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GOLD! INVESTING Personal Rules to Avoid Losing Your Wealth

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A question primarily for those who have amassed at least six figures in savings - do you have any personal rules to protect yourself from stupid decisions that will make you lose your wealth?

For example, here are a few basic rules I follow:
  • I don't gamble or invest in anything resembling it (including very high risk investments). I may possibly (maaaaybe) consider investing 5-10% of my net worth in riskier projects in the future (like angel investing) but otherwise I'd never invest any considerable amount of money in anything where it's very likely to lose your entire investment (even if the upside can be 10x).
  • I don't invest in companies/opportunities without a solid background. @MJ DeMarco talks about it in Unscripted (the apocalypse rule). I believe a lot of celebrities have lost a lot of money because they didn't follow this rule and invested in a Ponzi scheme.
  • I educate myself and calculate risks before investing in anything. And if I can't understand it or can't calculate risks, I don't invest in it. Even if it's super hot and everyone talks about it (like crypto).
  • I prioritize diversification over returns. So for example, I'd rather invest in three rental properties than one (I don't have any rental properties at the moment) to spread my risk over three locations. I do the same with P2P loans (secured by mortgage) where each loan is just a small percentage of the entire portfolio.
  • I prefer income investing over capital gains investing. That's primarily because income is usually predictable and I prefer monthly cashflow (and live off it) to some unrealized uncertain capital gains. That's why I'd rather invest in a boring dividend stock or REIT than a "hot" new technology stock.
  • I don't buy anything for status. That's actually because of my personality and not because I set it as a financial rule but it's still very important nonetheless. I'm very utilitarian and don't care about stuff that's primarily sold for personal image reasons (like expensive cars, designer clothes, jewelry, etc.). I think this is the most common reason why people lose their entire wealth, even if it's seven or eight figures (like pro athletes).
With some of these rules I'm probably more risk-averse than an average investor. But I'd rather earn less from my money than make a stupid decision. And if I want to make more money, instead of looking for a (dubious) 20% "passive" return from something high-risk, I'd rather just create a new income stream where my ROI will be 10-100x or higher.

What are your rules?
 
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Here are some of my rules, thinking off the cuff...
  1. Having your cash lose 5% from inflation is better than losing it 100% from a bad investment.
  2. Trust no one who doesn't have to be accountable for their actions or isn't subject to a minimal amount of governance -- sometimes bigger is better.
  3. A fancy website and slick copywriting doesn't mean its legit.
  4. Invest in what you know, but learn to expand what you know...
  5. The more complicated an investment, the better probability it will end up as a method and the means for bad actors to scam the uneducated.
  6. If everyone is doing it, I won't be doing it -- or better, I'd approach it from the "shovel" perspective. (Sell shovels in the gold rush).
  7. Try to keep liquidity at least 30 days away, best case, 1 day.
  8. Always make sure the worst case scenario (black swans) doesn't put you back into the poorhouse-- if the "worst case" has you looking for a job, you're poorly diversified and rolling dice.
  9. Would you sell and take gains if the actual cash was in front of you? And not a number on a computer monitor? (See picture)
  10. Beware of Diodetic expenditures -- buying a Lambo causes a lot more expenditures outside of the cost of the car itself -- gas, insurance, maintenance, car washes, etc.
  11. The better investment will always be something you can control, vs something you cannot.

IMG_2496 copy.jpg
 

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1. Always use a logical and mathematical model.

2. Stay in control and aware of your emotions.

3. Be driven by economic principles like utility and efficiency. Don’t fall prey to easy and vague returns or investments.

4. Money is made where scarce resources intersects with scare money meeting an inefficiency . Buyers and sellers.

5. Don’t be greedy. Don’t be materialistic.

6. Only invest in markets that are experiencing price distortions, disequilibriums and inefficiencies.
 
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MJ DeMarco" data-source="post: 932969" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
Always make sure the worst case scenario (black swans) doesn't put you back into the poorhouse-- if the "worst case" has you looking for a job, you're poorly diversified and rolling dice.

This is my favorite of yours. Excellent.

Here’s mine:

1. Understand the world around you and know why you are investing what you are investing in. You are not smartest person alive for engaging in groupthink.

“You have to bet against the consensus and be right to be successful in the markets” -Ray Dalio

Don’t be too much of a contrarian either. Ocean tides are hard to fight.

