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View Full Version : General wealth building vehicles & methods. (pet project)


AdamL
01-17-2005, 06:43 AM
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. /images/graemlins/tongue.gif

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
01-17-2005, 06:54 AM
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
01-17-2005, 04:55 PM
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
01-18-2005, 02:40 AM
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
01-18-2005, 04:36 AM
[ 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
01-18-2005, 09:17 AM
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
01-18-2005, 06:02 PM
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 (http://www.johntreed.com/Kiyosaki.html)

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
01-18-2005, 06:14 PM
have you done this? what kind of process is it and what kind of return are you looking at? legal?

CardMinger
01-18-2005, 08:49 PM
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
01-19-2005, 01:28 PM
go to www.richdad.com (http://www.richdad.com) It's similar to the 2+2 of real estate investing. Very easy to understand and lots of helpful people.

parttimepro
01-19-2005, 07:14 PM
So, correct me if I'm wrong, I haven't actually read Rich Dad, Poor Dad, but isn't the premise that you can get rich flipping real estate? Dressed up in language about assets and stuff, but basically that you can buy properties, fix them up, and sell them for a huge profit?

Next question: Isn't this a scam? I think the people who make the most money from real estate flipping are the ones leading the seminars and selling the books. The ads all feature people talking about how much money they made, with "Results not typical" in tiny print at the bottom of the screen. Kind of like ads for weight-loss pills. There's an infomercial in my area where two twin midgets sell this scheme. If that's not a sign it's a bad idea, I don't know what is.

This is just my impression. If someone has actually done it successfully, I'd like to hear about it.

xxx
01-19-2005, 09:49 PM
I agree this guy is great. Unlike most of the real estate hucksters out there, he lays things on the line.
He also points out why real estate isn;t for everyone. A real breath of clear air.

elus2
01-20-2005, 12:29 AM
depends on how bullish the market is. any idiot could have made money buying property in vancouver over the last couple of years. my parents' home appreciated in value by 40% over the last 2 to 3 years but it hardly appreciated at all for the previous 5 years.

Nemesis
01-22-2005, 06:59 PM
no his premise is not about flipping properties, It's about no particular investment vehicle, just the way rich people think v. the way poor people think.

TStoneMBD
01-23-2005, 05:45 PM
[ QUOTE ]
no his premise is not about flipping properties, It's about no particular investment vehicle, just the way rich people think v. the way poor people think.

[/ QUOTE ]

the original book doesnt really get into biased opinions of investment vehicles, but as the series continues it does. kiyosaki does not fix up properties and sell them, and doesnt really go into detail about this area of investing as he does not specialize it, however he does mention that there are people who do this and it can be quite profitable. kiyosaki merely buys real estate using leverage and good judgment, and advises buying property with positive cash flow as your first investments.

it may seem unrealistic to a first time reader that there are investments out there with positive cash flow, but i have seen several. for instance, my apartment building is up for sale, and if i were to buy it i would have positive cash flow with the attendants in the apartment already. it is a fantastic investment. the only downside to it is that the economy in the area is collapsing, and so the property will most likely decrease in value. regardless, if i wanted to begin my real estate investing career at the moment i would almost certainly buy it. however, i plan on moving 7 hours away a year from now and therefore dont want the responsibility. i also dont want to start investing in real estate until i have a 100k bankroll, which i should be able to acquire by the time i turn 22 (2 years from now) according to my projected income. my landlord wants 75k for the building, it has a new roof and 4 active tenants. each tenant is paying $500/m. With a 30 year mortgage at 6% interest, monthly payments would be about $440, for a positive cash flow of $1560 before calculating other expenses.

my father's home is not up for sale at the moment, but if it was and i was interested in buying real estate i would certainly jump on the opportunity. the house is worth about 270k and if you did research, it would probably be projected to appreciate as it is in an increasingly populated area. with a 6% mortgage over the course of 30 years, the monthly payments would be $1618. he has a tenant living downstairs in a studio unit paying $800 a month, and the upstairs apartment would rent for about $1200/m, for a positive cash flow of nearly $400 pre-expenses.

TStoneMBD
01-23-2005, 06:06 PM
[ QUOTE ]
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 (http://www.johntreed.com/Kiyosaki.html)



[/ QUOTE ]

wow.
Quite an interesting essay to say the least. Its hard to argue with clear cut evidence, but it is also possible the random author of the essay is just making up falsified information. Regardless, I will be sure to read the entire report. However, he states his opinion early on that investing in real estate is not going to easily make you rich.

