how to make money like a billionaire

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

how to make money like a billionaire

Post by ArthurO » Tue Nov 18, 2014 5:45 pm

http://www.marketwatch.com/story/tony-r ... 2014-11-18

This article was posted today on MarketWatch that I read sometimes. The rule #1 makes me confident that my overweighing in CDs and safe investments is the right strategy... I am always obsessing with not loosing and if the price is that my returns are low so be it. I sometimes question myself when i see 100K in CDs make less in a year than 10K in equities... it is nice to read a reinforcing argument stating that not losing is more important than making anything from a billionaire...anyone else follows the DO NOT LOSE stategy? and how is it working out...

1. Don’t lose. Every single one of these masters, while driven to deliver extraordinary returns, is more obsessed with not losing money. Even the world’s greatest hedge fund managers, who you’d think would be comfortable taking huge risks, are actually laser-focused on protecting their downside. From Ray Dalio (the founder of the largest hedge fund on the planet) to Kyle Bass (who turned $30 million in investments into $2 billion in two years) to Paul Tudor Jones (one of the top 10 financial traders since 1993), they understand implicitly that if you don’t lose, you live to fight another day.

As Jones said: “I care deeply about making money. I want to know I’m not losing it . . . The most important thing for me is that defense is 10 times more important than offense . . . You have to be very focused on the downside at all times.”

Sidney
Posts: 6694
Joined: Thu Mar 08, 2007 6:06 pm

Re: how to make money like a billionaire

Post by Sidney » Tue Nov 18, 2014 5:48 pm

Reminds me of an interview on ESPN I saw a few years ago. Reporter asked a coach what his secret to winning was. "Outscore the competition."
I always wanted to be a procrastinator.

Busting Myths
Posts: 353
Joined: Sun Oct 24, 2010 4:04 pm
Location: So Cal

Re: how to make money like a billionaire

Post by Busting Myths » Tue Nov 18, 2014 5:50 pm

ArthurO,
A popular saying on the board is "There are many roads to Dublin" so I cannot state whether you are wrong or correct as everyone has different return/risk objectives. However, you do exhibit confirmation biases in your investment decision making process (based on posting across many threads) which may result in suboptimal risk adjusted returns.

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Tue Nov 18, 2014 5:57 pm

Busting Myths wrote:ArthurO,

A popular saying on the board is "There are many roads to Dublin" so I cannot state whether you are wrong or correct as everyone has different return/risk objectives. However, you do exhibit confirmation biases in your investment decision making process (based on posting across many threads) which may result in suboptimal risk adjusted returns.
I completely agree with you that my returns are 99% suboptimal in an up market like we have right now comparing to bogleheads who take more risky approach, but if we hit a rough patch that lasts a year of two I will be perfectly positioned to have enough critical mass left when it's all said and done to make out OK.

Optimal returns are difficult to judge... what exactly is optimal, all I know is I will not be a sore loser when a big crash happens, and on the flip side, if it wasn't for bogleheads I would be a sore loser either way, I still remember my starting days picking and choosing my 401K funds at random from some list given to us by an avisor... all with 1.50 ERs or higher, and I didn't even know what ER meant....

Now I am much more mature and educated, and got all my education free...

yes there are a lot of roads to Dublin, I take a slow uphill winding road with a lot of grass and safety barriers on each side... some people choose to take and up and down dangerous road with cliff on one side, just more risky one... they both lead to the same retirement peak, but I do prefer the safe and steady approach... not that I don't question it at times....

User avatar
HomerJ
Posts: 11824
Joined: Fri Jun 06, 2008 12:50 pm

Re: how to make money like a billionaire

Post by HomerJ » Tue Nov 18, 2014 5:59 pm

Billionaires didn't become that way via CDs.

AFTER they've made their money, they are now focused on keeping it.

You're still in the accumulating phase, so any lessons you get from billionaires may not apply to you.

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Tue Nov 18, 2014 6:05 pm

HomerJ wrote:Billionaires didn't become that way via CDs.

AFTER they've made their money, they are now focused on keeping it.

You're still in the accumulating phase, so any lessons you get from billionaires may not apply to you.
I think billonaires weren't made in stock market (except Buffet maybe).. I've read that majority of high income/net worth individuals get there because of their entrepreneurial skills and they only use stock market as preservation of capital tool, the get rich schemes are bound to get us all into trouble.

The 4 rules to striking it rich are:

1. Educate yourself, DONE
2. Invest in Real Estate, DONE
3. Invest in Stock Market, DONE
4. Start your own business.... didn't do that yet... but planning on that in a next few years... curious how it will work out

lessons from billionaires apply to all of us, we need to take pointers from the ones who not only talk the talk but also walk the walk...

And just to clarify, I don't think investing is putting money in CDs, that's preservation of capital, that's not losing it all in a crash, investing is putting money in the market in a smart and educated way with the protection against the downside, which according to the article (with which I agree) is 10x more important than 1-2% points more on the upside...

I try to minimize the risk and maximize the return...

User avatar
bottlecap
Posts: 5855
Joined: Tue Mar 06, 2007 11:21 pm
Location: Tennessee

Re: how to make money like a billionaire

Post by bottlecap » Tue Nov 18, 2014 8:42 pm

I can't say what is right for you, but I can say that that article is a bunch of senseless junk. It also doesn't suggest you shouldn't take any risks with your money, but that's besides the point, because the piece is so bad.

JT

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Tue Nov 18, 2014 8:46 pm

I respectfully disagree, very smart article....