2. You don’t have to spend your own money on your ventures, in fact, you should probably minimize this. There are other people that care a lot less about (insert amount that is a lot to you) than you do and would rather have an opportunity than boring idle market crap.

3. Once you earn your money, it is your’s, not your business’. Treat them separately. If money has to go back into the business, consider if that is an investment you would make in someone else’s company. If not, you have some things to fix.

4. Buy shit that you can afford. I don’t care if it is a new car, a used car, a lease or financing, buy stuff that you don’t have to think about affording. Cars, homes, jets, yachts, whatever...

5. I favor a lifetime of steady accumulation over boom and bust. Yeah, I missed the 957473773% upside in Bitcoin, and the last 6 months has left me barely up, while WSB people with 3 brain cells have beaten me senseless. So what? I’m playing a different game.

6. Lol, Don’t compare yourself to others. You’ll make suboptimal decisions.

7. Don’t do things today at the expense of tomorrow.

8. Once you get to a place where you could quit if you wanted to, don’t ever give that up. Just upgrade within it. Maintain control.

9. Don’t let the world beat the fire out of you. Confidence waxes and wanes, but find reasons to appreciate your past decisions and enjoy today. Be confident, and if you aren’t, you need to find reasons to be confident.

10. Don’t be over confident. No one likes a douchebag that talks about the glory days.

11. Believe in the goodness of what you do. You are not evil for making a lot of money. On the contrary, if you engaged in win-win value exchanges, you made the world a better place.

12. Build your influence and reputation with your wealth. Not one at the expense of the other.
 
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biggeemac

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8. Once you get to a place where you could quit if you wanted to, don’t ever give that up. Just upgrade within it. Maintain control.
I'm trying to understand this statement as I am literally exploring what "after the day job" will look like for me. Its time for me to make a decision and I would like to understand what you are saying here.
 

Kak

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I'm trying to understand this statement as I am literally exploring what "after the day job" will look like for me. Its time for me to make a decision and I would like to understand what you are saying here.

It’s “screw you”

At some point, hopefully you’ll realize you have enough investment income and average growth that you could literally live the rest of your life without working and still die with more money than you have today.

Don’t do anything to jeopardize that once you have it. It is super simple math. Buying anything that lowers that principle to a level where the income and growth no longer exceeds your expenses means you are pissing it away.

Spending half or less of even your investment income and still running companies? You’re going to be one rich bastard in a few decades.
 

biggeemac

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It’s “screw you”

At some point, hopefully you’ll realize you have enough investment income and average growth that you could literally live the rest of your life without working and still die with more money than you have today.

Don’t do anything to jeopardize that once you have it. It is super simple math. Buying anything that lowers that principle to a level where the income and growth no longer exceeds your expenses means you are pissing it away.

Spending half or less of even your investment income and still running companies? You’re going to be one rich bastard in a few decades.
Oh ok.....yeah our business nets us like 5x my day job. I think I'm about ready to jump ship. Thanks for the breakdown.
 

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A question primarily for those who have amassed at least six figures in savings - do you have any personal rules to protect yourself from stupid decisions that will make you lose your wealth?

For example, here are a few basic rules I follow:
  • I don't gamble or invest in anything resembling it (including very high risk investments). I may possibly (maaaaybe) consider investing 5-10% of my net worth in riskier projects in the future (like angel investing) but otherwise I'd never invest any considerable amount of money in anything where it's very likely to lose your entire investment (even if the upside can be 10x).
  • I don't invest in companies/opportunities without a solid background. @MJ DeMarco talks about it in Unscripted (the apocalypse rule). I believe a lot of celebrities have lost a lot of money because they didn't follow this rule and invested in a Ponzi scheme.
  • I educate myself and calculate risks before investing in anything. And if I can't understand it or can't calculate risks, I don't invest in it. Even if it's super hot and everyone talks about it (like crypto).
  • I prioritize diversification over returns. So for example, I'd rather invest in three rental properties than one (I don't have any rental properties at the moment) to spread my risk over three locations. I do the same with P2P loans (secured by mortgage) where each loan is just a small percentage of the entire portfolio.
  • I prefer income investing over capital gains investing. That's primarily because income is usually predictable and I prefer monthly cashflow (and live off it) to some unrealized uncertain capital gains. That's why I'd rather invest in a boring dividend stock or REIT than a "hot" new technology stock.
  • I don't buy anything for status. That's actually because of my personality and not because I set it as a financial rule but it's still very important nonetheless. I'm very utilitarian and don't care about stuff that's primarily sold for personal image reasons (like expensive cars, designer clothes, jewelry, etc.). I think this is the most common reason why people lose their entire wealth, even if it's seven or eight figures (like pro athletes).
With some of these rules I'm probably more risk-averse than an average investor. But I'd rather earn less from my money than make a stupid decision. And if I want to make more money, instead of looking for a (dubious) 20% "passive" return from something high-risk, I'd rather just create a new income stream where my ROI will be 10-100x or higher.

