His premise seems flawed to me. He says people should forget about F@#$ You Money because you can't depend on it to grow in this bad economy. That's reasonable.
But then he suggests you aim for “f@#$ you influence and credibility” because it "allows you to charge $30k+ for a 1 hour speaking engagement". But I know people who used to make $10k per speaking engagement and they aren't getting much work lately. In my experience the first thing people cut in a bad economy are the expensive speakers and while influence can probably get you a magazine column I wouldn't expect that to pay much at all.
So if the problem was finding a stable income in a bad economy his solution really didn't solve it.
I agree with you fully, the first thing to go when the economy isn't all that great is the stuff that you can do without.
So, no more lavish all employee trips to tropical islands and no more expensive speakers.
Time to get up and do some more work instead of talking about your previous successes.
And about dying penniless, who cares, you can't take it with you anyway. If you plan on passing your wealth to your kids better do it while you are alive and scale back accordingly. In plenty of countries that's the better strategy tax wise anyway.
Isn't the general point more along the lines of not earning much on savings now quite possibily implies a need to do some work at some stage in future (even if its really easy lucrative engagements), and therefore staying in touch with the industry is probably a good idea unless you hit really big.
Personally I'd like to see influence and credibility more as an end than a means to speaking engagements and high-billing consulting though...
eh, I dono. To a certain extent, credibility can be transformed in to money... e.g. if you write a technical book, you will have a much easier time getting a job later on.
On the other hand, I think most things that get you a lot of money also gets you a lot of credibility, so going from just f-ck you money to f-ck you money plus f-ck you credibility isn't going to take much effort; you just have to be a bit more public, a bit more vocal about what you are doing.
I wouldn't base your career change on the experience of your friends. You assume that because your friends are cheaper, that they'd have more business. I'd argue the opposite:
1. If you are bottom-end expensive, you get cut quickly. (e.g. $10k speaking engagement)
2. If you are middle-end expensive, you get cut... but not as quickly. (e.g. $20-30k)
3. If you are high-end expensive, you get cut dead last.
My husband and I did very specific, highly sought-after freelance services in the realm of visualization design/JavaScript. We are definitely high-end expensive.
As the economy went into the shitter, we only got more and more work.
Why? Because clients/customers often feel that the low-end and mid-end expensive people don't fully pay for themselves. Those people are basically getting "excess" budget, as opposed to being truly sought after.
Or they are a consolation prize: "Well, we could get Tony Robbins but he's $80k, then again, there's this dude, he's kinda interesting, how do you feel about $10K?"
Once even that $10k may be a stretch, they decide not to hire anyone at all.
The article has a serious point (there's no insurance against life, other than your own ability), but I too found the jump from an anecdote to a conclusion (with scenarios mentioned already being unrealistic) distracting.
That being said, I don't think this reflects negatively on Tony. There are many other writers who I respect who show this annoying tendency (somebody has pointed out that Malcolm Gladwell and Thomas Friedman are especially prone to this).
Top money manager at major Wall Street firm != random people. It doesn't necessarily mean stocks are about to go down either (Wall Street has certainly been wrong too, eg. 2000 or 2007), but it's a far cry from having a shoe-shine boy tell you to buy stocks.
In a market full of speculators that is true. I think the money manager is talking about people who are moving money out of the market because they want to retire, medical expenses, income, etc.
Isn't that what managers who buy undervalued stock do? Finding a stock everyone thinks is not going to do well (or much better), and buy a controlling stack of it.
Repost but a quote from George Foreman about longshoremen. What is real wealth?:
Mr. Foreman, who stared down financial collapse as an adult despite a troubled, impoverished childhood, said he knew real wealth when he saw it. “If you’re confident, you’re wealthy,” he says. “I’ve seen guys who work on a ship channel and they get to a certain point and they’re confident. You can look in their faces, they’re longshoremen, and they have this confidence about them...I’ve seen a lot of guys with millions and they don’t have any confidence,” he says. “So they’re not wealthy.”
in entertainment and sales, confidence is almost everything. The thing is, outside those fields, confidence is dramatically less useful. (granted, sales skills have a pretty wide applicability, but my point is there are jobs that don't involve much sales, where confidence doesn't matter that much.)