How can he say such a thing? Has he attempted to invest in real estate and failed? Why is it true then that the majority of the millionares of this country all acquired their wealth through real estate? As a poker player, I meet alot of abundantly wealthy people at my local casino. Why is it that the real estate investors there have always told me that I should invest in real estate immediately? I was once told and I quote, "Listen, you need a place to live right? 'Yah.' Then there is no reason why you shouldn't buy your own home."

Investing in real estate is hard work. It really is. Unless you have enough money to afford a management company to take care of your properties you will have to do it all yourself. That is one of the main reasons why I don't want to start investing until I have a gigantic bankroll, which I feel confidently I will acquire through the means of poker.

Kiyosaki doesn't say that investing in real estate isn't hard work. However, he believes that through that hard work you will acquire great wealth. Real estate is profitable when done correctly. How can anybody deny that? Kiyosaki's book is geared toward the financially illiterate public. He teaches people how to read financial numbers in a clear, concise manner for lamers to understand.

Anybody who has ever had to touch a dollar bill should read Kiyosaki's book, especially the Quadrant edition, despite whether his life story is true or not. His understanding of money is correct, and how he perceives life and his value of money is inspiring.

I feel quite strongly that the people who protest Kiyosaki's teachings have either failed at investing, or simply want to justify their laziness by proving to themselves that it is impossible. I have never seen a successful real estate investor, or businessman ever discredit Kiyosaki's teachings.

DOTTT
01-23-2005, 07:50 PM
I'm guessing you don't believe there is a real estate bubble about to explode?

DWarrior
05-01-2005, 07:35 PM
I read RDPD and then Cashflow Quadrant. Something wasn't adding up, it felt like he was all over the place with his life story and his suggestions. I read John Reed's essay, and Rich Dad's response, and concluded that I won't buy any more of his books.

That's not to say that Kiyosaki is a "fraud" as a lot of the readers of John Reed's essay seem to label him on line, but I find his advice not technical enough. I think he exaggerates the little details, so that the overall story gets totally skewed. For example, I just started reading Millionaire Next Door, and they say only about 1% of all millionaires spend the way Kiyosaki spends (Rolexes, Porches, Boats). Also, he oversimplifies his suggestions about cash flow, his advice about cash flow is similar to: you want to buy XYZ, go out, buy rental properties for cheap until you get enough cash flow, and the cash flow should pay for XYZ, repeat. In his game, there is no difference between owning one property and owning a hundred, the cash just magically gets added to you. In reality, it will take time and effort to rent the properties out and renew leases. You'll have to spend time travelling and physically doing the deals. It's not like you buy a property, it gets rented, and you can go back to your old job, but you'll have extra cash each month now.

While I didn't go out and make a website labelling Kiyosaki a thief, because statistics can be manipulated, I do have to agree with Mr. Reed's general advice: it's better to learn from technical books than from general advice. As I read The Millionaire Next Door, I find a lot of what Kiyosaki suggests, but with statistical data to back it up and no crazy dreams.

Also, I think my aunt made her fortune "flipping" properties, though she didn't do what Kiyosaki suggests. His advice is "buy, rent for +cashflow, sell when market goes up", where she had to spend a lot of time fixing the places up, and either rented them out or sold them. Kiyosaki seems to leave out the "fix the place up" part, which takes a lot of effort, since the discounted places are generally run-down.

Again, his advice is good, but can be found in the technical books. It's like poker: you can read the beginner books, and they will give you valid advice, but Sklansky and other technical authors will give you the same advice and a whole another world. Also, RichDad forums are overwhelmed with spammers, "i'm broke and need money to pay the rent tomorrow" people, and naive "investors" throwing money at studiotraffic.

lu_hawk
05-01-2005, 08:11 PM
[ QUOTE ]
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.



[/ QUOTE ]

This is called leverage. It is great on the way up, if things go bad you lose everything. Can you guarantee that RE prices won't go down?

inishowen
05-02-2005, 01:33 AM
The most important thing right now, at 24, is your FICO score. This country is built on leverage and being a good credit risk is paramount to building wealth. If you have a bad number, fix it, and don't screw up again. If you have no credit record, which is conceivable at 24, create one by getting a credit card and paying it off every month or go to a local bank, take out a personal loan for $1500 or so, DO NOT spend that money but make a few payments then pay it off in full. The interest you pay will be offset by the record you create. Once you have good credit many doors open.
If I were you I'd try to live as cheaply as I can and pound money into some type of savings account. If you don't think your current job is career worthy and are doing it just for the money then find another job that pays more. Basically, what I'm saying is that you should invest in yourself first and be ready for an opportunity to invest when it arises. Putting $10k into an index fund is great but if that $10k represents 90% of your net worth then it is highly likely that you will need some of it back. Real estate is great, it has been the most important investment in my life, but it takes time to create wealth. Believe it or not those monthly rent checks do not make your landlord rich, it's the equity build up that does.

