The Secret To Attaining (and Recognizing) Wealth — Know Your Number

[worldwidetraveler]

Not at all. The difference lay in the motivation. The point is he's doing what he wants, enjoys it on its own merit, and if it made nothing, he'd still be doing it. "Start a blog and make $500k/yr" is hardly actionable advice, and borderline foolhardy when you have kids to feed. H1N1s point is accumulate more and more and more money because you should be working towards an infinite amount of money. By this logic, if the blog didn't generate money he should be doing something else, or in the early stages when it wasn't, go back to engineering, or hell even now since the blog seems like a part time gig, still hold down a professional level job on top. Given that he raises a family on like 30k/yr, despite making an order of magnitude more, and has given several hundred k to charity, why should money even come into the picture? Being able to follow your passion and have bills paid is a wonderful luxury to have, because there are a thousands of arts grads who took that advice hook line and sinker but still can't make rent.

I suspect if the blog wasn't doing well he wouldn't be doing the blog.

There is something that everyone can find that can both enjoy and make money. It may not be photography like your friend, but it could be something else.

Luckily, we typically enjoy doing a wide array of things.

They may make money - they may not. But the main reason to get to your number is to free up the most valuable resource you have, which is your time.

People are wasting decades trying to get to their number. If they instead put that time and resources into bringing in more cashflow they will be way ahead of the curve.

If you inherited a billion dollars tomorrow, would you be doing everything the same? Still developing your skills in whatever field, still doing those side hustles? If you can say yes, and that as a consequence of that, those skills alone would generate enough money to sufficiently cover your material needs and desires then you are truly fortunate. But I think those people are in the true minority

Yes, I would be doing the same thing. I may be in the minority but only because people follow the regurgitated logic of saving for decades instead of using their time to acquire more skills that can generate more money.

Having a "number" is the sort of thinking that feeds unhappiness, imo. "I just need to stick this out a little longer until I get $x,xxx,xxx saved up and then I will be free."

 

[worldwidetraveler]

For a small percentage of the population, you may be right. For the vast majority of people, putting your savings to work is far more important. Albert Einstein once said “Compound interest is the eighth wonder of the world.” See the example I cited above regarding someone who can live better making 30% annually on a $100k investment versus someone who makes only 2% in a money market account on a $2 million investment.

I didn't knock the concept of compound interest. I disagree that saving is the most important thing the majority should do. I find reinvesting money into the right skills will have a much better roi.

I believe compound interest can also be applied to skills.

You mentioned that it takes a lot of work to find a 30% return on investment. I would agree which is why I ask if your time is better spent looking for a high return or developing skills that will allow you to make 30% more income every year?

Read Scott Adams book, "How to Fail at Almost Everything and Still Win Big".

I fell into this idea myself because I worked many different jobs and have massively different college degrees that has helped me build my own business. I really didn't put much thought into it until I read his book.

For those that haven't read Scott's book, the idea is you have a group of skills that work together to give you better opportunities. You don't need to be an expert in one particular skill. You can be mediocre at all the skills yet the combination of them will lead to success.

You can't get that type of success working for a company while squirreling away money hoping to retire in 30 years.

My dad worked for one of the big 3 car companies in the US. There was a time when they were getting a lot of overtime. There were guys who saved, there were guys who spent all of it and then there were guys who took that extra money and build businesses such as trucking companies.

Granted, the guys who invested their money into businesses were low in comparison. Many of them became multi-millionaires because of it. I doubt the people that saved made that multi-millionaire leap.

I honestly don't know how you guys could sleep at night with a retirement figure of 1 million. I would be uneasy at 2 million. The older you get, the more you pay in medical expenses. God forbid you move to a 3rd world country and have to pay cash for something like a stroke. It may be cheaper, but it isn't that cheap. It would take a major cut out of that roughly 30k yearly budget since you got to cough up the cash before they help you. I've seen too many aging family members to know medical expenses can be a big issue.

Warren Buffett wouldn't be where he is if he worked a normal job and saved half his income. I also don't think Buffet had a retirement number in mind when he started.

 

[Tail Gunner]

I honestly don't know how you guys could sleep at night with a retirement figure of 1 million.

It is easy to sleep at night if you take the time to find and invest in real assets that pay a 20% to 30% annual yield, especially when those assets are safe investments that every person on the planet needs to survive (food, housing, etc.). Then if you take just half of that money and reinvest (i.e., compound) it every year you have serious cash flow. Yes, if you are an idiot with $1 million, or just an average person who invests in the stock market, then you may develop serious problems down the road.

You mentioned that it takes a lot of work to find a 30% return on investment.