User avatar
pennstater2005
Posts: 2463
Joined: Wed Apr 11, 2012 8:50 pm

Re: how to make money like a billionaire

Post by pennstater2005 » Tue Nov 18, 2014 8:58 pm

Author Tony Robbins occupation on Wikipedia listed as an American life coach..... think I'll just stop right there.
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

Pizzasteve510
Posts: 635
Joined: Sun Jul 27, 2014 3:32 pm

Re: how to make money like a billionaire

Post by Pizzasteve510 » Tue Nov 18, 2014 9:00 pm

The OP Seems to live in an area that might smell like the area under a bridge....just saying....

Each to his own. I will take my 16% ROI over the last 10 yrs or so vs CD rates. My gripe today, 40 2026 5.25% year tax free muni bonds were called as of Dec 6. :oops:

User avatar
gravlax
Posts: 247
Joined: Thu Aug 21, 2008 2:29 pm
Location: Cole Valley, CA

Re: how to make money like a billionaire

Post by gravlax » Tue Nov 18, 2014 9:13 pm

“I am more concerned with the return of my money than the return on my money.” Will Rogers (11/4/1879)

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Tue Nov 18, 2014 9:17 pm

gravlax wrote:“I am more concerned with the return of my money than the return on my money.” Will Rogers (11/4/1879)
this quote fits my investment profile to the T... but so far I pay for this investment profile in profits that could be made... there is no free lunch, there is a price to be paid for everything

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Tue Nov 18, 2014 9:18 pm

Pizzasteve510 wrote:The OP Seems to live in an area that might smell like the area under a bridge....just saying....

Each to his own. I will take my 16% ROI over the last 10 yrs or so vs CD rates. My gripe today, 40 2026 5.25% year tax free muni bonds were called as of Dec 6. :oops:
yes each to his own, for your sake I hope we don't experience 90% decline in stocks... it happened before it could happen again...

User avatar
Yesterdaysnews
Posts: 429
Joined: Sun Sep 14, 2014 1:25 pm

Re: how to make money like a billionaire

Post by Yesterdaysnews » Tue Nov 18, 2014 9:22 pm

I don't see how a hedge fund strategy can be feasible for your average investor, unless already extremely wealthy. When you are building up your portfolio and have a long time horizons stocks will make you good money. You just have to avoid selling when they go down no matter how difficult to stomach. Best approach is to look at your account a lot less often lol.

User avatar
HomerJ
Posts: 11824
Joined: Fri Jun 06, 2008 12:50 pm

Re: how to make money like a billionaire

Post by HomerJ » Tue Nov 18, 2014 10:52 pm

ArthurO wrote:
Pizzasteve510 wrote:The OP Seems to live in an area that might smell like the area under a bridge....just saying....

Each to his own. I will take my 16% ROI over the last 10 yrs or so vs CD rates. My gripe today, 40 2026 5.25% year tax free muni bonds were called as of Dec 6. :oops:
yes each to his own, for your sake I hope we don't experience 90% decline in stocks... it happened before it could happen again...
But what's never happened (yet) is for stocks to STAY 90% down.

Didn't you invest in the Ali-baba IPO? Seems weird to alternate between IPO individual stocks, and CDs.

Me, I'm 50/50 stocks/bonds, so you and I actually probably agree on a lot of things... I too have a ton of my money in "safe" investments just in case... Having CDs instead of bonds isn't a bad idea... But are you saying that you are 0% stocks? (Except for BABA?)
Last edited by HomerJ on Tue Nov 18, 2014 11:00 pm, edited 1 time in total.

User avatar
backpacker
Posts: 1620
Joined: Mon Sep 22, 2014 2:17 pm

Re: how to make money like a billionaire

Post by backpacker » Tue Nov 18, 2014 11:00 pm

HomerJ wrote: Didn't you invest in the Ali-baba IPO? Seems weird to alternate between IPO individual stocks, and CDs.
Lot's of investors (for better or worse) are "risk confiners". Rather than having their risk spread all of their portfolio, they like to pile it up in one corner. I think that's why the Larry portfolio appeals to lots of people.

User avatar
backpacker
Posts: 1620
Joined: Mon Sep 22, 2014 2:17 pm

Re: how to make money like a billionaire

Post by backpacker » Tue Nov 18, 2014 11:06 pm

ArthurO wrote: 1. Don’t lose. Every single one of these masters, while driven to deliver extraordinary returns, is more obsessed with not losing money. Even the world’s greatest hedge fund managers, who you’d think would be comfortable taking huge risks, are actually laser-focused on protecting their downside. From Ray Dalio (the founder of the largest hedge fund on the planet) to Kyle Bass (who turned $30 million in investments into $2 billion in two years) to Paul Tudor Jones (one of the top 10 financial traders since 1993), they understand implicitly that if you don’t lose, you live to fight another day.
There is some truth in this and it's why I buy broad index funds. If you go out and buy one company at a time, there is a very real chance that you lose all your money. Your company could just go broke. If you buy the whole world economy on the other hand, it would take an economic catastrophe the likes of which the world has never seen to wipe out your investment.

pkcrafter
Posts: 13095
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: how to make money like a billionaire

Post by pkcrafter » Tue Nov 18, 2014 11:31 pm

how to make money like a billionaire
Step 1. Become a Billionaire.