If you ask me, the best way to invest the $2 million mentioned in the article in order to retire comfortably would be rental property. Take your $2 million and buy four $500K houses (or eight $250K houses, or whatever's appropriate). Pay an agent to take care of them, or do it yourself, depending on how much involvement you want. That should yield maybe $8,000 a month in rent, which after you've taken care of all the extra costs should still be enough to live on quite comfortably. Any capital gains you enjoy (and if you're smart you'll have invested in an up-and-coming area) are a bonus.
The best part is that you don't need to leave some money on the table to hedge against inflation, since in the long term rent will pretty much keep pace with inflation.
There are areas where this is a completely terrible idea due to rent controls and other landlord-unfriendly policies, obviously you shouldn't do it there. Also, avoid any area where you're likely to get undesirables as tenants.
Improvement on that is avoid family housing and go for industrial/commercial.
You can get a quality property with minimal leverage for your $2million. You will get a blue chip tenant like a national retailer or even a government department, and they'll sign a 10 year lease with mandated, upwards only, CPI-indexed increases each year. You won't even have to fork over 8-10% on a property manager because the tenant will maintain the property. And at the end of it, you'll have a property worth much, much more than what you paid for it.
Compare to a portfolio of houses, this strategy is higher return, lower risk and much lower management. The problem with family housing is that they are full of families, with all the associated problems that brings. Families split up, move out, get into trouble, have parties - blue chip businesses just keep their place tidy, make money and get on with life.
Rentals are a shit-ton of work, even if you have an agent. If you always had dreams of being a landlord, I suppose this is the retirement for you, but for the rest of us, there's no way in hell this is a good idea.
You will have issues with tenants. You will invest heavily in maintenance, possibly due to your tenants. You will be hogtied by municipal and regional laws that heavily favour the rights of the tenant.
What you inevitably find is that if rent differs greatly from the amount of your mortgage (i.e this is profitable), all the good tenants have bought a house of their own. If it doesn't, you'll basically have a holding property that is gambling all your earnings on the property market. This isn't a very good strategy.
This is a terrible idea, unless you want a full time job. You didn't deduct from the $8,000 a month income - repairs, taxes, upkeep, insurance, potential loss of income due to bad tenants, tenants that damage your property - a bad tenant could cause $100K+ damage to your property and stop paying rent entirely. Also, property value loss due to deflation of the housing market, and other risks.
The average price of maintenance on a house is 1-3% of its value per year - this takes $20-60K per year off the top of your income. Be sure to take taxes off that as well as deadbeat tenants.
You could actually be in a negative situation, especially if you get a bad tenant that damages your property.
8% ROI is unrealistic, but a 2-4% is certainly possible especially with municipal bonds and insurance annuities. The former are also exempt from federal taxes, state taxes (if you live in the same state) and even local taxes (if you live in the same city). Both have guarantees against inflation (at the cost of lower yield) .
Nonetheless, I do think the is somewhat overrated. If I had fuck you money, I'd... write code, read books and papers. I'd have more freedom on how I write my code during working hours (and it's important not to understate importance of that, but the more senior you get, the more choice you have in what you work on what tools you use), but I'd also not have the focus that comes from working on systems that solve actual problems that individuals and organizations have; nor would I be solving these problems at scale that makes them much more interesting.
On the other hand, I'm pretty confident that if I were to spend my time chasing a big payoff I'd be working on problems that are far less interesting and more frustrating (which is almost axiomatically why these problems have the payoff). There's very few early-stage startups doing systems programming (and I'm speaking loosely here i.e., beyond just operating system kernels and file systems). For web companies systems programming only becomes needed as a scalability becomes a problem (in most cases it never does). The idea that may be I'll be able to go back to doing what I enjoy most of the time if the business succeeds won't be enough to drive me: I already do that (perhaps that's why so few "home run" startups have come out of Google?)