Once you have an adequate bankroll, I would look at real estate over the other choices mentioned, multi-family properties specifically. The decision to buy is a math equation; it either makes a positive cash flow or it doesn't. The leverage you gain in RE can not be matched imho. That said, the RE market is mature right now, if you are in a pos to invest, I'd only buy something that was a complete steal.

DWarrior
05-02-2005, 04:34 PM
I love how poker players use "bankroll" to refer to personal wealth /images/graemlins/smile.gif

KaneKungFu123
05-03-2005, 08:07 AM
the same way you use your roll to play poker, i think you should aim to use your roll to open/start some sort of business. open a 7-11 type store, or a pizza store, or carpet store, or antique lamps.

find something that interests you and learn alot about it and become an expert the same way you are an expert at poker.

about real estate. people are always going to need somewhere to live.

[ QUOTE ]
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. /images/graemlins/tongue.gif

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.

[/ QUOTE ]

DWarrior
05-03-2005, 12:53 PM
I'm only 20, and about to become a slave to college (as I transfer from 2 to 4-year school). I still have no idea how I'm going to pay this, and my parents won't co-sign any loans, but that's besides the point.

I thought of placing ATMs in various locations, and I stumbled across a bunch of threads regarding this. Apparently, ATMs were deregulated and are now open to individuals, not just the banks. The problem is finding a good location, I know NYC and New Jersey are flooded with ATMs, they're practically on every street corner here (and literally ARE on every street corner in NYC). Perhaps finding an area that's just being built, I know there are such areas in New Jersey (haven't researched this much, but I noticed some corporate buildings being built near Rutgers, where I'll be going next semester, and Princeton, perhaps that's an area).

Food and grocery stores supposedly require real good management, because the margins are so small. You really need to look for crazy bargains on everything, and you don't have much room to slip.

Also, I think to become an expert, you're going to have to spend at least some time working in the place. If you want to learn about antique lamps, you can't just read up on it and then open a business, you'll probably have to get a job at one to at least learn the ropes. That's why I don't want just a typical college job like a waiter or a building receptionist, because you don't learn anything there. Since I'm thinking about getting into Accounting, I'm trying to find out if it's the right thing for me. The only way to do this is by actually working in one.

Moyer
05-23-2005, 07:55 PM
I'm 21yrs old. I've read the RDPD book and browsed many different investing sites. My conclusion so far is this:

-Individual stock investing is only good for people who have studied the market thoroughly and continue to research it diligently. This really seems like a job to me, not an investment. Everything else is really just gambling w/ an unkown EV(+ or -).

-Basically, for someone my age, the best advice is to work hard at one or two jobs(including poker) and save as much money as possible. Live below your means. This way if a great opportunity comes up some day(a new business or a great real estate buy), you can take advantage of it.

-The only real "passive" investments are the ones that offer low returns: money market accounts, CDs, mutual funds, etc.

Someone please correct me if I'm wrong.

gvibes
05-24-2005, 10:15 PM
[ QUOTE ]
-The only real "passive" investments are the ones that offer low returns: money market accounts, CDs, mutual funds, etc.

[/ QUOTE ]

Throwing mutual funds in with money market accounts and CD's is doing mutual funds a grave disservice. Equities have averageed 11-12% since 1928.

imported_bingobazza
05-28-2005, 09:39 AM
[ QUOTE ]
The leverage you gain in RE can not be matched imho. That said, the RE market is mature right now, if you are in a pos to invest, I'd only buy something that was a complete steal.

[/ QUOTE ]

I definitely agree with the first part of this statement. When a bank will lend you money to buy a cash positive investment, how can you go wrong if you do your homework?

Answer - Buying at the wrong time. Of the top of my head, I would say that prices in theses countries are definitely too high...

US
UK
China
Ireland
Spain
Australia


Heres my list of countries perfect for real estate investment right now.

Japan tops the list IMO - local lending rates of 2% and rental yeilds of 6% against an asset that has lost 90% of its value in 15 years.

...followed by, in no particular order....

Russia
Slovakia
Slovenia
Lithuania
Craotia
South Africa
Argentina (make sure you borrow in the right currency)
Poland
France
Cyprus (southern)
The Czech republic
Turkey

Think globally about real estate and you wont go far wrong...the barriers to foreign ownership are falling in most places and mortgage lending is rising. If you do your sums right, you need never lift a finger as you can have agents look after your properties for you. Theres always golden opportunites, especially after currency devaluations.