What are your rules?
Debt will make you a dead duck! Since I'm in the RE business, I've had to use debit over the years to finance properties and projects. And it has bitten me on the butt a few times -- from which I learned very hard lessons. I understand how to use leverage, but I'm very head-shy about those payments. Yes, I had a lot of people around me give me lectures on why I should take on debt because I could realize a higher gain. Uh????

Fly under the radar I try to NOT stand out in the crowd. Buying stuff that is flashy to show other people how successful I am would be stupid.
First of all, I'd be putting a target on my back to attract grifters and opportunists. I need friends who care about me -- not a bunch of leeches following me around.
A lot of this glitzy stuff has a very short life. It's mega cool today and then tomorrow it's last year's Christmas trash. And that rating is based upon the opinion of other people over which I have no control.
So, the bottom line is, why would buy expensive stuff, that is probably worthless tomorrow, spending my hard-earned money rather than investing it, to impress people that don't care about me or want to take away what I have earned?

No one will take care of your investments as you will. I find that a lot of people have a steady stream of investment advice. And, yes, I listen UNTIL they put their hand out for a fee, investment money or they try to take control. Like a great man said, "The buck stops here." It's my money that is being invested, and therefore my decision.
 

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All you anti status items people are making me feel bad about wanting a Masarati. :rofl:
 
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All you anti status items people are making me feel bad about wanting a Masarati. :rofl:

There's a big difference between wanting one -- and being able to really afford one. Most drivers of expensive cars really can't afford them. They are financed or rented. Time and success tend to temper one's spending.
 

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Lots of good ones posted, not much to add.

Invest in simple until you understand the advanced.

Never invest money that my family might need tomorrow.

Always have the spouse on board before making bigger investments. If I cannot convince her, than I need to take another look at the investment or how I am explaining it to her. She can be wary and not fully understand, but having her agree usually saves me from looking past bad data or red flags that I cannot realize on my own.
 

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There's a big difference between wanting one -- and being able to really afford one. Most drivers of expensive cars really can't afford them. They are financed or rented. Time and success tend to temper one's spending.
Exactly. There are companies and individuals who can live “within their means” and still afford supreme luxury.

It’s just that most people who have such luxuries can’t actually afford them. But there are people who can!
 

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All you anti status items people are making me feel bad about wanting a Masarati.

As you get older, you will understand. At 31, you're still a spring chicken who probably isn't contemplating "end of life" scenarios too often -- the older I get, the more and more the luxury car thing starts to lose its appeal.
 

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What I realized is that the only way to lose/spend large chunks of money is through bad investments. How else do you lose $100k? You aren't really going to spend yourself broke.

I don't think I have any rules that I go by. What I do is run a bunch of scenarios in my head on what could happen if I make this investment. If I'm ok with all the possible outcomes then I feel pretty comfortable investing.

With most investments, the worst possible case is that you lose ALL of your money. Are you ok with it if that happens? Then you look at the best possible case. Then you apply some probabilities to each scenario and think it through.

For example, let's just take crypto. Just some random one and I invest $1000.
50% it goes to $0
40% it goes to $2000
9% it goes to $10000
1% it goes to $100,000
You are assigning these percentages based on your own knowledge after gathering all the data. It doesn't matter what everyone else is saying. It is up to you to decide after if this is worth investing $1000.

Or let's look at real estate. Buy a place for $500k.
Scenario 1: Home values drop to $250k, you can't rent it, not worth saving, goes to foreclosure.
2: Home values remain the same, you rent it
3. Home values go up by 100%, you rent it
4. Home values drop, you can't rent it, but maybe you vacation rent it
5. Home values drop, you can't rent it, but you move into it.
There are many scenarios, but you really need to just think of 5-10 possibilities.
 

WJK

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What I realized is that the only way to lose/spend large chunks of money is through bad investments. How else do you lose $100k? You aren't really going to spend yourself broke.