Keep in mind that while stock options after product/market fit (pre-IPO startups, public companies) account for only a tiny percentage, the chance of a payoff is much higher (which, again, is why it's a tiny percentage: you're no longer taking a risk). That payoff is certainly no fuck you money (except in rare cases e.g., Google in early 2000s), but it's often sufficient in terms of giving you more freedom e.g., to go back to school for a Ph.D.
Were I to have a vision for a business (rather than a science project, which most of my ideas have been) based upon interesting technology (i.e., not a website) I'd certainly consider pursuing it, but even then I'd have no illusions: I suspect, I'd spend more of my time doing what I don't like (general business operations) than what I do (coding); it would be the vision of bringing forth new technologies that solves real problems that would let me pull through that (as opposed to pure research or solving business problems with well known existing technologies) .
"His belief was that it was likelier to get worse before it got better and that it could be 10 years or more before the economy bounced back. “I think we’ll see Dow 4,000 before we see Dow 12,000,” he told me."
sure but as long as you believe the economy is going to bounce back over 10 years then if you took a good piece of your $5m and simply put it into an index fund now, in ten years (retirement) time you'd have a very healthy return on it.
i don't agree that now is a bad time to invest. i believe now is a bad time to invest for returns over the shorter/medium term but if you're talking about investing over a retirement time scale then it's during periods like the one we are in where big returns can be made.
People who think 6-10% returns are unrealistic are sheep, and know nothing about real estate.
A friend of mine, a complete novice, was able to buy a multifamily unit in downtown San Jose for 500K and rent it out for 5000 a month. His down payment is 100K. His expenses(400K mortgage, insurance, taxes, etc) is 2500 a month. His rate of return is (5000-2500)x12/100K = 30% or so.
He did this while violating the #1 rule of real estate investing: you never buy at market price. You pay 70% of what stuff are going for on the MLS.
I invest in courthouse foreclosure auctions, and manage about 40% cash on cash returns.
Investing in real estate is a skill, just like building companies or coding. Imagine how much a typical person know about building web apps. That is how much a typical person know about real estate investment.
So because your friend managed to get a crazy-good deal on one property, everyone else is sheep?
Arbitrage opportunities do exist in the current market due to the current craziness, but the present foreclosure pace can't last forever. I don't know how long "70% of MLS" has been "the #1 rule of real estate investing", but how easy was it to snap up properties for those prices in 2005?
> His expenses(400K mortgage, insurance, taxes, etc) is 2500 a month.
A different point of view is that his expenses are 12500 a month and FedGov is paying him a 10k/month interest subsidy, and that he is upside down by 150k and accounting for FedGov price supports as an asset. Tick. Tick. Tick.
I know of a couple of entrepreneurs who made a good few mil by selling their startup and were looking to start a business as a lifestyle cashflow only business. When I asked him why, he said they did not want to dip into their savings for daily expenses and wanted to have a business that was sure to make them just enough money without way too much effort. I think this is not a bad strategy unless you just don't want to work, which I think is rare.
In terms of growth, I think its wiser to invest in BRIC where the core domestic markets are getting stronger and the stock market returns are a lot better, though choppy. Also if you diversify into real estate (recurring income), CDs (monthly income), and such other opportunities, then you can strike a balance for yourself.
Influence is VERY tough though. I wouldn't count on it as an indefinite opportunity to earn money when needed, assuming you are able to cut through the noise and build credibility (which itself may be tougher than having a decent exit. Plus it is not for everyone). New influencers constantly displace current influencers and it would take a lot more work to maintain it unless you founded Google or something.
what's the moral of this story? you most likely, even if you make a good amount of money, will not escape the anxiety associated with money. or, escaping the anxiety associated with money is not accomplished by making money. the idea of fuck you money is for kids. being able to say fuck you to anyone is more about what you've got on the inside than what you've got on the outside.
It's actually silly to think that stock market ROIs won't rise again. They're abnormally low now, but we've seen it many times before.
