in a vacuum. Investing doesn't occur in a vacuum.

The best investments for 5% change and are cyclical. It could be bonds, it could be sovereign debt, it could be banks, it could be munis, it could be REITS, it could be dividend stocks.

I've detailed on how this works right here, and in real time.

Money System Management: Real Example, Closed-End Fund

I'm guessing you didn't bother reading that. That fund pays more than 5% when taxes are taken into consideration. And I showed how I manage it based on "a ten second peek." (I don't own it now and did not suffer in its decline.)

Some assets I DO own ...

Southern Company - Pays a 5.25% (Disclaimer: I own it, started buying AFTER the big declines)
Holly Energy - Pays a 8.8% (Disclaimer: I own it.)
AT&T - Pays 6.04% (Disclaimer: I own it.)
LTC - Pays 6.46% (Disclaimer: I own it.)
STAG - Pays 6.06% (Disclaimer: I own it.)

None of these investments require a significant time output.

However I will admit that I peek at these daily (not weekly) simply because I own another business in the financial space involving options. (That business is detailed in a 40 page thread on the inside.)

Because I'm already eyeballing the market in that business, I do look more so than say, the average person.

And finally, no financial instrument is immune from a financial apocalypse. If a 2008 or a 1987 "event" occurs, EVERYONE will take a hit, some more so than others. The "others" that will take it on the chin are the folks who use the markets for wealth accumulation, not capital deployment, liquidity, and income.

I am in the latter.

Money market cash is also an investment --while a 2% return is nothing exciting, it's better than a stock that loses 20%.

I would NOT also recommend allocating your entire nest egg into the market, but only what you want from the "Paycheck Pot."
 

e_fastlane

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There are no inconsistencies other than your lack of understanding.

Just because you don't understand something, doesn't mean it is inconsistent.

In other words, you've interpreted what I've written it in a vacuum. Investing doesn't occur in a vacuum.

The best investments for 5% change and are cyclical. It could be bonds, it could be sovereign debt, it could be banks, it could be munis, it could be REITS, it could be dividend stocks.

I've detailed on how this works right here, and in real time.

Money System Management: Real Example, Closed-End Fund

I'm guessing you didn't bother reading that. That fund pays more than 5% when taxes are taken into consideration. And I showed how I manage it based on "a ten second peek." (I don't own it now and did not suffer in its decline.)

Some assets I DO own ...

Southern Company - Pays a 5.25% (Disclaimer: I own it, started buying AFTER the big declines)
Holly Energy - Pays a 8.8% (Disclaimer: I own it.)
AT&T - Pays 6.04% (Disclaimer: I own it.)
LTC - Pays 6.46% (Disclaimer: I own it.)
STAG - Pays 6.06% (Disclaimer: I own it.)

None of these investments require a significant time output.

However I will admit that I peek at these daily (not weekly) simply because I own another business in the financial space involving options. (That business is detailed in a 40 page thread on the inside.)

Because I'm already eyeballing the market in that business, I do look more so than say, the average person.

And finally, no financial instrument is immune from a financial apocalypse. If a 2008 or a 1987 "event" occurs, EVERYONE will take a hit, some more so than others. The "others" that will take it on the chin are the folks who use the markets for wealth accumulation, not capital deployment, liquidity, and income.

I am in the latter.

Money market cash is also an investment --while a 2% return is nothing exciting, it's better than a stock that loses 20%.

I would NOT also recommend allocating your entire nest egg into the market, but only what you want from the "Paycheck Pot."

I am not being difficult on purpose. I may be wrong and maybe I have just not heard it explained in a way that jives with my brain.

The way I see it; Your reply does more to substantiate my point of view (investing becomes a job) than what I am interpreting is your point of view (it takes minimal work).

You are surrounded by investment talk and news about specific markets. So yea, I understand that with your proverbial ear to the ground, you only need a few extra moments per day to turn that into actionable intelligence. But that's a huge assumption. Shouldn't we approach this the same way your "Starting a business" teachings are done. The assumption should be that I am NOT currently immersed in the investment, market or business world. Outside of doing the initial "research" into the meaning of the vehicles, anything I have to do outside of that is no longer an initial learning investment and is now in the "my job" category.