I don't think I have any rules that I go by. What I do is run a bunch of scenarios in my head on what could happen if I make this investment. If I'm ok with all the possible outcomes then I feel pretty comfortable investing.

With most investments, the worst possible case is that you lose ALL of your money. Are you ok with it if that happens? Then you look at the best possible case. Then you apply some probabilities to each scenario and think it through.

For example, let's just take crypto. Just some random one and I invest $1000.
50% it goes to $0
40% it goes to $2000
9% it goes to $10000
1% it goes to $100,000
You are assigning these percentages based on your own knowledge after gathering all the data. It doesn't matter what everyone else is saying. It is up to you to decide after if this is worth investing $1000.

Or let's look at real estate. Buy a place for $500k.
Scenario 1: Home values drop to $250k, you can't rent it, not worth saving, goes to foreclosure.
2: Home values remain the same, you rent it
3. Home values go up by 100%, you rent it
4. Home values drop, you can't rent it, but maybe you vacation rent it
5. Home values drop, you can't rent it, but you move into it.
There are many scenarios, but you really need to just think of 5-10 possibilities.
I have known people who have spent themselves broke. And some had famous names. They got trapped into a lifestyle that they couldn't sustain. The collection of big houses, the cars, the army of household and security staff, the exotic vacations, the private schools for the kids, the club membership dues, and their persistent shopping habits brought them to their knees...
I have also seen people work for years and feel like they finally made it. They had reached their milestone. I used to watch as men traded in their wives, who helped them build the business, for the office bimbo. Another move was when they got a big boat or a plane. These changes are usually followed by a perpetual vacation. These once successful men went from being on top of the world to many times losing everything.
I agree with you that you must run through a worst-case scenario before you can make a decision.
One factor you didn't weigh into your analysis is the mix of your portfolio. Your investments do not stand alone. I found out the hard way during the Rodney King riots in Los Angeles. They burned down a few of our commercial buildings. Fire insurance doesn't work during "civil unrest" and the bank still wants their money for the mortgages. Another situation was owning multi-family residential properties when the market values in that whole sector tanked.
 

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All you anti status items people are making me feel bad about wanting a Masarati. :rofl:

@MJ DeMarco @WJK make a great argument.

If you "need" a luxury or exotic vehicle. Make sure it something that will retain its value.

For example:
  • Manual Gallardo
  • Manual R8
  • CLK63 Black Edition
  • Exige
  • Elise
  • DB7GT (Not a Maserati. A forgotten V-12 coupe.)
  • 360 spider stick
  • Ford GT
While those cars may seem fun to drive. Or a "status" symbol.

I am classic car guy through and through.

A 67 Camaro would fit the bill nicely.

Although, the Ford GT, would be a great candidate, as well.
 

WJK

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@MJ DeMarco @WJK make a great argument.

If you "need" a luxury or exotic vehicle. Make sure it something that will retain its value.

For example:
  • Manual Gallardo
  • Manual R8
  • CLK63 Black Edition
  • Exige
  • Elise
  • DB7GT (Not a Maserati. A forgotten V-12 coupe.)
  • 360 spider stick
  • Ford GT
While those cars may seem fun to drive. Or a "status" symbol.

I am classic car guy through and through.

A 67 Camaro would fit the bill nicely.

Although, the Ford GT, would be a great candidate, as well.
I had a client, Jack, who was into multi-family buildings. When he met with a seller or a buyer, he always showed up in one of his classic cars. If they agreed to his price, he'd throw the classic car into the deal as a "sweetener". Jack bought buildings at the bottom of the market and he sold at the top. He made amazing RE deals and he was always restoring more cars.
 

classichouse

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I used to think that it was important to achieve the best result, for example in a sale (real estate), and to take it into my own hands. Problem with the story is a high price written next to my name. In socialist Germany, this can cause you real problems: blackmail, envy and physical threats.

That is why it is better nowadays to sell a property through an agent and to support him "with an invisible hand". Anonymity, data protection and a humble appearance are an important part of being able to live in peace and freedom.
 

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A question primarily for those who have amassed at least six figures in savings - do you have any personal rules to protect yourself from stupid decisions that will make you lose your wealth?