Again, it is all about perception. It is hard work for the average person, because reading about finance and business for 15-30 minutes per day for several years is hard work for the average person who would rather vegetate before the TV each night. If you are willing to give up 30 minutes of watching TV every day, then it is not really hard work.

 

[Blancpain]

Calling the stock market a scam while saying its possible to earn 30% a year safely is really contradicting.
If you seriously think becoming an organic farmer is safer than investing into blue chips then there is no need to argue with you.
We are 3 generation of farmers on my moms side, even though we own huge plots of land Farming is still a very risky business.
Hell even real estate has its risks, and the returns on real estate are very modest (5-15% annualy)

If you are smart enough to earn 30% passively in your investment every year then you you'll have way more than 100k saved up trust me, 100k will be your monthly living expense if you are that smart.

Earning 30% a year is definitely doable, but it will bring with it major risks. Maybe you are not experienced in that field to see those risks yet.

But I'll give you a glimpse of few risks assosicated with farming

1. Bad Harvest.
2. Health epidemic ( Swine flu, H1N1, new form of disease which eats your crop, health scare regarding that product)
3. Fluctuation in prices
4. Your fixed costs increasing overnight (1970 gulf oil crisis)
5. Mother nature ( Earthquake, Flood, Volcano erupting)


Not to mention the bigger your capital, the harder it becomes to generate attractive returns outside of the stock market.

Warren is worth like 70 billion right now, can he sustain 30% annual growth? If he could he would be worth 400-500 billion in no time.

If you have small sums like 10-20k, its easier to earn 30% on it. But the bigger it is, the harder it becomes.

 

[Bushido]

^ A 30% a year annual return would be above Warren Buffett's average. Probably the greatest investor of all time. Just saying.

 

[Blancpain]

^ A 30% a year annual return would be above Warren Buffett's average. Probably the greatest investor of all time. Just saying.

This crypto craze has fucked with peoples perception, after seeing returns of 1000% a year, they think 30% can be sustainable while being safe.

 

[Tail Gunner]

^ A 30% a year annual return would be above Warren Buffett's average. Probably the greatest investor of all time. Just saying.

It may seem really smart to throw out a quip such as this one, until you ask the question "why"? This comment is a perfect example of EXACTLY why I urge forum members to commit to learning about business, finance, investing, or any other field by investing in yourself for 15-30 minutes every day for years (or even decades). Be an autodidact.

Most knowledgeable people would just shake their head and walk away after someone made such a comment. I really am trying to help you guys out, by spurring you to think outside the box and to improve yourselves. There are three things that you must consider when making any investment (or any major life decision): (1) things you know, (2) things you don't know, and (3) things that you don't know that you don't know. You can survive the second category by simply educating yourselves. It is the third category that is the real killer.

Anyone who knows even the most elemental rules of investing knows that investment yield decreases inversely to the size of an investment fund. Large funds, such as Warren Buffet's, cannot snap up the smaller investments that originally contributed to their success. Many funds underperform the market indices and eventually go out of business because of this very fact. Warren Buffet is famous, in part, because he made such consistent returns despite this obstacle. It is axiomatic that smaller investors can produce far higher yields than Warren Buffet when not operating under such constraints.

Warren Buffett talked about the problem that investment success can bring about in his 1995 shareholder letter:

The giant disadvantage we face is size: In the early years, we needed only good ideas, but now we need good big ideas. Unfortunately, the difficulty of finding these grows in direct proportion to our financial success, a problem that increasingly erodes our strengths.

The problem is that it’s unlikely that a portfolio manager or fund marketing executive will admit that size is the enemy of investment performance. It’s really up to the investor to set realistic expectations for the scale of any strategy they invest in by ensuring there are enough opportunities and liquidity available in the investable universe.

This doesn’t mean you should give up on a fund or strategy simply because it attracts investor capital. But it does mean that investors need to be aware of the possibilities for expected future returns based on size of the fund when the performance was earned in relation to the current size of the fund.

The life cycle of many successful funds goes like this: (1) Establish a solid track record with a small amount of invested capital, (2) Attract new capital based on the performance history and (3) And after too much new money has entered the fund, underperform because it is much harder to secure big gains with a larger fund size.

In a way past outperformance can be a fund manager’s biggest hurdle for future outperformance.

http://awealthofcommonsense.com/2014/09/size-enemy-performance/

 

[Bushido]

^ A 30% a year annual return would be above Warren Buffett's average. Probably the greatest investor of all time. Just saying.

Most knowledgeable people would just shake their head and walk away after someone made such a comment. I really am trying to help you guys out, by spurring you to think outside the box and to improve yourselves.

No they would walk away right when you mentioned 30% average return. Hah.