Tony Robbins has a new book out and he's popping up everywhere promoting it.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

inbox788
Posts: 5640
Joined: Thu Mar 15, 2012 5:24 pm

Re: how to make money like a billionaire

Post by inbox788 » Wed Nov 19, 2014 12:03 am

You mean like Billionaire Eike Batista?

http://www.forbes.com/profile/eike-batista/

Or some of these other folks:

http://www.oddee.com/item_98782.aspx

Fallible
Posts: 6534
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: how to make money like a billionaire

Post by Fallible » Wed Nov 19, 2014 12:06 am

pkcrafter wrote:
how to make money like a billionaire
Step 1. Become a Billionaire.
...
Paul
Become a billionaire first. Of course! I knew there was a catch to it. :P
Last edited by Fallible on Wed Nov 19, 2014 1:10 am, edited 1 time in total.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

staythecourse
Posts: 6108
Joined: Mon Jan 03, 2011 9:40 am

Re: how to make money like a billionaire

Post by staythecourse » Wed Nov 19, 2014 12:41 am

ArthurO wrote:I try to minimize the risk and maximize the return...
Do as you want, but I don't care how many articles, books, or interviews are done there is one fundamental rule/ dogma in investing: One's expected return is DIRECTLY proportional to the level of risk one takes.

The above comment flies in the face of that rule.

I do agree with others that their seems to be smell of confirmation bias in your posts. There is NOTHING wrong with being heavy in capital preservation investments as long as you realize your returns will be very low to none.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

abyan
Posts: 372
Joined: Mon Jun 23, 2014 8:51 pm

Re: how to make money like a billionaire

Post by abyan » Wed Nov 19, 2014 12:50 am

The 4 rules to striking it rich are:

1. Educate yourself, DONE
2. Invest in Real Estate, DONE
3. Invest in Stock Market, DONE
4. Start your own business.... didn't do that yet... but planning on that in a next few years... curious how it will work out
I did all 4 as well. And am currently living paycheck to paycheck, and diligently looking for a new job, as my own business bottomed out suddenly.

Let me know how it works out for you ;-)

All kidding aside, your exuberance is laudable, but you're sounding like you've discovered some secret formula to success. And I'm not entirely convinced you have. In any case, I suggest you do the math as to how much money you'll need in retirement, and if the CD strategy gets you there, good for you.

Beliavsky
Posts: 690
Joined: Sun Jun 29, 2014 10:21 am

Re: how to make money like a billionaire

Post by Beliavsky » Wed Nov 19, 2014 8:26 am

ArthurO wrote:
HomerJ wrote:Billionaires didn't become that way via CDs.

AFTER they've made their money, they are now focused on keeping it.

You're still in the accumulating phase, so any lessons you get from billionaires may not apply to you.
I think billonaires weren't made in stock market (except Buffet maybe).. I've read that majority of high income/net worth individuals get there because of their entrepreneurial skills and they only use stock market as preservation of capital tool, the get rich schemes are bound to get us all into trouble.

The 4 rules to striking it rich are:

1. Educate yourself, DONE
2. Invest in Real Estate, DONE
3. Invest in Stock Market, DONE
4. Start your own business.... didn't do that yet... but planning on that in a next few years... curious how it will work out
New businesses fail at a high rate, and I bet the Sharpe ratio, on average, of starting a business is lower than that from investing in the S&P and substantially lower than investing in a portfolio of the S&P and bonds, especially when you include lost income. Therefore a higher probability way of getting rich than starting a business may be to keep your job and leverage the "optimal portfolio" of financial assets, perhaps using stock index and Treasury bond futures. There has been a lengthy thread on buying a balanced fund on margin. The more leverage you use, the higher the chance your portfolio will be wiped out, but I think the odds are still better than those for starting a business for most people. Of course, if you have a great business idea, go for it. But if you are doing something like opening a restaurant or convenience store without any special skill in that area, think twice.

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 8:33 am

new businesses are very risky but potential for reward is huge, not that I have any experience as I have never owned a business so far, but I am yet to meet a person with net worth of 10M or more who didn't do it through entrepreneurial skills of some sort...

and when you fail, always get up and try again... just look up Michael Lee Chin, that guy failed many times before building huge company that was extremely successful, and I happen to know him personally, don't agree with his investments though...
Last edited by ArthurO on Wed Nov 19, 2014 8:42 am, edited 1 time in total.

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 8:40 am

abyan wrote:
The 4 rules to striking it rich are:

1. Educate yourself, DONE
2. Invest in Real Estate, DONE
3. Invest in Stock Market, DONE
4. Start your own business.... didn't do that yet... but planning on that in a next few years... curious how it will work out
I did all 4 as well. And am currently living paycheck to paycheck, and diligently looking for a new job, as my own business bottomed out suddenly.

Let me know how it works out for you ;-)

All kidding aside, your exuberance is laudable, but you're sounding like you've discovered some secret formula to success. And I'm not entirely convinced you have. In any case, I suggest you do the math as to how much money you'll need in retirement, and if the CD strategy gets you there, good for you.
the rules of success are no guarantee of success,

If I have discovered a secret success formula I would not be reading this forum looking for answers...

CD strategy is very good for my every day spending and indulgences of life and I am fine with it... I do have my retirement bucket in which I invest 70/30 split so far like a typical boglehead, and yes I do have a play money bucket which I treat like a casino, it is a relatively small chunk of my own capital, it has done very well, that's where my alibaba IPO investment came from, but the point is:

I have a safe bucket with substantial amount, that will never lose capital (CDs)
I have a retirement bucket which is about 1/4 of amount of retirement bucket, and even though capital here is much less than first bucket the returns are so far much higher
then I have a play money bucket with extraordinarily high return but that's only because I was either careful or lucky, don't know which one.

This is my secret formula, I don't mix my buckets, each has a clear purpose and each performs separately from the others, I don't consider money in one to make investment decisions in the other two, and so far I am happy with my safety net of bucket number 1 unfortunately that safety net comes with penalty of subpar overall returns (again I underline word SO FAR).

