General wealth building vehicles & methods. (pet project)

[AdamL]

I'd like to look at all the financial vehicles, including poker play, and consider based on the returns and volumes generally needed for each option which vehicles would be most appropriate at given stages in a persons life, given their preferences too.

The goal is find an overall financial plan for someone taking their first real bit of income from a low income full-time job and an apartment to a retired person.

Looking at the characteristics of the different wealth building vehicles I can make some observations, generally.

Good poker play (not necessarily expert, at this level) seems to yield the highest return with the least risk (provided you're playing well, and you have the appropriate 300BB bankroll) for small quantities of money. This makes it particularly useful to students who have a lot of time on their hands and not so much money. It demands a high degree of attention and management, so a person without a lot of time will not be able to work with poker.

Real estate seems to be the best choice for someone with a fair amout of cash (for a downpayment) and a fair income (for mortgage loan payment.) It doesn't require a lot of time to manage, although if you count the income you need to pay the mortgage it takes a fair amount of labour.

Money Market instruments are pretty useless unless you have ENORMOUS volumes of money to work with -- i.e. you're a bank. I can see them as alternative to savings accounts for people who have no use for their spare cash, but will need it in less than a year.

I won't get into bonds. Someone else feel free to point out the merits of them.

Equities are great if you are looking at a large sum of money to work with. I don't think they are worth the amount of time you have to spend researching for the average person to bother with. Such people should just grab a mutual fund. The mutual fund is an obvious long-term, low maintenance investment vehicle. I think it's a great way of growing surplus wealth that you plan on using in more than ten years, mostly because there aren't many other options. [img]/images/graemlins/tongue.gif[/img]

There is stuff like buying real estate to rent. There is buying small businesses in the community, to control that sort of everyday wealth flow.

There is the career route. Investing in one's career can be a great thing if you're young and ambitious -- payoffs are huge. You need to pick where you're going. Know the industries that shape our modern economy. The big boys:

The big money is in energy, but it's high revenue (ROI isn't high percent, it's high volume) and it's not something you throw $10k into. It's for the really, really big boys: the government, major corporations in the country, extremely wealth families, financial institutions, etc. If you can get a powerful position in the energy industry, you're set.

Ok, then there's all the stuff we buy. The cars, the electronics, etc. A few major companies, again high revenue and low profit %, are involved with that. Similar to the power industry, something you don't throw $10k into. You get a powerful position in the industry instead.

The information age. This is the other big thing alongside energy and oil: Intel, Microsoft (if they could get some semblance of quality), etc. This is the modern chemical industry of old. Knowledge based, non-commodity, patent-heavy. I suppose pharmaceuticals are in the general category of information based, but they are a little too patent heavy.

Career options in these industries, beyond being a cog in the wheel, require a high investment of one's living time. Family has to suffer, your "soul" in general suffers. I don't think it's worth it. But there it is anyway.

I think the most useful wealth generating vehicles are low-maintenance and don't require much time. The whole point for me having money is free time and moderate ability to explore -- not luxury, power for it's own sake, or fame.

With that in mind, I'm interested in hearing if anyone has any ideas on low-time req'd wealth building avenues appropriate to different life-stages and ages.

Right now, I'm just a 24 year old guy living in an apartment with some modest savings and a poker account. I posted another thread about mutual funds, mostly curioisity. I need to move into real estate and get out of the apartment first and foremost. Not being a career-oriented guy (I have a job, not a career) I don't have a lot of money to work with.

I hope this is interesting.

[AdamL]

Another thing I want to look at is the question of what to do with the bank's money. They're offering it to us, we may as well find something useful to do with it.

Any use of bank money that returns higher than the interest charged on it, and does not require a large volume of personal time, is a successfull way to acrue wealth. Especially if you can keep doing it.

This is often the big point behind real estate wealth building systems. The idea is that mortgages are fairly easy to aquire, and that rent is low-maintenance. If there is a flaw in the system it is in the strife of being a landlord and maintaining tenants, not the assessment about the ease of obtaining mortgages.