Let me try to approach this from a different angle. If I do a search on your forums for similar questions as mine, I can pull up multiple threads. Each one ends without a concrete answer. Sounds like a market opportunity! If you are confident in your ability to invest in the market and reap around 5% take home pay (averaged throughout all years), why not offer that as an opportunity? Or even better, why not provide a loan type opportunity.... I guess that is kind of what an Annuity offers, right?
 

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why not offer that as an opportunity?

Already being done. It's called an annuity.

and two...

why not offer that as an opportunity?

Ya mean start another business and deal with stringent government regulations, the SEC, and a swath of employees?

Sure, let me get right on that.
 

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The way I see it; Your reply does more to substantiate my point of view (investing becomes a job) than what I am interpreting is your point of view (it takes minimal work).
Just from my perspective and I could be wrong, but seems from this statement, you are searching for an easy way to learn about finances without making the investment yourself. While M.J. wrote his book gave his message. Since I've been in this forum since I read his first book back in 2014, I've understood one simple thing. M.J.'s my mentor, I value his lead, but this doesn't mean M.J. is going to do the leg work for me and give me every answer along the way about finances, business, entrepreneurship, and hold my hand through the process to make sure I learn all the bits and pieces of being an Entrepreneur.

He points the way bottom line. It's up to the reader to further investigate the topic. Although, I don't argue with him. I just listen to him, understand he obviously knows something, or else he wouldn't be where he is today. And I've grown a lot from this forum. I plan on reading the book this week myself, but still I know to do further research with relying on him to give me the answers and solutions.
 

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Just from my perspective and I could be wrong, but seems from this statement, you are searching for an easy way to learn about finances without making the investment yourself.

I am not. Since everyone is misunderstanding my point, I am obviously not portraying it correctly. I will try again.

Every one of these answers substantiate what I have been saying all along. Investment has to become a side job. This isn't "Now that you made money, the money can make money for you on it's own and you can ride off into the sunset". That is how I interpreted the last part of the book. This is what didn't pass the sniff test for me. Judging off the responses, obviously I misinterpreted. But from my point of view, many people are still selling short just how much 'work' it really is. Many of you just seem blind to that, since it has probably become your hobby and you do not feel like sitting on the forum reading about things is 'work'.

The distinction sounds frivolous, but it is in fact very important. I do not shy from hard work or putting time into things. But at the current time, the ROI on my time is much better spent in my business. The end of the book made it seem like this might not be the case, if it just takes "10 seconds every morning". But I have reaffirmed that it is in fact the case.
 

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See my post above...

What you describe here is certainly possible. The question is what level of return do you need in order to "ride off into the sunset?" This will depend on your starting capital and your "nut" (your expenses).

If you have $10M you're looking to invest and would be happy living on $200K/year, it wouldn't be at all difficult for you to never have to think about working or investing again. But, if you have $2M you're looking to invest and want $500K/year, you're not going to generate that anywhere near passively.

Only you know those two numbers, but based on them, it shouldn't be too tough to figure out whether you're close to be able to "ride off into the sunset" or not...
THANK YOU.

Both of your replies are very clear and are great explanations. I appreciate the time you took to write them. Your explanation is roughly my understanding of the topic, and what I was interpreting from others posts/books seemed to be at odds with it.

Based on my current savings, 2% is enough to live well on and "ride into the sunset". Unfortunately this doesn't account for inflation, which makes the realistic number have to be 5%.

Honestly, I know I will never actually "ride into the sunset". My hands will always itch to do more. I love to learn and I know at a certain stage in my life, learning to invest my money will be a great option. But till then, I guess I will have to accept inflation atrophy on my money as the cost of doing business.
 
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There are 1000's of way to invest your money.

I suggest finding a way that holds your interest and study until you're good at it. Start as small as allowed and scale into it. In time you will naturally be exposed to similar opportunities but just different enough to provide some diversification.

In our case, our rental experience plus some extra study has helped us to expand into MF equity syndicate and debt fund investing.

I appreciated the little bit that @MJ DeMarco put in Unscripted , it validated our plans.
 

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Maybe it's just me, but I wouldn't consider "financial literacy" a new job.

Now, I am not saying you are illiterate, so please don't take that the wrong way.

What I mean is:

You've done a great job at accumulating wealth! Don't you feel like it's in your best interest to learn how to preserve and increase that wealth?

