Below are my current investment holdings.
Note: this is for transparency purposes only and is not investment advice.
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If you're broke you probably shouldn't be investing in the S&P500, you should be investing in the S&ME500. Invest in yourself. No one can take your skills away from you and it significantly increases your earning power. Don't make the same mistakes I did: if you don't have $100k+ or if you're not earning at least $10k/mo you're wasting time playing investor. 50% on $3k is only $1500... it doesn't change your life in any meaningful way, but growing your income 50% can.
If I had to start over today (May 2023) I'd focus on making min $10k/mo before investing in probably just 5 assets: Tesla, Bitcoin, Berkshire, QQQ, VOO.
$30M has been my "fuck you money" number for as long as I can remember.
$5M buys a ballin' house and the 4% rule means that the remaining $25M results in $1M a year in income, forever.
To me, that's freedom.
I don't know what I'd spend $1M on each and every year but I'm sure once you have a family the wife and kids find a way to spend it.
After my mini retirement, I realized that money gives you the freedom to do things you want to do and that you need some form of work to gain fulfillment and purpose in life.
I think of money in three different buckets:
1. Runway for day-to-day freedom
- What's my burn rate? How much cash do I have on hand? What's my personal runway?
- I keep 12-24 months of expenses in cash at all times for freedom and peace of mind.
2. Active income for day-to-day purpose/fulfillment and to keep long term compounding
- The goal for my active income is to cover my burn. Because I have a long personal runway, I'm able to work on things that I genuinely want to pursue. Even still, there are days where I don't enjoy my work. I guess that's to be expected when the definition of work is doing things that you don't want to do.
- In my business account, I invest excess cash into a low cost S&P 500 ETF. My active income will become optional once this investment account reaches my $30M goal.
3. Long term compounding
- The biggest mistake I made during my mini retirement was not working to cover my burn. I broke the power of compounding by selling investments to shore up my cash reserves. Learn from my mistakes, never break the power of compounding.
- How big can this snowball get? What impact can my family have in the world with the billons of dollars. I love investing but am I actually good at it? Let's find out.
The first two points are simple.
I have the cash runway needed to pursue activities and active income sources that I'm genuinely interested in.
I could significantly increase my active income sources but that would require me to give up some of the activities I enjoy (i.e. working out, training MMA, reading, podcasting, playing basketball, optimizing diet, and pushing myself physically and mentally).
I could turn some of these activities into income sources. Like getting advertisers for the podcast, fighting on more MMA cards, or coaching people on body optimization. But for now these are just fun things I enjoy.
Most of my time is spent thinking about long term compounding.
I have a crazy goal to compound my money at 26% a year for 30 years.
Because 26 is a magic number.
If you compound at 26% per year your money doubles every three years.
$1M compounded at 26% per year for 30 years compounds to over $1B.
A 26% average annual return for 30 years would be up there with the most legendary investors of all time. But even if I fail and only compound at 15% per year, $1M still compounds into $66M in 30 years and $1B in 50 years.
Einstein called compounding the eighth wonder of the world. If you're fortunate enough to discover and truly understand the power of compounding while you're young, then there's zero excuses to not retire a multi-millionaire and die a billionaire in the western world.
Yet in the Instagram and TikTok world we live in today, delaying gratification is getting more and more difficult.
I started crafting my longevity protocol earlier this year (2022) after sacrificing my health in the pursuit of wealth.
I had a heart attack at 25 and my epigenetic age was 38.2 when I was only 26.
Now health is my top priority. I plan on living a healthy active life well into my 100s.
If I keep health as my top priority I should have about 80 more years of compounding.
There's no chance I compound at 26% per year for 80 years but an average annual return of 10-15% over a 80 year period is quite possible considering Warren Buffett has compounded at around 22% for over 80 years.
If you spend lower than your means and let the power of compounding work for you, its inevitable to become insanely wealthy.
Play around with a compound interest calculator and you'll see how even small sums of money compounded at average rates of return for very long periods of time result in absurd fortunes.
Before we jump into my investment portfolio, please remember that everyone's situation is unique to them. What I do with my money will likely be very different than what you should do with yours.
Warren Buffett recommends people invest 90% in the S&P 500 and 10% in Cash / short term US Treasuries.
On the other hand, Buffett also says that diversification is for idiots.
Buffett himself owns 1 stock: Berkshire Hathaway.
Charlie Munger owns 5 assets: Berkshire, Costco, Daily Journal stock, Li Lu's fund, and apartment buildings in LA.
Bill Ackman typically owns around 7 companies in his fund, Pershing Square.
If you study the Forbes List, it becomes clear that creating wealth comes from the concentration of capital. Or from putting all your eggs in one basket and watching that basket.
I think most people should invest 80-90% in a low cost S&P 500 ETF and the remaining 10-20% in cash or the top 1-2 names they truly believe in and have a holding period of forever.
I invest ~90% of my investable assets in my top 3-5 names that I plan on holding forever. The remaining ~10% I call my "venture portfolio" but it's honestly blatant gambling.
Remember that I also maintain 12-24 months of expenses in cash at all times, and invest the excess cash from my business in an S&P 500 ETF.
Great investors don't do much. Inaction is often the best course of action.
Physicist Albert Bartlett put it best: "The greatest shortcoming of the human race is our inability to understand the exponential function.”
Good investing is about earning pretty good returns that you can stick with for a very long period of time. That's when compounding runs wild.
There's been thousands of books written about how Warren Buffett built his fortune. But the most important one would be titled, Shut Up and Wait. Buffett focused on ONE thing for over 80 years.
You try focusing on one thing for 80 years and let compounding go to work for you during that time frame and you'll end up insanely rich too.
Compounding is not just a financial thing. The most important returns in life come from the compounded effects of our investments over time, whether in our finances, careers, hobbies, or relationships.
Change the timescale of your life, and you change your life.