I’ve put my entrepreneurial projects on hold for now and have started focusing on investing as a job. Entrepreneurship is great but it requires other people who are willing to risk their time on an unproven idea. I have not found anybody willing to work for an equity stake and do not have the capital to guarantee a years worth of salary so I might as well take up investing full time. When I started investing in the stock market I was surprised by the above market returns I was gaining and decided that by simply investing for short term gains I can fund my travels. I use the 80/20 principle as a foundation for my investment decisions. 80/20 is rooted in power distribution theory and the 2nd law of thermodynamics, it basically states 80% of the output is generated by 20% of the input. 80% of investment returns are generated by 20% of your investments. By just focusing on the 20% of the market the is producing the most you can realize the most gains. The 80/20 principle has applications across the societal spectrum from simple processes in nature to worldwide trends. Here are some tips I have learned while investing on the 80/20 principle.
1) Pick the right time of day.
The New York markets open at 09:30 EST and the first three hours of trading represent the majority of gains so I really just focus on making gains in the first three hours. The first 15 minutes of trading is essentially a gamble so I wait and see where the market is going. If there are too many surprises I just decide not to invest that day.
2) Pick the right time of year.
Historically the markets generally gain from October to December. When December rolls around it is wise to either put your money in less volatile stocks or keep it in the money market entirely and wait for the next upswing.
3) Pick the right industries
Over history companies that are spending resources developing new technology have realized the most gains. Cloud computing, 3D printing, and Biotech is the most rapidly developing technology today. It takes it bit more research to determine the value of an unproven technology but just think about the biggest problems in the world today and what technology has the potential to solve those problems then find the companies working on that technology. Many industries have become saturated and there is no room for growth. Find the companies with the most potential for growth.
4) Find the momentum
If you are only in an investment for the short term find a volatile stock based on your screening and buy right after a huge loss. Other traders most likely undervalued the stock and that is when you see the most gains on the upswing. Buy low, sell high.
5) Don’t be greedy
The moment you are surprised by a return, sell it, and lock in the gains. Most people hold on longer than they should just out of pure greed and end up not locking up gains.
6) Reinvest gains
I have a goal of building wealth rather than building income. The majority of the world only cares about income and do not understand that by building wealth you have more resources to grow. I only transfer 30% of my profits into my checking account. The rest goes into the principle so my wealth can gain. There will be a point where I can live off of 20% or even 10% of my gains. If you have a model of reinvesting gains then your wealth will grow on an exponential level to support whatever income you want at the end.
Investing in volatile stocks backed by unproven technology is the opposite of what mainstream analysts advice. But you have to consider those mainstream analysts operate on a different scale as they primarily advise institutional investors and not someone with a small portfolio. If I was running a multi-million dollar fund I would not risk the volatility that is present in tech in small cap companies, but at my scale, what do I have to lose? Consider the worst case scenario that you lose everything. You don’t have much to begin with, and if you should fail you can regain what you lost rather fast by simply working. Consider the best case scenario, which there is no limit to. I see the best case scenario rewards outweigh the worst case scenario consequences. So what if I have to go back to trucking for 6 months, but if everything works out I can continue to travel on my own terms for as long as I want. Nothing bad about that.
Pai, Thailand is an excellent place for those who just like to sit back, relax and watch the world go by while sipping your beverage of choice. My routine for the past week has consisted of getting up in the early morning to hike in the fog. Once the fog lifts I return for a breakfast and I just veg out all day reading and occasionally napping. Once the sun goes down I partake in some fun with the other travelers, then I work on my computer making some money til I fall asleep. The hustle and bustle of Bangkok can make anybody tired but here in Pai you seem to gain more energy as the days go by. I wouldn’t mind retiring in a small town surrounded by a tropical mountainous jungle. I say it beats the beach any day of the week. There is more adventure in the mountains anyway. The mountains tend to attract the right mix of people too, save for the douchebag Canadians I met who were dumb enough to buy some coke in a country where you can get a life sentence for mere possession. I don’t know but I might just stay here til my visa runs out in December.