DYOR

Bingo

imported_bingobazza
05-28-2005, 11:03 AM
Ok, Ive just reread the above post, and realised that it hasnt answered original posters question. I think i may have something useful to add to this thread.

Ive worked as a financial adviser and also with a property development company, so Ive seen both the stock market and the property side of the equation for wealth building. Most people that I have met (who held onto their wealth) made their fortune through property.

This point is illustrated brilliantly by 2 former clients of mine who worked for a large computer company. Both joined the company at the same time, both had me as their financial adviser at the height of the dotcom bubble. Both had 90% of their net worth in share options worth $20m each in the company which they had accumulated over the years as part of the senior management renumeration package. Both had good pension positions and $200,000 in salary and were in their 50's with grown up families. Both were unsophisticated investors who got lucky. My advice to both, as the share price went from 60c in 1982 to $57 in 1999 was to sell at least 80% of their holding. My logic was this.

Although the company was good, the shares were in a mania. Asked if either would buy shares at this level, both said no. Neither knew what they were doing or why they were doing it. It is crazy to have 90% of your net worth in 1 company. They held onto the shares simply because they always had and it had proved to be a good investment. They wouldnt be seen as disloyal to the organisation if they sold. Selling would release $12m NOW after taxes, and then were home and dry and never needed to worry about money again. WHY RISK IT? They could reinvest in property at a time when prices were moving strongly up and looked set to continue. I told them both to buy a copy of 'manias, panics and crashes', read it and get back to me with their decision. One held on to the shares (greedy), the other took my advice, (he began to realise his position and became cautious) sold his shares, bought a property portfolio.

Then the stock slid from $57 to $10 in 6 months, then to $2 a year later. The $20m became less than $1m.

I went to see greedy investor after the slump, and his wife broke down infront of me and hit him. Ive never seen him since, but Ill never forget him.

The property portfolio has since gone up about 120% and provides the cautious investor with a nice income stream on his original $12m investment. Almost $1m a year. Unfortunately, he didnt take my advice to borrow another $20m from the banks to really go for broke (error of caution). I'll be telling him to sell all his UK property next time I see him. We play golf and have some beers a few times a year...Im never asked to pay a penny.

Equities can be really good for building a capital base, once you've bought your own house, but property is the key thing for consolidating that base. There arent many shares that offer the protection of a well timed property purchase. Property allows you to gear your returns to a level that allows you to safely get out of the game, ie retire, while moving you to a less risky environment. IMO, thats what it should be used for. The only stock that I would say is close to property is berkshire hathaway, and its not 1 stock, its dozens...but you cant borrow safely to buy those.

So heres my plan for wealth building........

I donít have a family. I play poker 30 hours a week. Im selling my house due to the UK price bubble and moving to Beijing with my girlfriend where she owns a very nice house outright, so no rent or mortgage.

I intend to invest the cash from my house and savings, as well as $8000 each month from poker, into Berkshire Hathaway shares (Buffett is a better investor than me). I'll be completely debt free when this is done (feels realllll good) and my living expenses will be $2000/month to live like a king.

Although Buffett has got close to 28% on average for the last 30 years, his enlarged capital base and the low inflation enviroment means that he will probably never repeat this. But I'll sleep well and have no work to do if he is looking after my money. Iím assuming 18%/annum growth on my Berkshire holdings, and plan to sell 3% each year as 'dividend' income, if needed, to supplement my $2000 per month that I donít invest from my poker winnings. In 10 years, my 'dividend' income should be in the region of £8,000/ month.

At that point, I should have more than $3m in shares. I can stop playing poker if I want. If I can find the right property opportunities somewhere in the world, I will use the shares as collateral (some banks in Ireland will do this for you if you know the manager well enough) to raise a mortgage for an $8m property with a net yield after mortgage payments and costs of 2% and capital growth prospects of at least 10%. At this point, my income should be around $13000/month from this property, with another $8,000/month in Ďdividendsí.

10 years later Iíll sell the property for $20m, and give Warren the net cash of $13m taking my total Berkshire holding to @$20m with $50,000 per month of Ďdividendí income assuming 3%. As I will have changed my UK domiciled status by then, thereís no CGT if I can buy in the right place/through the right vehicle on either stock or property purchases. Property is good, but Buffett has proven to me that he is better.

As long as I can keep 4 tabling the $2 NL tables for 10BB/100, I think Iím home and dry.

Its very unlikely that poker on its own will make you rich unless you win a big tourney, but it can provide the income to build a very substantial capital base, if you donít squander all your winnings, and invest conservatively. The key is to treat your poker winnings with respectÖ.hard to do sometimes.


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