Market returns are based on the amount investors need to take the inherent risks. Unless stock market investing gets considerably less risky (seems quite unlikely) investors will leave the market for less risky vehicles until rates return to the amounts needed to justify taking the risk, which have historically been around 7-10%.
Stocks, real estate, bonds, and all other market-based investment vehicles will always have returns in-line with risks in the long run.
Nobody should ever retire hoping to get a steady income from the stock market or real estate or other volatile investments. By the time you're ready to retire, you should be entirely in FDIC-insured CDs and the like. If your retirement plan is contingent on 6% annually you're asking for trouble, and you're probably going to get it if you live long enough.
One thing that worries me, and I'd love to hear other people's opinions, is that as baby boomers retire they will be removing their retirements from the stock market. Whether they move their money to other non-stock investments or whatever. But don't you think the transfer of money out of stock-related investments by such a large percentage of people is going to cause some problems for those of us who still have money in stocks in the market?
The author also seems to forget about dividends. If the market doesn't move at all in a period of time, it doesn't mean the companies I've invested in won't pay any dividends.
It is important to buy companies based on their fundamentals.
I think after you get fuck you money, your goal should be to create a lifestyle business. Something that can more or less run on autopilot and generate money for you to live on.
If you are a web guy, you can create some software product(or pay someone to build one for you). Then charge $50 a month...and you only need to make 6 sales a day(via adwords) to make $100K/yr.
If you are not...you can buy a franchise...i.e. McDonalds franchises make something like 1-2 million a year. And you as an owner don't need to do anything...just hire a good manager...and it'll more or less run on autopilot(from your perspective)
And you as an owner don't need to do anything...just hire a good manager...and it'll more or less run on autopilot(from your perspective)
This is probably true for many fast-food franchises but not McDonald's. Franchise owners a called "Owner/Operators" they are expected to work in their restaurants. McDonald's does not sell franchises to "Owner/Investors".
As an Owner/Operator you will go through "Hamburger University" in Oak Brook and learn how to make every product the restaurant sells. You will learn how to project sales, schedule employees and order product. You will learn how to manage labor and food cost, and how to manage your management team. You will spend some time working ordinary crew jobs and shift manager jobs at a restaurant.
Then, once you get your restaurant, you will have to be an active "chief executive" of the management team. You will have to recruit and hire trustworthy store managers... they are the ones who will be running your restaurant day to day and if they are not good at it you will not make any money or worse they will be stealing from you.
Just FYI: It's actually very hard to get a McDonalds Franchise these days. McDonalds controls where their restaurants can be built and how far they have to be from other restaurants. Plus McDonalds Corp. makes most of its money of real estate so the company has to be able to acquire land to sell to you. When there is land available in the U.S. there's usually a bidding war between existing franchisees making it hard for an individual to get a foot hold.
Plus you have to sign up for a 20 year term or face a steep termination fee (I heard it was in the arena of $100 Million).
I'm not sure it goes to your point I just thought it might give perspective on how even easy money isn't all that easy to get.
>I think after you get fuck you money, your goal should be to create a lifestyle business. Something that can more or less run on autopilot and generate money for you to live on.
my god, man, if you are capable of building a business that pays you a good salary without doing much any work, why not do so /before/ you get f-ck you money? I mean, at that point, you'd have a lot of time to pursue whatever startup ideas that might get you f-ck you money.
Well, there must be some correlation between money and influence. If Paul Graham is right, then the guy who has $5M at 30 by virtue of a startup exit has created enough value to be compensated as such. Which of course, leads to influence.
FYM in it's old-world sense (retirement) is probably getting more obsolete anyway. As Tim Ferriss put it, "The goal isn't to work less. It is to live more."
1. Low return on money. That's because money itself worth more now; the Fed has destroyed whole bunch money via credit tightening. We have gone through an asset deflation phrase and the money you have can buy more assets now. It's ok to have low return on money for now.
2. Asset allocation. Should not just put your FU money in stocks or Treasury. Read up on asset allocation. Have better downfall protection and better return.