For example, here are a few basic rules I follow:
  • I don't gamble or invest in anything resembling it (including very high risk investments). I may possibly (maaaaybe) consider investing 5-10% of my net worth in riskier projects in the future (like angel investing) but otherwise I'd never invest any considerable amount of money in anything where it's very likely to lose your entire investment (even if the upside can be 10x).
  • I don't invest in companies/opportunities without a solid background. @MJ DeMarco talks about it in Unscripted (the apocalypse rule). I believe a lot of celebrities have lost a lot of money because they didn't follow this rule and invested in a Ponzi scheme.
  • I educate myself and calculate risks before investing in anything. And if I can't understand it or can't calculate risks, I don't invest in it. Even if it's super hot and everyone talks about it (like crypto).
  • I prioritize diversification over returns. So for example, I'd rather invest in three rental properties than one (I don't have any rental properties at the moment) to spread my risk over three locations. I do the same with P2P loans (secured by mortgage) where each loan is just a small percentage of the entire portfolio.
  • I prefer income investing over capital gains investing. That's primarily because income is usually predictable and I prefer monthly cashflow (and live off it) to some unrealized uncertain capital gains. That's why I'd rather invest in a boring dividend stock or REIT than a "hot" new technology stock.
  • I don't buy anything for status. That's actually because of my personality and not because I set it as a financial rule but it's still very important nonetheless. I'm very utilitarian and don't care about stuff that's primarily sold for personal image reasons (like expensive cars, designer clothes, jewelry, etc.). I think this is the most common reason why people lose their entire wealth, even if it's seven or eight figures (like pro athletes).
With some of these rules I'm probably more risk-averse than an average investor. But I'd rather earn less from my money than make a stupid decision. And if I want to make more money, instead of looking for a (dubious) 20% "passive" return from something high-risk, I'd rather just create a new income stream where my ROI will be 10-100x or higher.

What are your rules?
My Philosophy is not trying to win the war through a single battle. Never all in or invest too heavily on one bet.

Right now we are living in an era where people are seeing extreme gains in penny stocks and alt coins.

Stories are going viral on how a yolo bet that goes right become life changing. Even in a bullish market like this such stories have a strong survivalship bias.
 
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So cool to see this thread is now GOLD! So many great responses!

MJ DeMarco" data-source="post: 932969" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
Having your cash lose 5% from inflation is better than losing it 100% from a bad investment.

I love this rule. My friend doesn't understand why I'd rather lose some money by keeping it in the bank than risking it by rushing with an investment (even in something relatively safe).

MJ DeMarco" data-source="post: 932969" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
Try to keep liquidity at least 30 days away, best case, 1 day.

Do you say no to rental properties then?

MJ DeMarco" data-source="post: 932969" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
Always make sure the worst case scenario (black swans) doesn't put you back into the poorhouse-- if the "worst case" has you looking for a job, you're poorly diversified and rolling dice.

I assume this doesn't include the worst worst case scenarios like a complete collapse of the financial system and the stock market? Otherwise almost every stock market investor wold break this rule. And actually everyone because it's all digitalized now...

12. Build your influence and reputation with your wealth. Not one at the expense of the other.

SOLID.

Fly under the radar I try to NOT stand out in the crowd. Buying stuff that is flashy to show other people how successful I am would be stupid.
First of all, I'd be putting a target on my back to attract grifters and opportunists. I need friends who care about me -- not a bunch of leeches following me around.
A lot of this glitzy stuff has a very short life. It's mega cool today and then tomorrow it's last year's Christmas trash. And that rating is based upon the opinion of other people over which I have no control.
So, the bottom line is, why would buy expensive stuff, that is probably worthless tomorrow, spending my hard-earned money rather than investing it, to impress people that don't care about me or want to take away what I have earned?

This post will resonate with you (the entire blog probably not but they do have some interesting thoughts):

MJ DeMarco" data-source="post: 933019" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
As you get older, you will understand. At 31, you're still a spring chicken who probably isn't contemplating "end of life" scenarios too often -- the older I get, the more and more the luxury car thing starts to lose its appeal.

Alternatively, read Michael A. Singer and all this stuff will lose appeal instantly. No need to wait to get older. :happy:

I don't think I have any rules that I go by. What I do is run a bunch of scenarios in my head on what could happen if I make this investment. If I'm ok with all the possible outcomes then I feel pretty comfortable investing.

Awesome breakdown of your thinking process, thanks!

I used to think that it was important to achieve the best result, for example in a sale (real estate), and to take it into my own hands. Problem with the story is a high price written next to my name. In socialist Germany, this can cause you real problems: blackmail, envy and physical threats.

Does you name go on record somewhere public just because you sold a piece of real estate?