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 8:48 am

abyan wrote:
The 4 rules to striking it rich are:

1. Educate yourself, DONE
2. Invest in Real Estate, DONE
3. Invest in Stock Market, DONE
4. Start your own business.... didn't do that yet... but planning on that in a next few years... curious how it will work out
I did all 4 as well. And am currently living paycheck to paycheck, and diligently looking for a new job, as my own business bottomed out suddenly.

Let me know how it works out for you ;-)

All kidding aside, your exuberance is laudable, but you're sounding like you've discovered some secret formula to success. And I'm not entirely convinced you have. In any case, I suggest you do the math as to how much money you'll need in retirement, and if the CD strategy gets you there, good for you.
I think your statement is little dangerous... one can do all the math they want and math could potentially show that in order to reach the retirement goal, one must be 100% in stocks... the more important point is that math is no guarantee, proper assets allocation maximizes the PROBABILITY of success, but as I stated many times before, market is a lottery and if you play it right odds are in your favor, but still there could be many many losers, if you are not prepared to lose, do not play... period...

I get the feeling when reading may posters here that somehow magically if you do things right you must surely come out ahead, this is simply not the case. There is a chance that one might do everything right invest properly, build beautiful buy and hold portfolio and still lose, Mr. Market is capricious beast and there are no guarantees.

I build a guarantee myself, and that is my CD bucket, it is growing very slowly but surely and will eventually reach 1M, at that time my 30k a year living expenses will be covered, I could live on that... maybe then I will stop contributing to CDs and choose something more how I say it, appetizing...

everyone keeps saying with more risk comes more return, this statement is oh so common on this forum, however... the real meaning of it is that yes, chances are there will be more return if the risk does not show up, but if it does show up there will be real LOSSES and no return, and the losses can be large... and even in the market 50% loss break even point is 100% return and to get that requires TIME and thats a luxury none of us have, when the risk shows up it eats up profits and only time will ameliorate that problem, and a lot of it, and I for one am not going to wake up with a finger up my ..... and realize I will need 20 years to break even and have 10 years to live... each to his own.... and good luck everyone....

Grt2bOutdoors
Posts: 19293
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: how to make money like a billionaire

Post by Grt2bOutdoors » Wed Nov 19, 2014 8:54 am

ArthurO wrote:new businesses are very risky but potential for reward is huge, not that I have any experience as I have never owned a business so far, but I am yet to meet a person with net worth of 10M or more who didn't do it through entrepreneurial skills of some sort...

and when you fail, always get up and try again... just look up Michael Lee Chin, that guy failed many times before building huge company that was extremely successful, and I happen to know him personally, don't agree with his investments though...
I have a handful of relatives who are worth $10MM+. How did they get there? Two of them had their own businesses that were cash-based, they paid themselves an average salary commensurate with the job, saved and invested all excess funds in individual stocks that at the time one could consider to be highly profitable small and mid cap stocks, they worked for 60 years - 6 days a week, 12-15 hour days and they reinvested the dividends, never spent a dime of capital - strictly buy and hold except when tax loss harvesting and being taken out in a cash buy out merger. The cash received from those mergers were plowed back into the market. But the bottom line is, it took 60 years, it took a lot of deferred compensation, average spending habits and no divorces to make it work. Now, you have to ask yourself - are you willing to wait 60 years, can you work for 60 years? They started during the golden age of investing right after World War II - I hope you don't pray for another type event so you too can get a shot at buying in cheap.

Now, the other relatives, they worked for a large well known company and another was in the building trades that offered great benefits including a very juicy pension. They too, lived beneath their means, saved and invested in individual equities, it also helped that a few of the local companies in the neighborhood offered a "friends and families" early discount on IPO's (those are inside deals not open to the average Joe) that they got in on and just like my other two relatives above, they also waited 60 years or so. So yes, you can be worth $10MM plus, but how much are you willing to sacrifice in the present, because it's not easy street to being a multi-millionaire. Except of course, if you pretend your a business person and charge folks 2% of assets and 20% of profits for taking no risk and putting up no capital - set up shop as a hedge fund, get a few years of good performance and you too can be a billionaire! The roadside is littered with the carcasses of failed hedge funds, littered!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 9:04 am

Grt2bOutdoors wrote:
ArthurO wrote:new businesses are very risky but potential for reward is huge, not that I have any experience as I have never owned a business so far, but I am yet to meet a person with net worth of 10M or more who didn't do it through entrepreneurial skills of some sort...

and when you fail, always get up and try again... just look up Michael Lee Chin, that guy failed many times before building huge company that was extremely successful, and I happen to know him personally, don't agree with his investments though...
I have a handful of relatives who are worth $10MM+. How did they get there? Two of them had their own businesses that were cash-based, they paid themselves an average salary commensurate with the job, saved and invested all excess funds in individual stocks that at the time one could consider to be highly profitable small and mid cap stocks, they worked for 60 years - 6 days a week, 12-15 hour days and they reinvested the dividends, never spent a dime of capital - strictly buy and hold except when tax loss harvesting and being taken out in a cash buy out merger. The cash received from those mergers were plowed back into the market. But the bottom line is, it took 60 years, it took a lot of deferred compensation, average spending habits and no divorces to make it work. Now, you have to ask yourself - are you willing to wait 60 years, can you work for 60 years? They started during the golden age of investing right after World War II - I hope you don't pray for another type event so you too can get a shot at buying in cheap.