3. 4% withdrawal rate. Studies and simulations have found that annual 4% withdrawal rate of a portfolio can make it last for very long time adjusted for inflation. 4% of 2M is 80K, which can provide a nice living.
4. Count net worth, not just cash. That 80K makes a big difference with a paid-for house.
5. Don't discount Social Security/Medicare/IRA/401K/Pension. The discussion of couple millions of PRESENT day often ignores the age restricted retirement funds. Those can be substantial.
What about dividend paying stocks? Good companies are usually very reluctant to cut dividends even in bad times and with stock prices suppressed, this should lead to higher dividend yields. Probably not a total solution but should be looked at.
But yeah, I do think that would be the generally best bet with $5 million. I would most of it in a dividend paying ETF or mutual fund, like DVY or Vanguard Utilties. These funs will pay 4% in dividends, plus, the dividend payout will generally rise at nearly the same rate as income inflation. That's a much, much better deal than CD's which pay 2% a year with no inflation increase.
In theory, shouldn't all stocks be dividend paying? If your stock doesn't pay dividends, what makes it any different from baseball cards as an investment?
maybe it safer strategy not to think of retirement at all and try to find what really motivates/fulfills you. If you get good at it whatever it is, there will always be a way to make money with it.
this may be good advice for people who have the potential to earn fu money. the corollary to average people seems to be that it's no longer possible to retire.
how did we go from an age in which average people could hope to retire, to one in which someone with 5M needs to worry?
[+] [-] SamAtt|15 years ago|reply
But then he suggests you aim for “f@#$ you influence and credibility” because it "allows you to charge $30k+ for a 1 hour speaking engagement". But I know people who used to make $10k per speaking engagement and they aren't getting much work lately. In my experience the first thing people cut in a bad economy are the expensive speakers and while influence can probably get you a magazine column I wouldn't expect that to pay much at all.
So if the problem was finding a stable income in a bad economy his solution really didn't solve it.
[+] [-] jacquesm|15 years ago|reply
So, no more lavish all employee trips to tropical islands and no more expensive speakers.
Time to get up and do some more work instead of talking about your previous successes.
And about dying penniless, who cares, you can't take it with you anyway. If you plan on passing your wealth to your kids better do it while you are alive and scale back accordingly. In plenty of countries that's the better strategy tax wise anyway.
[+] [-] notahacker|15 years ago|reply
Personally I'd like to see influence and credibility more as an end than a means to speaking engagements and high-billing consulting though...
[+] [-] unknown|15 years ago|reply
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[+] [-] lsc|15 years ago|reply
On the other hand, I think most things that get you a lot of money also gets you a lot of credibility, so going from just f-ck you money to f-ck you money plus f-ck you credibility isn't going to take much effort; you just have to be a bit more public, a bit more vocal about what you are doing.
[+] [-] ahoyhere|15 years ago|reply
1. If you are bottom-end expensive, you get cut quickly. (e.g. $10k speaking engagement)
2. If you are middle-end expensive, you get cut... but not as quickly. (e.g. $20-30k)
3. If you are high-end expensive, you get cut dead last.
My husband and I did very specific, highly sought-after freelance services in the realm of visualization design/JavaScript. We are definitely high-end expensive.
As the economy went into the shitter, we only got more and more work.
Why? Because clients/customers often feel that the low-end and mid-end expensive people don't fully pay for themselves. Those people are basically getting "excess" budget, as opposed to being truly sought after.
Or they are a consolation prize: "Well, we could get Tony Robbins but he's $80k, then again, there's this dude, he's kinda interesting, how do you feel about $10K?"
Once even that $10k may be a stretch, they decide not to hire anyone at all.
[+] [-] astine|15 years ago|reply
[+] [-] pg|15 years ago|reply
If so, this is a pretty encouraging sign.
[+] [-] quizbiz|15 years ago|reply
[+] [-] strlen|15 years ago|reply
That being said, I don't think this reflects negatively on Tony. There are many other writers who I respect who show this annoying tendency (somebody has pointed out that Malcolm Gladwell and Thomas Friedman are especially prone to this).
