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02-05-2012, 03:48 PM #1
Wealth Building like Romney
We've all heard it a lot recently. Mitt Romney finally released his tax statements and it shows just how smart he was with his investments. Some demonize him; I wasn't to be him...just without the political bullsh!t. In fact, who doesn't want to so smart that you no longer live bi-week to bi-week, but quarter to quarter, year to year.
So with that, this is posed to those what done it, are doing it or currently doing it for someone else, as a living.
What financial advise can you offer, outside of buy my product? Example, say I have $30k to begin building with. Where do I begin? Do I just drop it into an account and leave it, or do I give it to someone to manage for me and pray they are 1) successful and 2) honest?
What do I do?"Any decision based soley on one influence or another is a BAD decision!"
02-05-2012, 11:55 PM #2
It really depends on how much time you have.
I am a fund manager and financial advisor by profession, but it took many years to get where I am successful. If you don't have 8 hours a day to commit to trading and learning, then I wouldn't go that route. Day-trading has only about a 5% success rate, and years of learning before most people make any money.
If you are not looking to manage it on your own actively, you could invest in longer term stocks/commodities, but you will still need some type of discipline or advice from a professional in my opinion. It's not like it use to be where you could put $30k in something and in 5 years have a 50% return.
You could invest your money in a diverisfied portfolio with dividend paying stocks, but of course nothing is guaranteed. If I were you I would try to find an honest advisory service who only charges you if you make money. You just have to sort through them and find which ones you find to be best in line with your goals and be sure to read the fine print When it comes to your own money definitely ask a lot of questions.
If you want to PM about more specific things I can answer some other questions for you. Good luck!
02-10-2012, 08:41 PM #3
Romney started Bain Capital. They make serious money because they have serious money. They're not interested in new clients unless they have serious money to bring in, and the same goes for pretty much all the other hedge funds and the like. (There was a guy on John Stewart a few nights ago who was talking about this. I only caught a minute before bed, but it's completely accurate.)
If you have $30k, you're not of interest to them or anyone like them. With $300k, still not. $3MM, nope. If you have $30MM to invest, meaning you have $100MM total, because you wouldn't put all your eggs in one basket, then you might be talking to these type of guys. So you're several orders of magnitude away.
Most money managers, whether private or fund managers or whatever, are terrible. No offense to Cabrio, I know nothing about him personally. Here's an article showing a study from Vanguard (large fund company) that most actively managed funds (meaning funds that have managers) did worse than the market average. Meaning you are generally better off not having a manager.
Once you start getting into serious money, you can access serious managers. These guys tend to do better because they are brighter, can afford more research (or as the SEC calls it, insider trading), have the ability to make markets rather than just be part of them, and can buy not just stock in companies but large shares with voting and management rights so they can actually influence them.
If you don't have this type of access, your best bet is either to find a decent manager or do it yourself. If you can do it well yourself, you can beat the market, and hence also most managers. If you can't do it well yourself, find a decent manager or just buy a market fund. I would recommend QQQ, which is traded like a stock and is the Nasdaq ETF, meaning it follows the Nasdaq and hence primarily tech stocks.
If you can do it yourself, buy low, sell high. Part of why managers do poorly is they always have to be investing and moving. You don't. When stuff is cheap, buy. When it is high, sell. Don't be afraid to sit on cash until it becomes cheap again, or go with gold, or whatever. This economy has been cycling with a general up trend for several years now, so you can buy and sell on volatility and ride each bump up.
Buy things you believe in. For me that means I buy very few companies. I buy Apple when the market appears to drag them down but they are clearly about to rebound with amazing results. Oil companies I generally think are a good buy, because it's not going anywhere but up. I generally think the market is going up, so I buy market trackers like SPY (S&P) and QQQ (Nasdaq). These are market funds, not active funds, so they go up when the market goes up and are not dependent on the skill of the manager. Right now, I think the market is inflated, so I'm not buying. If I am buying low and selling high, I buy QLD, which is the QQQ Long Double, meaning it is roughly tied to double the QQQ, so when QQQ goes up 1%, QLD goes up 2%. I make double the returns, but can also have double the losses if I buy high and the market drops. QID is the opposite, QQQ Inverse Double, and it goes up 2% when the QQQ goes down 1%. Use it if you want to bet against the market.