That shouldn't feel like a job. That should be a natural progression and a skill that you can utilize for the rest of your life.

Literally, the best investment you can make at this point in your life.

After all, you can't hire someone and know if they are doing a good job if you are not at least somewhat competent in the area that you hired them for.
 

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Ideas:

Call up a discount brokerage firm and ask for the fixed income specialists. Ask for a bond ladder proposal for X% of your investment portfolio. This will be naturally diversified across various credit ratings, maturities, and industries in order to achieve your target yield. If this is non-retirement fund money, look to incorporate munis to reduce tax liabilities - they should do this anyway.

Throw some into an annuity as well.

Throw some into real estate and hire a property manager.

Invest in other long term alternative investments. Not a fan of crypto and don’t own any myself, but if it’s a long term play why not?

Throw some into ETFs and sell some covered calls expiring 45days out. Profit off of time decay. Maybe you miss out on some upside and it gets called away once every 6 weeks. Who cares? You only want like 5% anyway - you will make that in that scenario. Rinse and repeat.
Maybe it trades sideways? Good, you made premium.
Yes, you can lose everything..if every constituent goes to zero at the exact same time..which I hate to tell you this but if that happens your money will be useless anyway.
If it drops 10%, sweet, buy back your calls for pennies and now sell new ones for higher premium because volatility is up and you’re getting paid more.

If you don’t like any of that, then right back to the original plan - just throw it in an index fund and move on with life.


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It's really odd that you view learning about investing as a chore. As others have said, it is risk vs reward. If you don't want to risk your nest egg and don't want to learn about anything, take the 2% from the bank and be happy.

There are many investments that take a minimal amount of learning in order for you to understand them. Think if you would have put in a few weeks of education 5 years back, your money from 2013 could be worth 5% x 5 years by now. Is this not a reason to learn? You say that you get better ROI investing time in your business, but I would challenge you to do the numbers over the next 10 years and see what the better time investment is today.

And finally, one fairly simple way is to purchase real estate, hire a PM and collect checks and get 4-5% without even really trying.
 

Mattie

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selling short just how much 'work' it really is. Many of you just seem blind to that, since it has probably become your hobby and you do not feel like sitting on the forum reading about things is 'work'.
In my personal situation. I would say from M.J. sharing his story and probably being close in age with me, and similar circumstances, I probably would say, there's an illusion here you're not seeing clearly. Obviously if anyone read his story, "Where did it begin?" Did he ever say anytime it was over night success?

If I remember right the last four years he's always stated, "There's a process." A process means there is a lot of pieces and parts to the equation. If you listen to his video's and other material, he states, "There is no secret sauce, quick fixes, over night success."

I think you have to look at all the material given and the bigger picture of it. How many pieces of the puzzle are there. And yes, the average person will not have the drive, determination, the grit, the self-discipline to work their a$$ off with no short-term gains and short-term rewards. Those of us who get it, are not blind. We're not stupid. And I don't feel he's pulling the wool over my eyes.

I've also watched Entrepreneurs all my life sacrifice their time with family, having fun, and the long-term picture of laying a strong foundation for future generations. Through that whole process and empire is built.

I understand this is a lot of smart choices, educating yourself, applying it, and doing the inner work. If I thought this was my hobby, I wouldn't be in the forum. "Hobby Mindset" and "Entrepreneur Mindset", is two different things. You don't waste your time educating yourself, disciplining yourself, and just do it in your spare time. As a writer myself, that's just part of the job.

You have critics, bad reviews, and your audience picks apart everything you write, because of their specific interpretation of the message. I've had people tell me I don't know what I'm talking about, because they're not at the same level of me in their personal growth, evolution, and psychological development.

Sure, I know what I am talking about, but other's aren't at that level yet, and have false beliefs. There is no perfect way for M.J. or any writer to be perfect in trying to explain whatever subject they're writing and make everyone happy in the audience. He knows that just as much as I do.
 

MJ DeMarco

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initial learning investment and is now in the "my job" category.

Your "job" is to continually educate yourself.

If you're looking for an excuse to stop your education, especially in the world of money management and finance, you're not going to get that from me.

That said, the solution is really simple.