[+] [-] nostrademons|15 years ago|reply
[+] [-] riffer|15 years ago|reply
[+] [-] mattmaroon|15 years ago|reply
I won't lie, I've been funding my IRA early lately.
[+] [-] jamesseda|15 years ago|reply
[+] [-] rokhayakebe|15 years ago|reply
[+] [-] wallflower|15 years ago|reply
Mr. Foreman, who stared down financial collapse as an adult despite a troubled, impoverished childhood, said he knew real wealth when he saw it. “If you’re confident, you’re wealthy,” he says. “I’ve seen guys who work on a ship channel and they get to a certain point and they’re confident. You can look in their faces, they’re longshoremen, and they have this confidence about them...I’ve seen a lot of guys with millions and they don’t have any confidence,” he says. “So they’re not wealthy.”
[+] [-] unknown|15 years ago|reply
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[+] [-] lsc|15 years ago|reply
[+] [-] hugh3|15 years ago|reply
The best part is that you don't need to leave some money on the table to hedge against inflation, since in the long term rent will pretty much keep pace with inflation.
There are areas where this is a completely terrible idea due to rent controls and other landlord-unfriendly policies, obviously you shouldn't do it there. Also, avoid any area where you're likely to get undesirables as tenants.
[+] [-] brc|15 years ago|reply
You can get a quality property with minimal leverage for your $2million. You will get a blue chip tenant like a national retailer or even a government department, and they'll sign a 10 year lease with mandated, upwards only, CPI-indexed increases each year. You won't even have to fork over 8-10% on a property manager because the tenant will maintain the property. And at the end of it, you'll have a property worth much, much more than what you paid for it.
Compare to a portfolio of houses, this strategy is higher return, lower risk and much lower management. The problem with family housing is that they are full of families, with all the associated problems that brings. Families split up, move out, get into trouble, have parties - blue chip businesses just keep their place tidy, make money and get on with life.
[+] [-] run4yourlives|15 years ago|reply
You will have issues with tenants. You will invest heavily in maintenance, possibly due to your tenants. You will be hogtied by municipal and regional laws that heavily favour the rights of the tenant.
What you inevitably find is that if rent differs greatly from the amount of your mortgage (i.e this is profitable), all the good tenants have bought a house of their own. If it doesn't, you'll basically have a holding property that is gambling all your earnings on the property market. This isn't a very good strategy.
[+] [-] illumin8|15 years ago|reply
The average price of maintenance on a house is 1-3% of its value per year - this takes $20-60K per year off the top of your income. Be sure to take taxes off that as well as deadbeat tenants.
You could actually be in a negative situation, especially if you get a bad tenant that damages your property.
[+] [-] Vivtek|15 years ago|reply
Unless you're a hands-on people person, I recommend running away from rentals as fast as possible.
[+] [-] strlen|15 years ago|reply
Nonetheless, I do think the is somewhat overrated. If I had fuck you money, I'd... write code, read books and papers. I'd have more freedom on how I write my code during working hours (and it's important not to understate importance of that, but the more senior you get, the more choice you have in what you work on what tools you use), but I'd also not have the focus that comes from working on systems that solve actual problems that individuals and organizations have; nor would I be solving these problems at scale that makes them much more interesting.
On the other hand, I'm pretty confident that if I were to spend my time chasing a big payoff I'd be working on problems that are far less interesting and more frustrating (which is almost axiomatically why these problems have the payoff). There's very few early-stage startups doing systems programming (and I'm speaking loosely here i.e., beyond just operating system kernels and file systems). For web companies systems programming only becomes needed as a scalability becomes a problem (in most cases it never does). The idea that may be I'll be able to go back to doing what I enjoy most of the time if the business succeeds won't be enough to drive me: I already do that (perhaps that's why so few "home run" startups have come out of Google?)