 

[Tail Gunner]

^ A 30% a year annual return would be above Warren Buffett's average. Probably the greatest investor of all time. Just saying.

This crypto craze has fucked with peoples perception, after seeing returns of 1000% a year, they think 30% can be sustainable while being safe.

I truly shake my head with sadness when I read such comments. Please, for the love of God, educate yourselves. Here is an excerpt from an article that I read just yesterday. It is authored by Simon Black, with whom many members of this forum are familiar (because he is an offshore guru who travels the world searching for investment and arbitrage opportunities).

He bought a business for $1.5 million that produces a $1.5 million profit per year. So, he makes a 100% annual yield on his investment. This is not overly unusual, if you take the time to educate yourself, network, and search for such opportunities. People do it all the time when they buy internet businesses. By comparison, I am lazy. I spend 15-30 minutes per day sorting through emails (after spending years getting on suitable lists) searching for investments that provide a minimum of 20% to 30% annual yields. Only after weeding through the garbage do I take the time to travel and place boots on the ground.

As an example, I acquired a business in Australia about two years ago at a time when the Australian dollar was at a near decade low against the US dollar.

Even better, I picked up the business for an amazing deal, roughly 1x the company’s annual profit (about $1.5 million).

In an age of bubble markets where even poor-quality assets trade for 100x annual earnings on major stock exchanges, this Australian business was a real bargain... a deeply undervalued asset.

https://www.sovereignman.com/invest...ampaign=notes&utm_content=2018126_weak_dollar

 

[Bushido]

The average long-term ROI is different from a one year ROI my friend.

Stepping out of this thread, but hoping you aren't trying to solicit members of this forum for dodgy investments.

 

[Tail Gunner]

Calling the stock market a scam while saying its possible to earn 30% a year safely is really contradicting.
If you seriously think becoming an organic farmer is safer than investing into blue chips then there is no need to argue with you.
We are 3 generation of farmers on my moms side, even though we own huge plots of land Farming is still a very risky business.
Hell even real estate has its risks, and the returns on real estate are very modest (5-15% annualy)

If you are smart enough to earn 30% passively in your investment every year then you you'll have way more than 100k saved up trust me, 100k will be your monthly living expense if you are that smart.

Earning 30% a year is definitely doable, but it will bring with it major risks. Maybe you are not experienced in that field to see those risks yet.

But I'll give you a glimpse of few risks assosicated with farming

1. Bad Harvest.
2. Health epidemic ( Swine flu, H1N1, new form of disease which eats your crop, health scare regarding that product)
3. Fluctuation in prices
4. Your fixed costs increasing overnight (1970 gulf oil crisis)
5. Mother nature ( Earthquake, Flood, Volcano erupting)

Hey, here is an idea. Invest in organic exotic fruit for which there is a real shortage (so that they are impervious to price drops), sell the entire crop years in advance (to lock in your profit), in a country where there are no natural disasters that can possibly impact your harvests, where there are three independent sources of water (river, well, and yearly spring rains that are captured in man-made ponds), hybridize your crop so that it is naturally resistant to pests, and then plant neem trees around your crops to naturally discourage any pests. I am familiar with such farms.

Not to mention the bigger your capital, the harder it becomes to generate attractive returns outside of the stock market.

Warren is worth like 70 billion right now, can he sustain 30% annual growth? If he could he would be worth 400-500 billion in no time.

If you have small sums like 10-20k, its easier to earn 30% on it. But the bigger it is, the harder it becomes.

I give you credit for making such an observation. This is the reason why small intelligent investors can routinely outperform Warren Buffet. So, unlike the defeatists on this thread, at least you acknowledge that such investment opportunities are within the realm of possibility.

 

[Tail Gunner]

The average long-term ROI is different from a one year ROI my friend.

Yes, you are correct. The average long-term ROI will likely rise as the new ownership brings greater efficiency to the enterprise.

Stepping out of this thread, but hoping you aren't trying to solicit members of this forum for dodgy investments.

Here we go. When logic and reason fails, it is time for the ad hominem attacks. I am always amazed that threads about finance and investment draw almost as much hate as those about politics and religion. It is almost as if the subconscious realization of the need for self-improvement causes people to lash out, because it is easier to lash out than to consciously recognize the need for self-improvement and to take action. It really says a great deal about the human condition.

 

[worldwidetraveler]

^ A 30% a year annual return would be above Warren Buffett's average. Probably the greatest investor of all time. Just saying.

I don't know squat about the stock market. If I were to invest based on returns alone, I would go for multi-units where one could leverage with bank loans. I don't know about 30%, but 15% to 20% is very doable.