Don't educate yourself in money management and simply go buy an annuity.

Or take 1 to 2% from a bank or money market. (In the last 10 years, it's actually been .05%)

Problem solved.

You'll never have to look at it again, just set the brokerage account to send you $X thousands per month and be done with it.

Just make sure you've stockpiled enough to account for near-zero growth and inflation. Essentially, your "number" would have to nearly double. And this strategy isn't much different than mattress stuffing.

IMO, you can retire from everything but education.
 

e_fastlane

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Thank you guys for all the replies. You have given me alot to think about.

I am NOT one to turn a blind eye to learning. But once again, we all only have so much time and there is more than one direction that learning can occur. I am always reading and learning. So that's not the issue. Deciding what topic to learn about generally comes down to my current priorities and values.

That being said.

Fundamentally I do agree that managing money is where my financial life will eventually lead. So you are right; There is no better time than now to start making progress. My business partner and I have instituted a mandatory 2 hours a day twice a week where we will spend our work time on investment-only topics. I know it doesn't sound like much, but I've found that progress begets progress and we have accomplished alot by simply doing a small actionable step at a time.

It looks like there are alot of investment opportunities to familiarize myself with. So thanks again for the pointers.
 

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HackVenture

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Interesting thread. Also interesting to think that I've been voraciously reading on how to "manage my money" even back when I didn't even have much yet lol.

If you are confident in your ability to invest in the market and reap around 5% take home pay (averaged throughout all years), why not offer that as an opportunity? Or even better, why not provide a loan type opportunity.... I guess that is kind of what an Annuity offers, right?

Lots of people would be willing to provide this "opportunity". Barring regulations etc, it's hard to convince clients to believe it.

I personally know friends who've been burnt 7 figures on deals like this.

Nothing stopping a bad actor from taking your money and going all-in on some shitcoin on the crypto market and praying for 200% returns and giving you 5%; if he loses the bet, he loses nothing and is thus incentivised to be super aggressive.
 

e_fastlane

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Two things to keep in mind:
I don't know how old you are, but it seems like you're young (or relatively young). It's likely that in the next several years, interest rates will rise, which means that fixed interest, low-risk investments (again, like CDs, treasuries, bonds and even savings rates) will likely generate returns that outpace inflation.

I'm old enough to remember 5% savings accounts but young enough for it to be a small blip on my radar when I was younger and now forgotten. So you are right that a majority of my financial life has been exposure to terrible low risk investment returns.

Interesting thread. Also interesting to think that I've been voraciously reading on how to "manage my money" even back when I didn't even have much yet lol.



Lots of people would be willing to provide this "opportunity". Barring regulations etc, it's hard to convince clients to believe it.

I personally know friends who've been burnt 7 figures on deals like this.

Nothing stopping a bad actor from taking your money and going all-in on some shitcoin on the crypto market and praying for 200% returns and giving you 5%; if he loses the bet, he loses nothing and is thus incentivised to be super aggressive.
I agree and that's why I believe that the investment manager should have 'skin in the game'. But of coarse that's an entirely different topic.
 

Elif

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I just checked, you had the same question a year ago. What steps have you taken since then with all the advice that was given?
 

Ozz81

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I can tell you about my personal experience. Then you can judge if the path I took suits you or not.

I used to have my own business. The profit it generated were much higher than my and my family's expenses, so it allowed us to accumulate a lot of capital.

It came at a cost. 10 to 14 hours a day, a lot of stress and anxiety, sleepless nights and a constant feeling that life was happening somewhere else while I was busy working.

I got the opportunity to sell my business. I did the math: is a 3-4% of what I'm getting from the sale enough to sustain my and my family's expenses, without touching the principal and without touching my previous savings?

The answer was yes and I took the deal.

After that, I researched for an "out of the box" strategy to manage my money. Searched the internet, talked to many wealth managers and private bankers. Found NOTHING tailored to someone in my situation.

The best thing I read is the chapter in Unscripted , which is very general and brief. But I used it as a blueprint.

Then I spent 18 months studying and researching. I read books, blogs and newsletters. After that, I came up with a strategy that, I believe, suits my needs and allows me to sleep well at night. I also selected a wealth manager that acts as a partner/consultant and not as a "Trust me, I take care of everything for an X% fee, whether you earn something or not" scammer.