Keep in mind that while stock options after product/market fit (pre-IPO startups, public companies) account for only a tiny percentage, the chance of a payoff is much higher (which, again, is why it's a tiny percentage: you're no longer taking a risk). That payoff is certainly no fuck you money (except in rare cases e.g., Google in early 2000s), but it's often sufficient in terms of giving you more freedom e.g., to go back to school for a Ph.D.
Were I to have a vision for a business (rather than a science project, which most of my ideas have been) based upon interesting technology (i.e., not a website) I'd certainly consider pursuing it, but even then I'd have no illusions: I suspect, I'd spend more of my time doing what I don't like (general business operations) than what I do (coding); it would be the vision of bringing forth new technologies that solves real problems that would let me pull through that (as opposed to pure research or solving business problems with well known existing technologies) .
[+] [-] Harj|15 years ago|reply
sure but as long as you believe the economy is going to bounce back over 10 years then if you took a good piece of your $5m and simply put it into an index fund now, in ten years (retirement) time you'd have a very healthy return on it.
i don't agree that now is a bad time to invest. i believe now is a bad time to invest for returns over the shorter/medium term but if you're talking about investing over a retirement time scale then it's during periods like the one we are in where big returns can be made.
[+] [-] istari|15 years ago|reply
A friend of mine, a complete novice, was able to buy a multifamily unit in downtown San Jose for 500K and rent it out for 5000 a month. His down payment is 100K. His expenses(400K mortgage, insurance, taxes, etc) is 2500 a month. His rate of return is (5000-2500)x12/100K = 30% or so.
He did this while violating the #1 rule of real estate investing: you never buy at market price. You pay 70% of what stuff are going for on the MLS.
I invest in courthouse foreclosure auctions, and manage about 40% cash on cash returns.
Investing in real estate is a skill, just like building companies or coding. Imagine how much a typical person know about building web apps. That is how much a typical person know about real estate investment.
[+] [-] hugh3|15 years ago|reply
Arbitrage opportunities do exist in the current market due to the current craziness, but the present foreclosure pace can't last forever. I don't know how long "70% of MLS" has been "the #1 rule of real estate investing", but how easy was it to snap up properties for those prices in 2005?
[+] [-] Daniel_Newby|15 years ago|reply
A different point of view is that his expenses are 12500 a month and FedGov is paying him a 10k/month interest subsidy, and that he is upside down by 150k and accounting for FedGov price supports as an asset. Tick. Tick. Tick.
[+] [-] betterlabs|15 years ago|reply
In terms of growth, I think its wiser to invest in BRIC where the core domestic markets are getting stronger and the stock market returns are a lot better, though choppy. Also if you diversify into real estate (recurring income), CDs (monthly income), and such other opportunities, then you can strike a balance for yourself.
Influence is VERY tough though. I wouldn't count on it as an indefinite opportunity to earn money when needed, assuming you are able to cut through the noise and build credibility (which itself may be tougher than having a decent exit. Plus it is not for everyone). New influencers constantly displace current influencers and it would take a lot more work to maintain it unless you founded Google or something.
[+] [-] ehsanul|15 years ago|reply
http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-...
http://crawlingroad.com/blog/tag/permanent-portfolio/
[+] [-] smalter|15 years ago|reply
[+] [-] troygoode|15 years ago|reply
[+] [-] mattmaroon|15 years ago|reply
Market returns are based on the amount investors need to take the inherent risks. Unless stock market investing gets considerably less risky (seems quite unlikely) investors will leave the market for less risky vehicles until rates return to the amounts needed to justify taking the risk, which have historically been around 7-10%.
Stocks, real estate, bonds, and all other market-based investment vehicles will always have returns in-line with risks in the long run.
Nobody should ever retire hoping to get a steady income from the stock market or real estate or other volatile investments. By the time you're ready to retire, you should be entirely in FDIC-insured CDs and the like. If your retirement plan is contingent on 6% annually you're asking for trouble, and you're probably going to get it if you live long enough.
[+] [-] logicalmind|15 years ago|reply
[+] [-] ewald|15 years ago|reply
It is important to buy companies based on their fundamentals.