Obviously, buying your first home is a great use for the bank's money. Some small businesses are going to do the same for you.

I don't know too many uses for the average citizen with bank money. If you have any suggestions on how to make use of the opportunity and earn wealth with the bank please let us know.

[CardMinger]

If you are a student...at it is easy to become one...just take 12 units of accredited online classes. You can can qualify for very low or zero interest loans (the juice starts when you graduate or in 6 years I think) You can take this cash and throw it into a good fun like the Vanguard S&P500 fund and that helps...not going to make you a millionaire but its pretty much money from nowhere. You might also learn something from taking those classes...or you could just pay someone to take them for you.

[GeorgeF]

Money Market instruments, bonds

Investing in these are like folding before the flop and waiting to throw your chips behind future better hole cards.

You forgot foreign currencies, commodities (other than energy), and a myriad of others like convertible bonds, ect.

[AdamL]

[ QUOTE ]
Money Market instruments, bonds

Investing in these are like folding before the flop and waiting to throw your chips behind future better hole cards.

You forgot foreign currencies, commodities (other than energy), and a myriad of others like convertible bonds, ect.

[/ QUOTE ]

That's a good analogy for money market/bonds. I don't know a lot about foreign currencies or commodities if you want to fill us in.

[TStoneMBD]

get into real estate. take the money and learn how to invest it properly by educating yourself. real estate and businesses are the only vehicles available to 99% of the public to become financially free. the stock market will not turn you into a millionare unless you become a finanacial advisor. the "EV" of the market as you should know will be 20% a year ROI if you are extremely successful. if youre bankroll is 10k then 2k/yr can be your expected profit margin if youre good. bonds cant make you rich. the only things they are good for is to hedge your losses against your stock equities, or if you have loads of cash sitting around in your safety deposit box that you wont need for the next (x) years and are interested in keeping up with inflation the best you can without risking your wealth. poker will have the biggest ROI out of any investment that i can imagine (with the lowest risk of ruin), but it is considered earned income. if you stop playing you dont get paid, so its the same thing as having a high paying job. you cant get financially free by playing poker unless youre making significant amounts of money per hour, or get lucky and win a WPT.

i recommend you go out and read the "rich dad, poor dad series" by robert kiyosaki and the "creating wealth" series by some other author. ive read both series and can say they are certainly inspiring, but the content is very redundant. if you feel that you arent learning anything after reading several of these books because they share nothing new, start reading books that are number crunching. the books i recommended to you are merely eye-openers and motivational reads. i advise you read the first book in the "rich dad, poor dad series" and follow through with the book entilted quadrant something, something. the rich dad series is a good book at teaching fundamental principles of making money, and how to understand the numerical aspect of money. if youre a winning poker player than the rational concepts wont have much effect on you, but you will probably be exposed to several business concepts youve never heard of before. the quadrant book gets into a bit more of the math as far as investing is concerned, while the first book is the story of his life and how he perceives life through the lessons taught to him through his fathers.

[elus2]

make sure to check out this webpage if you're gonna be reading rich dad poor dad.

John T Reed's analysis of kiyosaki and rich dad poor dad

i think the problem with your analysis with regards to equity investing is that you're looking at it as a continued source of income. i prefer to look at it as a long term investment vehicle. by reinvesting dividends/capital gains back into the market you can take advantage of compounding your gains. to me investing in equities is the same as taking a passive role in business ownership.

so my strategy is to find ways to create a steady stream of income (poker, software programming, etc.) then reinvest the gains into equities and hope to squeeze out a decent return over the next 30 years.

[snorer]

have you done this? what kind of process is it and what kind of return are you looking at? legal?

[CardMinger]

No I am not currently doing this....I am a real student and do however receive financial aid in the form of grants from the government. I would not see a legal problem with this as long as you truthfully report your income because if you are taking 12+ units you are considered a full time student.

[Nemesis]

go to www.richdad.com It's similar to the 2+2 of real estate investing. Very easy to understand and lots of helpful people.