Much of my life has been taken up by time reading anything finance-related I could get my hands on. Sometimes this is a simple investment book or the autobiography of some famous CEO. Sometimes it’s the annual meeting notes of a hedge fund manager or the annual report of a conglomeration I’m thinking of investing in. Recently, it has been blog posts and podcasts on starting an online small business more often than not.
Aside from my own sub-$10k portfolio, a few retirement accounts for family members and whatever knowledge I utilize in my day job underwriting small business loans I haven’t made much use of this habit. So I decided to take some time to make a plan to put whatever info I have gleaned to good use and try to get rich.
Eventually this turned into an eBook with a fun name: 4 Steps to Retiring a Millionaire (Plus 4 More Steps to get Even Richer). The book starts with the requisite basic personal finance lessons. Stuff like compound interest, how to use credit cards and whether you should buy or rent your house.
Most of these things come second nature for those who have had concepts like the time value of money or return on capital beaten into to their brain for four years of undergrad and another year of grad school. But, if you went to school for English, or engineering or manage the KFC where you started working in high school it’s likely there was never much of a reason to think through how to save money and where to put it.
Next, we go into how to increase your income. No one has ever become rich (at least not unless it took them 50 years) by savings $12 more per week. The way you get rich is by creating new income sources and increasing the income you get from your current sources. This can mean buying rental properties, getting a raise at your current job, starting a lawn maintenance business to run on the weekends or even writing eBooks. There more income sources you have the better chance you won’t have rely on inflation level raises to retire comfortably.
To complete the first half of the book, intelligent asset allocation is discussed. Anyone can buy a CD or start a brokerage account and invest in an index fund and the company their uncle works for. The challenge is creating a diversified portfolio where when the stock market is crashing or even just remaining stagnant for years on end the portfolio continues to appreciate because other asset classes pull their weight.
The next four steps are the exciting ones. Well, there are three exciting ones and then one about using debt which is more common sense than exciting.
The first is actively investing. Active investing will be a big focus on this website. I will track my own portfolio, which has both long-term investments and speculations as well as actively manage a portfolio established in my first book, How to Hack Wall St. There are people with a talent for active investing who can increase the return they see with smart asset allocation by 50% or more and I discuss some strategies to achieve this. Unfortunately, these people are few and far between and even worse it takes a lot of work to consistently produce satisfactory investment results – so I also talk about sectioning of portions of the total portfolio to use on different strategies while leaving portions to passive management.
The richest you will get is by starting a successful business. Unless you are part of the vast minority of people who can command a 7-figure salary (plus stock options) starting a business will create more straight cash than getting a raise, or being frugal, or investing in value stocks could dream of. I don’t have a secret sauce on starting a business. If I did my website would look a lot nicer. But I work with small business owners every day in my day job and can speak to, on average, how and when you should start a business and how to make it successful.
The last section, ignoring the boring how to use debt stuff, talks about timing the market. This part was the one I struggled with the most. There are fundamental and technical indicators that help investors and speculators position themselves well in all markets, but none of them are perfect. I talk about using both but never going all in. Any market that has gone down 70% can go down 90% before it rebounds.
I will also be putting together a market timing portfolio to continue to experiment with the concepts discussed in the book. This portfolio will be established in my newsletter over time and then added to the portfolio page on the site.