[+] [-] vaksel|15 years ago|reply
If you are a web guy, you can create some software product(or pay someone to build one for you). Then charge $50 a month...and you only need to make 6 sales a day(via adwords) to make $100K/yr.
If you are not...you can buy a franchise...i.e. McDonalds franchises make something like 1-2 million a year. And you as an owner don't need to do anything...just hire a good manager...and it'll more or less run on autopilot(from your perspective)
[+] [-] ams6110|15 years ago|reply
This is probably true for many fast-food franchises but not McDonald's. Franchise owners a called "Owner/Operators" they are expected to work in their restaurants. McDonald's does not sell franchises to "Owner/Investors".
As an Owner/Operator you will go through "Hamburger University" in Oak Brook and learn how to make every product the restaurant sells. You will learn how to project sales, schedule employees and order product. You will learn how to manage labor and food cost, and how to manage your management team. You will spend some time working ordinary crew jobs and shift manager jobs at a restaurant.
Then, once you get your restaurant, you will have to be an active "chief executive" of the management team. You will have to recruit and hire trustworthy store managers... they are the ones who will be running your restaurant day to day and if they are not good at it you will not make any money or worse they will be stealing from you.
It is definitely NOT a passive investment.
[+] [-] SamAtt|15 years ago|reply
Plus you have to sign up for a 20 year term or face a steep termination fee (I heard it was in the arena of $100 Million).
I'm not sure it goes to your point I just thought it might give perspective on how even easy money isn't all that easy to get.
[+] [-] lsc|15 years ago|reply
my god, man, if you are capable of building a business that pays you a good salary without doing much any work, why not do so /before/ you get f-ck you money? I mean, at that point, you'd have a lot of time to pursue whatever startup ideas that might get you f-ck you money.
[+] [-] anamax|15 years ago|reply
Actually, it won't.
Good managers are very expensive and they leave to make their own FU money. Okay managers require constant supervision.
[+] [-] troygoode|15 years ago|reply
[+] [-] yewweitan|15 years ago|reply
FYM in it's old-world sense (retirement) is probably getting more obsolete anyway. As Tim Ferriss put it, "The goal isn't to work less. It is to live more."
[+] [-] ww520|15 years ago|reply
1. Low return on money. That's because money itself worth more now; the Fed has destroyed whole bunch money via credit tightening. We have gone through an asset deflation phrase and the money you have can buy more assets now. It's ok to have low return on money for now.
2. Asset allocation. Should not just put your FU money in stocks or Treasury. Read up on asset allocation. Have better downfall protection and better return.
3. 4% withdrawal rate. Studies and simulations have found that annual 4% withdrawal rate of a portfolio can make it last for very long time adjusted for inflation. 4% of 2M is 80K, which can provide a nice living.
4. Count net worth, not just cash. That 80K makes a big difference with a paid-for house.
5. Don't discount Social Security/Medicare/IRA/401K/Pension. The discussion of couple millions of PRESENT day often ignores the age restricted retirement funds. Those can be substantial.
[+] [-] gcheong|15 years ago|reply
[+] [-] bokonist|15 years ago|reply
But yeah, I do think that would be the generally best bet with $5 million. I would most of it in a dividend paying ETF or mutual fund, like DVY or Vanguard Utilties. These funs will pay 4% in dividends, plus, the dividend payout will generally rise at nearly the same rate as income inflation. That's a much, much better deal than CD's which pay 2% a year with no inflation increase.
[+] [-] philwelch|15 years ago|reply
[+] [-] harscoat|15 years ago|reply
[+] [-] myoung8|15 years ago|reply
I would have to disagree, though, because fame and influence fades. You still have to work hard to maintain it.
[+] [-] exit|15 years ago|reply
how did we go from an age in which average people could hope to retire, to one in which someone with 5M needs to worry?
[+] [-] webwright|15 years ago|reply
http://www.usinflationcalculator.com/inflation/historical-in...
Looks like about 2-4%. :-(