My Philosophy is not trying to win the war through a single battle. Never all in or invest too heavily on one bet.

Love this comparison!
 

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Do you say no to rental properties then?

Absolutely zero interest.

Been there, done that. I don't want management hassles, whether it's management of tenants, or management of property managers, not interested.

The amount of effort required to just cash flow a few hundred bucks a month was ridiculous, not to mention whenever a big maintenance expense popped up, like a new $8,000 AC system. After trading options for over a decade, I find the SFH RE an avenue of cash flow (and appreciation) to be far too intensive for the return. Of course, this is in reference to single family homes.

I can sell a couple of option contracts per month and get the same yield at 100X less risk and capital tie up.
 

redshift

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I found this video relevant to the discussion here. He talks about some of the points made above and is similar to my thought process as well.

View: https://youtu.be/a_8jOkj-9bg


Despite the title, he's not talking about the slowlane lol.

Other than that, my rules are basically this -

1) Only invest in something I would enjoy spending 1000's of hours learning about and being involved with.

2) Not invest in anything which has the potential to send me backwards, i.e to the slowlane or sidewalk (eg: debt, leverage, short selling etc).

If those two check out, then go all in and not be afraid of losing capital at the cost of experience, adjust strategy along the way.
 

MTF

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MJ DeMarco" data-source="post: 933146" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
Absolutely zero interest.

Been there, done that. I don't want management hassles, whether it's management of tenants, or management of property managers, not interested.

The amount of effort required to just cash flow a few hundred bucks a month was ridiculous, not to mention whenever a big maintenance expense popped up, like a new $8,000 AC system. After trading options for over a decade, I find the SFH RE an avenue of cash flow (and appreciation) to be far too intensive for the return. Of course, this is in reference to single family homes.

I can sell a couple of option contracts per month and get the same yield at 100X less risk and capital tie up.

I was considering investing in real estate recently and the best yield I could find was 6% with a property manager. Of course, there's also appreciation, but it doesn't change the fact that it's a small return for what is still a potential hassle. I don't need to do anything with my dividend stocks and some return 6% as well (plus appreciation, too). And they're very unlikely to stop paying the dividends and it's not like if the company breaks something, I have to pay to replace it and potentially lose my income for the past several months...

But I can't help but think that real estate is one of the pillars of lasting wealth. Perhaps I should just explore other types of real estate that would be more interesting and less of a headache to me. Though, for example, land investing rarely generates cashflow and, as I mentioned in my first post, I don't really like investments that are all about capital gains.

I found this video relevant to the discussion here. He talks about some of the points made above and is similar to my thought process as well.

View: https://youtu.be/a_8jOkj-9bg


Despite the title, he's not talking about the slowlane lol.

Other than that, my rules are basically this -

1) Only invest in something I would enjoy spending 1000's of hours learning about and being involved with.

2) Not invest in anything which has the potential to send me backwards, i.e to the slowlane or sidewalk (eg: debt, leverage, short selling etc).

If those two check out, then go all in and not be afraid of losing capital at the cost of experience, adjust strategy along the way.

Nice video, the guy has a very enjoyable casual charismatic public speaking style.

Which investments do you think potentially require thousands of hours of learning and being involved with?

By the way, this is what makes me reluctant to invest in rental apartments. I really don't care about apartments, don't know all the laws, traps, hidden costs, construction details I should know about, etc., and barely do any maintenance work in my own apartment lol.
 

biophase

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I was considering investing in real estate recently and the best yield I could find was 6% with a property manager. Of course, there's also appreciation, but it doesn't change the fact that it's a small return for what is still a potential hassle. I don't need to do anything with my dividend stocks and some return 6% as well (plus appreciation, too). And they're very unlikely to stop paying the dividends and it's not like if the company breaks something, I have to pay to replace it and potentially lose my income for the past several months...

But I can't help but think that real estate is one of the pillars of lasting wealth. Perhaps I should just explore other types of real estate that would be more interesting and less of a headache to me. Though, for example, land investing rarely generates cashflow and, as I mentioned in my first post, I don't really like investments that are all about capital gains.



Nice video, the guy has a very enjoyable casual charismatic public speaking style.

Which investments do you think potentially require thousands of hours of learning and being involved with?

By the way, this is what makes me reluctant to invest in rental apartments. I really don't care about apartments, don't know all the laws, traps, hidden costs, construction details I should know about, etc., and barely do any maintenance work in my own apartment lol.
You may find this discussion interesting.