Now my "job" is reading 3-4 newsletters per month and check my dividend portfolio with my advisor once every quarter.

In terms of "earnings", my time was much better spent in my business. In terms of quality of life, I feel 100 times better than a king now!

No, having money does not free you from keeping learning and educating yourself. And nothing in life is 100% passive. But this is something that comes pretty close to it.

Is it the best path for everyone? Definitely no. I know people that would go crazy for not being busy and hard working all the time. That's just not me.

If you enjoy what you are currently doing, start educating yourself in money management as a hobby, so you'll be ready when the time comes. But if you have enough money to live off a 3-4-5% of your principal, you don't need to become a hedge fund manager. you don't need to grow your capital 20% per year taking irresponsible risks. You can buy safe and stable companies and just cash the dividends. And 3-4 times a year, you just check that your companies are still doing fine, otherwise you sell and you buy something else.

I hope my experience can help clear the confusion you seem to have in your mind!
 

Ozz81

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Oh, and while you wait to decide what to do, there's nothing wrong sitting on a pile of cash!

If your expenses are 100% in US Dollars, you can simply buy a ladder of short term T-Bills and earn a 2.something% per year with very low risk!

I would do 25% cash, 25% 1-month t-bill, 25% 2- month t-bill and 25% 3-month t-bill. When the 1-month bill expires, you buy a new 3-month bill.

This way you are 100% liquid in 3 months without exposing yourself to interest rates fluctuations that could affect your principal. This is how I manage my cash dollars. Can't do the same with Euros and Swiss Francs because rates are way below 0%...
 

Kevin88660

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The last part of Unscripted hit really close to home for me, as I have needed to start making money on my money years ago already. The issue is that I have been too busy making money in my business instead (or enjoying my free time). This results in 7 figures sitting in cash and withering away it's value to inflation.

MJ makes everything seem very simple and easy...However I feel like there is a lot glossed. Which is fair considering Unscripted is not an investment book. But to be honest, it left me more lost than when I began.

Some inconsistencies:

1.
On the one hand: We should just be able to follow some simple rules and something like 5% year after year is very easy to get.

On the other hand: Someone must have not told the guys that do this for a living, since all the funds lost their asses during the crash. (Even the "top dogs").​
2.
On the one hand: I need to be in the know enough about the state of the economy and different industries I am investing in so I can manage the money intelligently.

On the other hand: MJ says he just takes a daily "10 second portfolio peek". It seems like this glosses over all the leg work in the background that has to happen for some days to be just a peek.​
3.
On the one hand: I recognize that there is no free lunch and I need to do my own research.

On the other hand: It sounds like "unscripted " means the goal is to go from business owner to professional financial adviser (of myself).​
4.
On the one hand, I believe MJ and how well he has been doing.

On the other hand: The stock market has just been in a crazy rally for almost a decade and most people made money even with poor decisions.​

Now switch gears to my problem. My time is still best spent investing into my business and not figuring out investing. If it was so low risk and easy, then this service would just be offered. To an average bystander, it seems like this exact service is offered. They call themselves financial advisers, portfolio managers or simply the guys that run funds. So where are the guys that are actually competent? Not everyone is the fresh graduate with only book knowledge. They supposedly have the same ideas of diversification (hence why a fund owns so many different stocks). How can I give someone all my money and get a guaranteed 4% back every year and let them keep the rest? I'm begging to give them my money!

The biggest thing I see wrong in the financial industry is there is no Skin in the game. They make money regardless of whether they make me money. Are there any firms or advisers out there that only make a percent of profit? I would be willing to let them make alot of money from me.

On the other hand..... I doubt banks are giving mortgages for 3.5% if they thought they can make 4% somewhere else........So the best I've been able to make of the situation is that unless I want to start working as a hedge fund manager as my 'retirement' job, I have to keep making money till I have enough to amortize over the rest of my life. Which is unfortunately a much bigger number. Can anyone provide any words of wisdom to straighten me out?
I am a financial adviser. I will be knocking on the prospect’s door daily If I know he has seven figures sitting in the bank. :)

Mj’s paycheck pot is more sophisticated. It is for the financial savvy types who actually trade in the market. I personally invest and trade heavily in Asian equities now (high yield stocks and etf) because of the more reasonable valuation compared to U.S. equities. There is always risk but as long as you know what you are doing. Knowing that the worst case scenario (though unlikely) is still bearable is something that keep me sleep well at night.

