How the wealthy allocate investment

Frank Booth said:
Perhaps you are right. I have an odd feeling, though, that my personal sample size of millionaires I know might be a bit larger than yours, and therefore very pertinent to this thread.

None the less, I applaud the fact that you have held on to your suburban empire. Extrapolating that collection of mansions into a greater insight about American wealth, however, would be poor reasoning. Among the $14 Trillion held by American High Net Worth Individuals (people with $30M+ in investable assets outside of their primary residence), only 13% of that wealth is tied into Real Estate of any sort. You can Google it from any number of sources. At some point, your house is just that, a house. Several houses is an inefficient investment, unless you are not privy to other sources of investment income.

Look, sometimes the stupid become the lucky, and people in Phoenix or Oklahoma or North Carolina string together a few subprime houses into something that generates enough income to buy a Kia now and then. That's not really wealth, that is just a super-big scratch-off lottery ticket. Income and wealth inequality in America is growing, and is problematic, but let us all remember what the sides of that inequality actually look like, lest we start falsely fearing that the government is going to start seizing wealth in measures of guns and Dodge Hemi Trucks
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You have such an elegant way of stating a burn Frank.

Assuming having a $1,000,000 in net worth and $200,000 in liquid assets meets the criteria of wealthy I'm only about a quarter of the way there with about 15 years before my retirement goal. In terms of income I only relatively recently reached a critical mass where I can invest more than maxing the company match in my 401K (which is actually quite generous) and in my modest home. I tend to agree with you having seen others invest large sums of their portfolio in real-estate (typically it seems to be farm land or McMansions or rental properties) that the ROI just doesn't seem to be there and it's very volatile. So my question is this, being a technical type and not well educated in investment, where do I being educating myself in the wealth/asset management process?

I currently have three strategies.

Invest aggressively in stocks primarily through my managed fund (401K) since even if the markets flat I'm guaranteed a 50% ROI due to company match.
Invest two to five grand per year in a ROTH IRA.
Pay off my mortgage as early as possible.

This strategy appears to at least meet my goal of maintaining my middle to upper middle class lifestyle (which is fine) but is obviously a very unsophisticated strategy that won't take me to the next level.
 
I've read the millionaire next door, a Ph.D. Study on millionaires.
It confirmed most economists study of asset allocation and returns by class.
Since stocks return way more than real estate or bonds I went all stocks in my 30's.
401k give you nearly double return by avoiding taxes up front.
The thing that would surprise people about the millionaires next door are
They aren't flashy, modest cars and homes.
They basically choose investment over bling
 
Currently I am just working on building/starting retirement accounts. I opened a Scottrade account a few years ago, and will eventually start putting money into stocks.
 
Trump is the most famous real estate investor.
He went bankrupt several times.
Warren Buffett did not, nor did most of the top billionaire stock investors

I tell my sons all the time. If you pass on 401k, it's like taking 15 percent less in salary
 
The Dude said:
Slumlord non millionaire
Is not as good as trump
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Never compared myself to Trump. I am very well off and have worked for myself my entire life.

Here is the difference between you and me. I am not saying one cannot make money in the market. There are lots of ways to make money. You are just a big mouthed blowhard who everyone laughs at.
 
Frank Booth said:
Perhaps you are right. I have an odd feeling, though, that my personal sample size of millionaires I know might be a bit larger than yours, and therefore very pertinent to this thread.

None the less, I applaud the fact that you have held on to your suburban empire. Extrapolating that collection of mansions into a greater insight about American wealth, however, would be poor reasoning. Among the $14 Trillion held by American High Net Worth Individuals (people with $30M+ in investable assets outside of their primary residence), only 13% of that wealth is tied into Real Estate of any sort. You can Google it from any number of sources. At some point, your house is just that, a house. Several houses is an inefficient investment, unless you are not privy to other sources of investment income.

Look, sometimes the stupid become the lucky, and people in Phoenix or Oklahoma or North Carolina string together a few subprime houses into something that generates enough income to buy a Kia now and then. That's not really wealth, that is just a super-big scratch-off lottery ticket. Income and wealth inequality in America is growing, and is problematic, but let us all remember what the sides of that inequality actually look like, lest we start falsely fearing that the government is going to start seizing wealth in measures of guns and Dodge Hemi Trucks
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I've never claimed RE to be the end all to wealth. You fell for Dude's straw man. Be adequately housed, one of the first rules to building wealth. Invest as much as you can in your 401 and similar, second rule...
 
The Dude said:
Trump is the most famous real estate investor.
He went bankrupt several times.
Warren Buffett did not, nor did most of the top billionaire stock investors

I tell my sons all the time. If you pass on 401k, it's like taking 15 percent less in salary
Click to expand...

Not everyone has the ability to start off investing as recklessly as Trump did, either...
 
Frank Booth said:
I don't know anyone making more than $300,000 a year who "made their wealth" from real estate, except for a few professional real estate developers - and remember, that is from managing the business end of another person's investment, not from leveraging an AV/ARM mortgage on a few shitty houses in the Southeast.

"Hitting in big" on real-estate is a windfall for people who aren't wealthy to begin with. For everyone else, Real Estate is a sideshow and a small investment class with a few favorable tax features. If you house (or houses) are worth more than 50% of you net worth, you are not really wealthy - just another over-leveraged person my tax dollars will have to bail out eventually.
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Well, if you don't know anyone, then it must not ever happen. Because, you know, you don't know anyone. Of course if you listen to The Dude, he makes 10,000 trades a year. Just ask him. He is buying and selling stocks left and right and beats the S&P by 5% a year.

I can understand why investing in real estate is scary for some. They prefer easy sound bites like "the stock market averages 10% a year". Real estate is hard work. It isn't something you just wake up and do.

The statistics about what wealthy people hold in assets is misleading because it doesn't account for how people made their money to begin with. For example, if someone made their money as a movie star, they are unlikely to buy an apartment complex.

There are many different ways to make money in real estate, you have obviously seen too many commercials about flipping houses (dumbest thing ever to do) and think that is what it is all about. I will leave you and Toppy to your delusions of grandeur, because you don't know anybody :)
 
Threedee said:
Not everyone has the ability to start off investing as recklessly as Trump did, either...
Click to expand...

No one will ever advise you better than this
Start your 401k with spy 100 percent
Max your contributions as soon as possible
If you want to retire with a million before 55
It doesn't get simpler or safer
 
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