Now, the other relatives, they worked for a large well known company and another was in the building trades that offered great benefits including a very juicy pension. They too, lived beneath their means, saved and invested in individual equities, it also helped that a few of the local companies in the neighborhood offered a "friends and families" early discount on IPO's (those are inside deals not open to the average Joe) that they got in on and just like my other two relatives above, they also waited 60 years or so. So yes, you can be worth $10MM plus, but how much are you willing to sacrifice in the present, because it's not easy street to being a multi-millionaire. Except of course, if you pretend your a business person and charge folks 2% of assets and 20% of profits for taking no risk and putting up no capital - set up shop as a hedge fund, get a few years of good performance and you too can be a billionaire! The roadside is littered with the carcasses of failed hedge funds, littered!
you bring an important point into the discussion, and that is that making money and more importantly keeping it is a hard work, and savings involves sacrificing, sacrificing is risky because you may never get the rewards for it, simply due to unlucky short life span that I don't wish on anyone but see happen almost every day... just having right asset allocation and putting 18K into 401k per year even over 30 years will not make you 10M... but hard work and entrepreneurial skills just might do it..

I view market as money management tool and use it in order not to loose, if I get a crumb from the big investment fist table I am happy and I don't pretend for one minute to be capable to sit at the table and eat like a pig with these "investment professionals".

AviN
Posts: 475
Joined: Mon Mar 10, 2014 8:14 am

Re: how to make money like a billionaire

Post by AviN » Wed Nov 19, 2014 9:07 am

Real estate and starting your own business are both far more risky than the stock market. Both generally result in a very undiversified portfolio, thus increasing risk.

Holding part of your investment portfolio in fixed income to reduce risk is generally a good idea. But that's not the same thing as "Don’t lose." You are likely to lose money on your risky investments, especially in the short term. It's also not the most effective way to maximize wealth. The expected return of a 100% stock portfolio, for instance, is higher than a portfolio that includes fixed income.
ArthurO wrote: The 4 rules to striking it rich are:

1. Educate yourself, DONE
2. Invest in Real Estate, DONE
3. Invest in Stock Market, DONE
4. Start your own business.... didn't do that yet... but planning on that in a next few years... curious how it will work out

staythecourse
Posts: 6108
Joined: Mon Jan 03, 2011 9:40 am

Re: how to make money like a billionaire

Post by staythecourse » Wed Nov 19, 2014 9:13 am

ArthurO wrote:new businesses are very risky but potential for reward is huge, not that I have any experience as I have never owned a business so far, but I am yet to meet a person with net worth of 10M or more who didn't do it through entrepreneurial skills of some sort...
Just making sure you realize you are being influenced by selection bias. Just because every person you have heard of that is worth 10M+ has a successful business does NOT mean that every business owner is successful.

Most businesses fail or of moderate success. Just think about the risk of investing all your money in a business MUCH smaller then the smallest penny stock and that is the situation with starting a business If it didn't why wouldn't everyone jump on this get rich idea? Going out and finding the successful ones and using them as the "norm" makes the analogy incorrect. That is the problem, in my opinion, with Stanley's "Millionaire Mind". He goes out and finds the successful folks and then tries to find correlations opening up a HUGE selection bias. If business folks are the most successful as a norm he should have found 1000 random business owners and seen what their financial success is compared to a 1000's of other doctors, lawyers, dentist, teachers, MBA, etc... My guess if he did that he would find a larger range of income levels with huge kurtosis on both ends.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

User avatar
HomerJ
Posts: 11824
Joined: Fri Jun 06, 2008 12:50 pm

Re: how to make money like a billionaire

Post by HomerJ » Wed Nov 19, 2014 11:14 am

ArthurO wrote:new businesses are very risky but potential for reward is huge, not that I have any experience as I have never owned a business so far, but I am yet to meet a person with net worth of 10M or more who didn't do it through entrepreneurial skills of some sort...
How is this relevant to you? Do you need anywhere near $10 million? Why would you want to start a business if you only need $1-2 million, and you're already on track to achieve that?

Your "bucket" idea has been used by many people, but usually in retirement while spending down.

When you're accumulating, it's all the same money... Your way of completely compartmentalizing risk levels on your buckets is very strange to me.

Having one bucket 100% in CDs, but another bucket 70/30 stocks/bonds, and one bucket in risky IPO stocks, means you're actually probably taking MORE risk overall than someone like me who is just 50/50 stocks/bonds all in one bucket.

You're almost schizophrenic, where you'll be posting in the thread about Ali-baba, and talking about how it is a good bet, and worth the risk, and then in this thread, talking about absolute safety where you cannot imagine risking losing a single cent. Your attitude changes depending on what bucket of money you're talking about.

But it's all the same money.
Last edited by HomerJ on Wed Nov 19, 2014 11:44 am, edited 1 time in total.

abyan
Posts: 372
Joined: Mon Jun 23, 2014 8:51 pm

Re: how to make money like a billionaire

Post by abyan » Wed Nov 19, 2014 11:19 am

Math is a better guarantee than one article you read online :-)

surfstar
Posts: 1493
Joined: Fri Sep 13, 2013 12:17 pm
Location: Santa Barbara, CA

Re: how to make money like a billionaire

Post by surfstar » Wed Nov 19, 2014 11:20 am

Microsoft, Apple, GoPro, etc founders didn't become billionaires by investing in CDs. Their companies stock did it for them.

Guess what? It takes money to make money. Give me a billion dollars and I'll show you how to become a billionaire successfully ;)

User avatar
HomerJ
Posts: 11824
Joined: Fri Jun 06, 2008 12:50 pm

Re: how to make money like a billionaire

Post by HomerJ » Wed Nov 19, 2014 11:43 am

ArthurO wrote: 1. Don’t lose. Every single one of these masters, while driven to deliver extraordinary returns, is more obsessed with not losing money. Even the world’s greatest hedge fund managers, who you’d think would be comfortable taking huge risks, are actually laser-focused on protecting their downside. From Ray Dalio (the founder of the largest hedge fund on the planet) to Kyle Bass (who turned $30 million in investments into $2 billion in two years) to Paul Tudor Jones (one of the top 10 financial traders since 1993), they understand implicitly that if you don’t lose, you live to fight another day.
Again, they may be focused on not losing money NOW, but I guarantee they took large risks to get their billions to begin with.