If you have a trusted investment adviser it is not a difficult thing. He charges you a fee as a percentage of the AUM, for instance one percent. What happens later is that he will allocate your money into financial market instruments based on your goal and risk appetite.

If you are looking for a “guaranteed” four percent the closet you can get to is to invest in diversified corporate debts ETF (USD denominated). It’s low cost, liquid, and you have a wide exposure. You do not really need an adviser for such a simple strategy and you just need some efforts to self-study on the subject matter. Basically imagine yourself lending money to hundreds of companies for 4 percent interest and most of them are not going to default on you.

I recommend you to look into corp debt ETF. The broker that I recommend is interactive broker. You need time to familiarize with the DIY system but they offer the best deals-lowest trading commission and best interest for your idle money sitting in the brokerage account. But be prepared to at least spend 3-6 month to familiarize with all these.
 

Kevin88660

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I've never understood why financial advisers charge as a percentage of AUM, as opposed to a percentage of profit/growth relative to some baseline index that represents public equity market returns?

Well, obviously I understand WHY they do it -- they do it so that they don't have to invest successfully to earn a paycheck.

But, I don't understand why the general public accepts this structure for financial management. Why should someone get paid to manage money if they can't beat the S&P or some other index that is simple for the general public to invest in.

Long story short, I'd never take investor money where my returns weren't directly tied to theirs; and I'd never invest money with someone who didn't have their financial interests aligned with my own.
Yes partly you are right they need a paycheck regardless of how he market performs.

But the main reason as I see it is how much your portfolio gains in one year has very little to do with the financial adviser.

Just for example at 2016 year end if a client sees an advisor and the client says that he is high risk taker. He is willing to suffer a large drawdown in a bad year in return for long term growth. The advisor recommends a portfolio with a heavy concentration in growth stocks and exposure to technology. Next year the Trump tax cut lead to a huge rally in equity in 2017. The high risk portfolio gained 35 percent. It is not much due to credit of the advisor that so much money is made in that year. It is large due to the ability of the client to take risk and in a good year he will do very well. It would not be fair for the client to give a high performance fee to the adviser just for the gain in that year.

In short the adviser is being paid for his advisory. The client ultimately is the one fighting for the war. The adviser helps to provide his knowledge and experience. He gives the client a menu of different strategies and tell him what is the pro and con of different investment strategies. He gives a recommendation based on the client’s risk appetite and preference but it is ultimately the client’s decision in what to invest.

For instance the client has some new money coming in and he wish to top up his investment. The client may ask himself and the adviser if he should top up now or wait for trump to do something stupid and the market goes lower. Such decision will affect his return for that year but in all likelihood it is a guessing game. Neither the client nor the adviser knows the answer to that questions.
 

Kevin88660

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If you looking for performance based funds to invest then you have to look into hedge fund and managed accounts (traders who manage your money).

This is the space of “active investing” whereby the investment team actively monitor the market to make money for you. They are supposed to generate a return regardless of how the broad market moves. If you make a call to your private banker they will be very happy to introduce funds managed by their proprietary trading team.

But if you study the details of such funds I guess you would probably not like to invest your money into them. This is because such funds are costly. You pay a performance fee ON TOP of the annual management fee to them.

The active investment space is perceived by the investment community as largely a disappointment. People did the research and realized the extra gain they provide was not worth of the fee over the years.

Now the trend is moving towards passive investing- Do it yourself to buy and hold low cost instruments. If the client is not comfortable to totally do it by himself and needs a guiding hand, which is case for most clients, they would prefer to have a investment adviser to teach then how to do it.
 

Kevin88660

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Sorry I miss read your question. You said why not they charge a fee based on superior performance relative to a baseline index. No body dares to do it. That is a good question.

The closest you can get is to have your money run by managed accounts. You get your money managed by math and computing PHD who run algorithms to make money for you. They get nothing if they do not make money. In return they charge you 20-30 percent on any profit made. They charge you a high performance fee to compensate for not having a management fee.

At end of the day I guess the fund managers want to cover their downside as well.
 

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