If all this seems complex, find a fund manager. Ask him how he is going to beat the market and ask him to show you proof he's done it before. If he can't, find another or start doing some more reading on your own.
You can turn $30k into $60k in a few years. You will generally not turn it into $100MM without some major risks, skill, and luck.
Last edited by saintz; 02-10-2012 at 08:47 PM.
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02-10-2012, 10:32 PM #4
No offense, but I will try to answer some things which isn't necessarily correct.
I know the funds and managers at Bain and you can invest with as little as $50k with them. There are about 10 to choose from and people generally invest from $50k to $50M depending on the fund. Most investments are in the $100k to $5m range though. That is what makes up the bulk of their business. Now if you are talking about them investing in your business and giving you capital, then yes you are going to need to be a $100m a year business. But as far as the hedge fund side, that's not the case. Most large funds will still take in $50k or more.
You do have to find a good manager and a good fund to invest in though. There are not many out there like that article points out that can make a consistent return, but they are there if you do enough homework or know some people. 95% of all traders lose money, and the 5% that win are 99% professionals. All the money of the 95% goes into the pockets of the 5%.
I don't agree at all with the fact that just because you have $100M to invest you will find serious managers that are "brighter". There are some managers that I know who run $100M funds that are much brighter than some managers running $10B funds. Most of the larger fund managers are never working anyway, they hand off their work to other people. There are definite advantages to having a smaller fund also. And just because you have one of the largest funds in the world (i.e. Bernie Madoff), it doesn't necessarily mean you are getting the best advice or best return on your money.
For the trading aspect, there are 100 different ways to trade and make money, but it all boils down to discipline and doing the same thing over and over. Day traders in general lose $50k in 3-5 years before they quit all together or run out of money. After 5 years, the success rate actually increases pretty well, but they become the 5% that are successful in the business. I wouldn't advise anyone to start day-trading unless the money they are using is purely for trading and if losing it all would have no effect on the way they live their life.
Again no offense to your post either, I just didn't want some people to get the wrong idea about all fund managers. We are not all crappy and not all bad guys...just a few
02-10-2012, 11:45 PM #5
I would be willing to wager that Bain won't take $50k from you unless you are an accredited investor. And there is a proposed Reg D amendment for "accredited natural persons" for hedge fund investments (among others) which raises the bar further.
02-11-2012, 12:13 AM #6
I've been known to be wrong on many occasions haha
Last edited by M6Cabrio; 02-11-2012 at 12:18 AM.
02-11-2012, 05:47 PM #7
Cabrio, I actually agree with what you said. There are good managers out there, you just need to find them, because as you mentioned, even people with a lot of money can still find bad ones (Madoff, as you mentioned).
However, for $50k, what Bain fund are you buying into? Given that most of the recent Bain funds have raised (well) over $1B, what exactly do you get for your $50k piece of the pie? I'd also love to know the name of a good hedge fund that will manage as little as $50k in assets.
02-11-2012, 10:16 PM #8
02-12-2012, 12:26 AM #9
Gents, this is the dialog I was hoping the question would prompt. One thing we all seem to agree on is you either need to learn and earn for yourself or find someone within the 5% who will manage your funds for you.
Off topic a bit: This is L4P, Luxury4Play. Everyone can enjoy a level of luxury at whatever financial stage they are. However, not everyone can really afford a level of luxury at that financial stage. Its like buying a high end replica watch instead of the genuine. No matter how much you spend on the replica, in most cases, you can't afford the genuine. What good is having "luxury" if you have to worry about the cost of it later? Thats more L4W, Luxury4Work, because it'll be your job to replace the money your spent on the luxury. Sorry, I digress.
With that...Who would fall in the 5% of managers who actually make money? Can anyone recommend a good hedge fund or money manager who is actually worth their weight?
@Saintz Thanks for the seemingly complex insight into your market action. Its not that complex at all, just a matter of learning the concept behind it all. Which also seems to be a decent way of knowing if your manager has a clue as well. I have some knowledge to acquire, so whatever else you're will to pass my way, I welcome and apprecaite it.
@M6Carbrio We understand or at least should understand your perspective. Its needed to further our education (which goes for everyone elses knowledge too), so keep it coming.
Last edited by CDWall; 02-12-2012 at 02:24 AM."Any decision based soley on one influence or another is a BAD decision!"
02-13-2012, 10:59 AM #10