There's nothing wrong with your thought-process. You don't NEED to take risk, because you're saving enough to meet your goals with just CDs... You're actually being very smart.

But this article doesn't apply to you as much as you think it does.

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 12:20 pm

HomerJ wrote:
ArthurO wrote:new businesses are very risky but potential for reward is huge, not that I have any experience as I have never owned a business so far, but I am yet to meet a person with net worth of 10M or more who didn't do it through entrepreneurial skills of some sort...
How is this relevant to you? Do you need anywhere near $10 million? Why would you want to start a business if you only need $1-2 million, and you're already on track to achieve that?

Your "bucket" idea has been used by many people, but usually in retirement while spending down.

When you're accumulating, it's all the same money... Your way of completely compartmentalizing risk levels on your buckets is very strange to me.

Having one bucket 100% in CDs, but another bucket 70/30 stocks/bonds, and one bucket in risky IPO stocks, means you're actually probably taking MORE risk overall than someone like me who is just 50/50 stocks/bonds all in one bucket.

You're almost schizophrenic, where you'll be posting in the thread about Ali-baba, and talking about how it is a good bet, and worth the risk, and then in this thread, talking about absolute safety where you cannot imagine risking losing a single cent. Your attitude changes depending on what bucket of money you're talking about.

I don't know how much risk I am taking overall and I am not interested to find out. Yes I do change my attitude 180 degrees depending on my bucket and that makes perfect sense because different buckets have different purposes and so my need ability and willingness to take risk also changes completely depending on the bucket, nothing schizophrenic about that, but if calling someone names or labeling them in negative connotation makes you feel better so be it, but i would prefer to keep the discussion constructive.

yes it is all the same money agreed there, and 1M is obviously not enough for me, my net worth is higher than that already...

keeping money in buckets while in accumulation phase in my view is not strage at all, it allows one to manage risk very effectively and know the bottom exactly, the bottom is the CD bucket..., it also allows for growth in the retirement accounts and some play to satisfy the need to tinker, I think it is perfectly reasonable approach to saving and investing...

But it's all the same money.

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 12:25 pm

HomerJ wrote:
ArthurO wrote: 1. Don’t lose. Every single one of these masters, while driven to deliver extraordinary returns, is more obsessed with not losing money. Even the world’s greatest hedge fund managers, who you’d think would be comfortable taking huge risks, are actually laser-focused on protecting their downside. From Ray Dalio (the founder of the largest hedge fund on the planet) to Kyle Bass (who turned $30 million in investments into $2 billion in two years) to Paul Tudor Jones (one of the top 10 financial traders since 1993), they understand implicitly that if you don’t lose, you live to fight another day.
Again, they may be focused on not losing money NOW, but I guarantee they took large risks to get their billions to begin with.

There's nothing wrong with your thought-process. You don't NEED to take risk, because you're saving enough to meet your goals with just CDs... You're actually being very smart.

But this article doesn't apply to you as much as you think it does.
the article does not apply to me because I don't have billions... but the principles apply just the same, if you want to preserve your capital do what billionaires do to preserve theirs, it's all the same.

I don't know how smart I actually am, time will tell, all I know is that I manage my risk very well and although there is a downside to my investments it has a well defined floor below which I will never drop and I am happy with that, again I give up the upside for having defined bottom but as long as the understanding is there, nothing is wrong...

if there is a huge crash i will come out comfortable and happy, if there is no crash i will make less comparing to most bogleheads but still enough to sustain my lifestyle, so it is a win win for my situation...

I think another point is that losing 50% out of 100k is not that bad, but once the wealth is accumulated, losing 50% out of a billion is a huge amount and so risk aversion as the game is going well and winnings are accumulating is a good thing and should be overweight comparing to trying to make more and more...

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 12:27 pm

abyan wrote:Math is a better guarantee than one article you read online :-)
math says for every investment strategy and asset weighting there is a mean (which is average that everyone obsesses about) and standard deviation, and standard deviation can be huge also on the downside, and you have 5% chance to be outside 2 standard deviations of average, I know my math very well, but in investment world math is about probabilities and not certainty...

Articles are interesting and should be digested...but have their value...

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 12:28 pm

surfstar wrote:Microsoft, Apple, GoPro, etc founders didn't become billionaires by investing in CDs. Their companies stock did it for them.

Guess what? It takes money to make money. Give me a billion dollars and I'll show you how to become a billionaire successfully ;)
you said it right there, they are FOUNDERS, therefore it is their business that made them billions and NOT stock market...

If I give you a billion dollars you will care less about bogleheads.... or investing, you will go to CDs lol

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 12:30 pm

HomerJ wrote:
ArthurO wrote:new businesses are very risky but potential for reward is huge, not that I have any experience as I have never owned a business so far, but I am yet to meet a person with net worth of 10M or more who didn't do it through entrepreneurial skills of some sort...
How is this relevant to you? Do you need anywhere near $10 million? Why would you want to start a business if you only need $1-2 million, and you're already on track to achieve that?

Your "bucket" idea has been used by many people, but usually in retirement while spending down.

When you're accumulating, it's all the same money... Your way of completely compartmentalizing risk levels on your buckets is very strange to me.