I recommended a helluva lot of books (only partially so I could make the Amazon commission on them if you buy them from this page), here’s the list:
Books to Read for Section 1
The Automatic Millionaire – David Bach
Master the Money Game – Tony Robbins
Becoming Your Own Banker – R. Nelson Nash
How Privatized Banking Really Works – Robert P. Murphy & L. Carlos Lara
50 Prosperity Classics – Tom Butler-Bowdon
Books to Read for Section 2
Automatic Wealth for Grads… and Anyone Else Just Starting Out– Michael Masterson
Seven Years to Seven Figures: The Fast-Track Plan to Becoming a Millionaire – Michael Masterson
Choose Yourself – James Altucher
The 4-Hour Work Week – Tim Ferris
The Side Hustle Path: 10 Proven Ways to Make Money Outside of Your Day Job Vols 1 & 2 – Nick Loper
Stealth Income Strategies for Investors – Mark Morgan Ford
Kindle Bestseller Secrets – Derek Doepker
How to Write for Kindle: A Non-Fiction Book in 72 Hours or Less – Nancy Hendrickson
Rich Dad, Poor Dad – Robert T. Kiyosaki
How to Write a Non-Fiction eBook in 21 Days – Steve Scott
How to Start a Successful Blog in One Hour– Steve Scott
Kindle Publishing Package – Steve Scott
Email Marketing Blueprint – Steve Scott
Books to Read for Section 4
The Permanent Portfolio – Craig Rowland & J.M. Lawson
The Gone Fishin’ Portfolio – Alexander Green
The Ivy Portfolio – Mebane T. Faber & Eric W. Richardson
The Fundamental Index: A Better Way to Invest– Rob Arnott
Tomorrow’s Gold: Asia’s Age of Discovery – Marc Faber
Unconventional Success – David Swensen
Pioneering Portfolio Management – David Swensen
When Markets Collide – Mohamed El-Erian
Berkshire Hathaway Letters to Shareholders – Warren E. Buffett & Max Olson
The Only Investment Guide You’ll Ever Need– Andrew Tobias
7Twelve: A Diversified Investment Portfolio with a Plan – Craig L. Israelsen
Rational Expectations: Asset Allocation for Investing Adults – William J. Bernstein
The Only Guide You’ll Ever Need for the Right Financial Plan – Larry E. Swedroe
The Little Book of Alternative Investments – Ben Stein & Phil DeMuth
Distressed Debt Analysis – Stephen G. Moyer
Investment Biker – Jim Rogers
Investing in REITs– Ralph L. Block
The Collapse of the Dollar and How to Profit From It– James Turk & John Rubino
The Golden Rule – Jim Gibbons
Hot Commodities – Jim Rogers
Profiting from the World’s Economic Crisis – Bud Conrad
World Dominating Dividend Growers – Dan Ferris
Books to Read for Section 5
The Choose Yourself Guide to Wealth– James Altucher
Ready, Fire, Aim – Michael Masterson
The Reluctant Entrepreneur – Michael Masterson
Family Fortunes– Bill Bonner
The Daily Entrepreneur – Steve Scott & Rebecca Livermore
The Myth of the Robber Barons – Burton W. Folsom Jr.
How to Be a Billionaire: Proven Strategies from the Titans of Wealth– Martin S. Fridson
The Driver– Garet Garrett
40 Alternatives to College – James Altucher
How to be Rich – J. Paul Getty
Ayn Rand and Business – Donna Greiner
Books to Read for Section 6
The Focused Few – Richard M. Rockwood
The Art of Value Investing – John Heins & Whitney Tilson
The Essays of Warren Buffett – Warren Buffett & Lawrence Cunningham
Margin of Safety – Seth Klarman
The Little Book that Still Beats the Market – Joel Greenblatt
The Big Short: Inside the Doomsday Machine – Michael Lewis
Money Masters of Our Time – John Train
A Gift to My Children – Jim Rogers
Invest Like a Dealmaker– Chris Mayer
The Essential Buffett – Robert Hagstrom
Mosaic: Perspectives on Investing – Mohnish Pabrai
Applied Value Investing – Joseph Calandro
Shareholder Yield – Meb Faber
Books to Read for Section 7
The Value of Debt– Thomas J. Anderson
I Will Teach You to be Rich – Ramit Sethi
Books to Read for Section 8
Irrational Exuberance– Robert J. Schiller
Global Value – Mebane Faber
Lessons for a Young Economist – Robert P. Murphy