View: https://youtu.be/u1rXNTbFm-s
 

MTF

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You may find this discussion interesting.

View: https://youtu.be/u1rXNTbFm-s

Awesome video with some incredible lessons.

Key takeaways:
  • no more than 20% of your portfolio in each asset class
  • no sector more than 20%
  • no stock more than 5%
  • more than 30% in cash
  • no debt
I've also learned that Kevin O'Leary shares my sentiment to invest only in cashflow-producing investments:

Moser: Kevin, before we wrap things up today, we always are very interested to know the investors that we speak with. We like to know the investors that have had an impact in your life. Throughout your entire investing life, what investors have had an impact on you and why?

O'Leary: There is one, Charlie Munger. Charlie Munger is my guy. I mean there's nothing wrong with Warren Buffett, but you want to know where all that philosophy comes from and who keeps Warren Buffett on a straight track? It's Charlie Munger. He has two words, cash flow.

Moser: [laughs]

O'Leary: Cash flow. That's what he believes in. My whole investment strategy is built around cash flow. I have a little Charlie Munger on my shoulder every day when I look at a deal and he's just saying two words, "Cash flow. Cash flow." He's right. He is the most astute balance sheet guy in the world. No BS guy, says it the way it is, you can't sell him crap, it's impossible. Does it keep them out of speculative situations? Yeah, there's many stocks that, probably, had fantastic returns but because he stays onto the straight and narrow on cash flow, he is an incredibly wealthy and successful man. You can't go wrong with cash flow.
 

Sethamus

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Awesome video with some incredible lessons.

Key takeaways:
  • no more than 20% of your portfolio in each asset class
  • no sector more than 20%
  • no stock more than 5%
  • more than 30% in cash
  • no debt
I've also learned that Kevin O'Leary shares my sentiment to invest only in cashflow-producing investments:
Kevin recently talk about how he is joining the crypto movement, though he had specific rules for how he was going to. Virgin coins by investing in mining operations that are more sustainable (only in cold weather) and a few more I didn’t really pay much attention to.
 

Ing

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MJ DeMarco" data-source="post: 933146" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch">
Absolutely zero interest.

Been there, done that. I don't want management hassles, whether it's management of tenants, or management of property managers, not interested.

The amount of effort required to just cash flow a few hundred bucks a month was ridiculous, not to mention whenever a big maintenance expense popped up, like a new $8,000 AC system. After trading options for over a decade, I find the SFH RE an avenue of cash flow (and appreciation) to be far too intensive for the return. Of course, this is in reference to single family homes.

I can sell a couple of option contracts per month and get the same yield at 100X less risk and capital tie up.
I thought about real estate/ renting properties over and over again.
I had some nearly bought. But after thinking through, I allways came to that conclusion like you. But your words meet it better than my thoughts ever.
 

jwhanke

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Some principles that I didn't see in the thread already that I've work to apply:
  • Look for asymmetric bets - You want to find something with a high upside with a limited downside. The more you understand the asset, the easier it will be to find these opportunities. IE own business, value stock with a margin of safety, crypto (a controversial one ;))
  • Protect your principal - When you lose 50% of your money. It isn't a 50% return to get it back. It takes a 100% return to get go back to neutral.
  • If you are losing sleep, you have too much capital at risk in a particular investment - Work to get a bigger low-risk buffer, or understand the investment more, or your internal psychology
  • Invest for the longterm - Always have a long-term mindset with investing. You buy assets to hold forever but need to keep reassessing the conditions. A three-year plan for investment and life planning is a good time horizon. Farther out, your prediction probability decreases, and no one can predict the future. IE big life event could occur marriage, kids, death of a loved one, engage in a new business area, economy fundamentally changes, the list goes on.....
  • Cash flow is king (especially with RE) - whenever you have a buffer, it will help give you a safety margin.
  • I prefer to have an emergency fund for a year of expenses - This depends on the person. It includes a "everything went wrong plan".
  • Good investing principles and frameworks can be applied to multiple life areas: time, capital, relationships, etc.
helpful podcast and articles I learned some of these in case anyone is interested:
Emergency fund buffer and money anxiety - Two simple calculations to cut your money anxiety by 50% | RadReads
The time horizon and applying investing to multiple areas of life - The Random Show — Bitcoin Pros and Cons, 2021 Resolutions, Fave Books, Lucid Dreaming, Couples Therapy, and More (#493)
 

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