Having one bucket 100% in CDs, but another bucket 70/30 stocks/bonds, and one bucket in risky IPO stocks, means you're actually probably taking MORE risk overall than someone like me who is just 50/50 stocks/bonds all in one bucket.

You're almost schizophrenic, where you'll be posting in the thread about Ali-baba, and talking about how it is a good bet, and worth the risk, and then in this thread, talking about absolute safety where you cannot imagine risking losing a single cent. Your attitude changes depending on what bucket of money you're talking about.

But it's all the same money.
How much do I need? I thought about it, and for me to be content that figure is 5M, put in CDs this will make 150K a year and I can have a luxurious living with no risk, but FAT chance I get there with my conservative investing... hopefully social security still will be kicking when I am ready to retire....

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 12:34 pm

AviN wrote:Real estate and starting your own business are both far more risky than the stock market. Both generally result in a very undiversified portfolio, thus increasing risk.

Holding part of your investment portfolio in fixed income to reduce risk is generally a good idea. But that's not the same thing as "Don’t lose." You are likely to lose money on your risky investments, especially in the short term. It's also not the most effective way to maximize wealth. The expected return of a 100% stock portfolio, for instance, is higher than a portfolio that includes fixed income.
ArthurO wrote: The 4 rules to striking it rich are:

1. Educate yourself, DONE
2. Invest in Real Estate, DONE
3. Invest in Stock Market, DONE
4. Start your own business.... didn't do that yet... but planning on that in a next few years... curious how it will work out
Real Estate is special because property values although can drop a lot will never go down to zero. land and buildings have inherent value in them.
And business, although risky I agree, gives you full control over how hard you work and what product you offer to masses, and with little bit of luck you can make it big, that's what capitalistic society is all about, and when you invest in your business you know EXACTLY where the money is going and you control exactly the direction of the business, whatever it may be. I haven't tried it myself but know a few successful businessmen who would never go back and work for someone else. Furthermore Tax structure in this country is such that the businesses are supported... Again not speaking from experience here, so talk to me in a few years, maybe my concept will change in that aspect of things....

User avatar
backpacker
Posts: 1620
Joined: Mon Sep 22, 2014 2:17 pm

Re: how to make money like a billionaire

Post by backpacker » Wed Nov 19, 2014 1:23 pm

ArthurO wrote: I think another point is that losing 50% out of 100k is not that bad, but once the wealth is accumulated, losing 50% out of a billion is a huge amount and so risk aversion as the game is going well and winnings are accumulating is a good thing and should be overweight comparing to trying to make more and more...
I would think that losing half of $1 billion would matter less than losing half of a $1 million portfolio. If you have $1 billion, you can withdraw $40 million a year. If that's cut in half, you can withdraw $20 million a year. I can't imagine that there would be much difference between a $20 million a year lifestyle and a $40 million a year lifestyle. On the other hand, going from $40,000 a year to $20,000 a year would be rather jarring.

camptalcott
Posts: 241
Joined: Wed Jul 23, 2014 4:45 pm
Location: Philadelphia PA

Re: how to make money like a billionaire

Post by camptalcott » Wed Nov 19, 2014 1:27 pm

HomerJ wrote:Billionaires didn't become that way via CDs.

AFTER they've made their money, they are now focused on keeping it.

You're still in the accumulating phase, so any lessons you get from billionaires may not apply to you.


That's what I was thinking. As with most articles you must take them with a grain of salt. HOW did they BUILD there wealth in the first place. My late husband and a couple of friends started their own business. when they first went independent not only were they not rich, we had a bunch of business related debt. So following these so call "preservation" rules would never had allowed them to start their own business.

From Ray Dalio (the founder of the largest hedge fund on the planet) to Kyle Bass (who turned $30 million in investments into $2 billion in two years

How did Kyle Bass turn 30 million into 2 billion? It sure as heck wasn't in cd's or by playing it safe.


but op, you are absolutely right. you must be comfortable with all your financial decisions. The more I learn about managing my money the more I realize that I am a unique individual and the right financial plan is the one that lets me sleep at night.

For me, even though I'm contemplating retiring in the very near future I still have 30 odd years that my money has to work for me. no how, no way could I consider sticking it in a cd and getting those measly rates. that's my comfort level.

So I think this title should be 'How to PRESERVE money like a millionaire.
Last edited by camptalcott on Wed Nov 19, 2014 1:52 pm, edited 3 times in total.
"He who dies with the most toys is still, nonetheless dead"

PugetSoundguy
Posts: 203
Joined: Mon Jul 30, 2012 3:46 pm
Location: Seattle

Re: how to make money like a billionaire

Post by PugetSoundguy » Wed Nov 19, 2014 1:32 pm

pennstater2005 wrote:Author Tony Robbins occupation on Wikipedia listed as an American life coach..... think I'll just stop right there.
LOL. +1

TravelerMSY
Posts: 198
Joined: Sun Mar 03, 2013 5:40 pm

Re: how to make money like a billionaire

Post by TravelerMSY » Wed Nov 19, 2014 2:23 pm

It's more impressive to me how Mr. Bass made the initial 30 million in the first place. Working his way up the ranks as a bond salesman, covering hedge funds, all the whole saving as much as he could, then eventually starting his own, I think only 1-2M of the initial stake was his personal funds.

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 2:24 pm

backpacker wrote:
ArthurO wrote: I think another point is that losing 50% out of 100k is not that bad, but once the wealth is accumulated, losing 50% out of a billion is a huge amount and so risk aversion as the game is going well and winnings are accumulating is a good thing and should be overweight comparing to trying to make more and more...
I would think that losing half of $1 billion would matter less than losing half of a $1 million portfolio. If you have $1 billion, you can withdraw $40 million a year. If that's cut in half, you can withdraw $20 million a year. I can't imagine that there would be much difference between a $20 million a year lifestyle and a $40 million a year lifestyle. On the other hand, going from $40,000 a year to $20,000 a year would be rather jarring.
yes I agree, losing 50% of 1 billion has much less effect on one lifestyle comapring to loosing 50% of 1 million, but nevertheless the billionaires seem to be very risk adverse... they don't like losing money even though losing a lot of it would not have any impact on their lifestyle... therefore taking this thinking one step further, once you won the game you can afford to take more risks because having a lot and losing 50% from a lot is still a lot....

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 2:29 pm

camptalcott wrote:
HomerJ wrote:Billionaires didn't become that way via CDs.

AFTER they've made their money, they are now focused on keeping it.

You're still in the accumulating phase, so any lessons you get from billionaires may not apply to you.


That's what I was thinking. As with most articles you must take them with a grain of salt. HOW did they BUILD there wealth in the first place. My late husband and a couple of friends started their own business. when they first went independent not only were they not rich, we had a bunch of business related debt. So following these so call "preservation" rules would never had allowed them to start their own business.

From Ray Dalio (the founder of the largest hedge fund on the planet) to Kyle Bass (who turned $30 million in investments into $2 billion in two years

How did Kyle Bass turn 30 million into 2 billion? It sure as heck wasn't in cd's or by playing it safe.

hedge fund managers are making money on backs of unsuspecting investors looking for getting rich quick schemes... anyone can collect the fees, the trick is to sell the dumb ideas to unsuspecting mom and pops who will lose their pants in the process... aka Bernie Madoff,

The money the people you mention made was not because of stock appreciation, but because of other people investing with them and hence the fees were collected... like all advisors, zero risk and 1-2% return makes wonders...


but op, you are absolutely right. you must be comfortable with all your financial decisions. The more I learn about managing my money the more I realize that I am a unique individual and the right financial plan is the one that lets me sleep at night.

For me, even though I'm contemplating retiring in the very near future I still have 30 odd years that my money has to work for me. no how, no way could I consider sticking it in a cd and getting those measly rates. that's my comfort level.

So I think this title should be 'How to PRESERVE money like a millionaire.

User avatar
HomerJ
Posts: 11824
Joined: Fri Jun 06, 2008 12:50 pm

Re: how to make money like a billionaire

Post by HomerJ » Wed Nov 19, 2014 2:41 pm

ArthurO wrote: therefore taking this thinking one step further, once you won the game you can afford to take more risks because having a lot and losing 50% from a lot is still a lot....
The point is, they've won the game... They can decide not to risk much anymore because they've already won, or they could even risk MORE because they've not only won the game, but are so far beyond the win point, they could lose a bunch, and still be winning.

You haven't won the game yet, so lessons from people who have already won the game may not apply to you...

User avatar
ogd
Posts: 4854
Joined: Thu Jun 14, 2012 11:43 pm

Re: how to make money like a billionaire

Post by ogd » Wed Nov 19, 2014 2:51 pm

The other way in which billionaires are different, in addition to need/ability, is that most of them are heavily invested in the economy anyway, through their primary business. Leaving aside company founders, even a hedge fund manager's salary will eventually dry up if the economy goes down and stays there, accompanied by defaults everywhere. There will simply be much less money in financial assets for him to extract a living out of, e.g. the 2008 recession reduced those invested assets by trillions (which didn't go anywhere, but simply disappeared into thin air).

Also, I would not take any financial advice from Tony Robbins. His specialty is not knowledge or skill, but being convincing. It happens that in the self-help industry this is the skill to have (you might even call it the real value), but when it comes to financials it just makes him dangerous. This man could convince you to do very dumb things.

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 3:03 pm

HomerJ wrote:
ArthurO wrote: therefore taking this thinking one step further, once you won the game you can afford to take more risks because having a lot and losing 50% from a lot is still a lot....
The point is, they've won the game... They can decide not to risk much anymore because they've already won, or they could even risk MORE because they've not only won the game, but are so far beyond the win point, they could lose a bunch, and still be winning.

You haven't won the game yet, so lessons from people who have already won the game may not apply to you...
money is money, win or not win yet is irrelevant, and I think logically speaking listening to advice from ones that won the game beats to listening to the ones that are still playing and haven't crossed the finish line...

And another point, EVERYONE should decide how much risk they are willing to take, and more importantly EVERYONE should understand what that risk really means, so many think they do until bad things happen...

won the game or still playing argument i don't really get....

ArthurO
Posts: 722
Joined: Sat May 24, 2014 12:25 pm

Re: how to make money like a billionaire

Post by ArthurO » Wed Nov 19, 2014 3:06 pm

ogd wrote:The other way in which billionaires are different, in addition to need/ability, is that most of them are heavily invested in the economy anyway, through their primary business. Leaving aside company founders, even a hedge fund manager's salary will eventually dry up if the economy goes down and stays there, accompanied by defaults everywhere. There will simply be much less money in financial assets for him to extract a living out of, e.g. the 2008 recession reduced those invested assets by trillions (which didn't go anywhere, but simply disappeared into thin air).

Also, I would not take any financial advice from Tony Robbins. His specialty is not knowledge or skill, but being convincing. It happens that in the self-help industry this is the skill to have (you might even call it the real value), but when it comes to financials it just makes him dangerous. This man could convince you to do very dumb things.
I don't take advice from him, or anyone else, I make my decisions based on inteligent choices (I hope anyway), he simply reiterates how billionaires think and puts it in writing... doesn't make argument about his own investing, at least from what I've read in the article...

Locked