I like to book one-way tickets overseas when I do not know my return date. For the most part you can save money vs having to pay for an itinerary change somewhere down the road. But, recently when I was checking in at the LAX Malaysia Airlines ticket counter I was asked to show proof of onward travel or I would be denied boarding. It was no big deal as I have 3 plans in the event of this happening.
Act dumb and say you don’t have your itinerary and just say what “flight” you will be on. This works most of the time if you are confident and act surprised from the question.
Produce a fake itinerary that looks real. The best way to do this is to actually book a flight with an airline without paying. Most people do not realize a reservation is separate from a ticket. You pay for the ticket but you do not pay for the reservation. I go to a site called https://ifc.id90.com/. It is a booking service for airline employees to list for flights on other carriers. I just say American is my employing carrier. The user name is the two digit airline IATA code followed by emp so for American the username would be AAEMP. The password is the IATA accounting code for the airline which for American would be 001. From this site make a booking on United and you are emailed a confirmation number that could be used to look up a legitimate looking itinerary on United.com. The only thing it is missing is the ticket number so it can not actually be used but could suffice to convince the agent you have a return ticket. You can also call any airline reservations number and have this done but you would need to know the jargon to avoid any red flags.
If you get an agent that is savvy and realizes there is no ticket number on the itinerary, first act dumb, than realize the gig is up and book the cheapest ticket you can out of the country. For most airlines you can get a full refund if the ticket is cancelled within 24 hours.
I had to use Plan B for Malaysian Airlines at LAX. Most people would have been denied boarding or actually would have bought a return ticket. But what’s the fun in that?
What would you do if you had the opportunity for unlimited free airline travel? The only catch is that it is standby, meaning if the flight is full you do not get a seat. During college, I worked in the airline industry and was awarded this privilege. I took full advantage of it, flying on average 125,000 miles a year and visiting 25 countries and virtually every major city of the United States. The odd thing is that many of my coworkers never participated in this opportunity or did so only seldom. The reason was fear. People thought it was too great of risk to fly somewhere and not have a flight back to work. I was successful in my risky jet setting by simply acquiring as much information as I could. With any risky pursuit the more information you know the less risky it becomes. I became an absolute expert on the global distribution systems used to book flights and knew how to find information that others did not. Furthermore, I learned the route networks of every major airline. I looked at flight loads continually to almost every imaginable destination. I knew what cities were risky and what ones weren’t. I studied the last minute booking behavior and the effects of irregular operations. Of the nearly half million miles I flew for basically nothing and I never arrived at work late. I came close many times, but since I knew my back up options, everything turned out ok, albeit much more stressful. I was once stuck in Vegas on a day trip, to get back to Denver the next day I flew to San Francisco than New York and then back to Denver. To get to Houston one time for a flight to Honduras I flew to Salt Lake City than to San Francisco than to Los Angeles and then to Houston. Even when flights filled up I had no problem going to alternate places, like that one time I wanted to go to Hong Kong or London and I ended up in Concord, New Hampshire of all places. I even went to places based on random chance, like that time I threw a dart on the map and ended up in Kiev, Ukraine. There was always a way since I was an expert at the system. I was easily at the top 1% of employees who utilized their flight benefits. I was so successful at traveling standby I realized I could put my skills to better use so I can travel even more and that is a major reason why I left. At the airline, everybody came to me for information regarding standby travel since I knew the system better than almost anyone else. You see information is power and the more information you know about a risky system the more potential rewards you can acquire.
The same is true with business and investing. I akin options and day trading to gambling as the participants are put at a disadvantage because they often invest with hunches and not information. It is possible to become a millionaire within a year with only $1000 to start with thru options or day trading but if you are not prepared to lose that $1000 than do not participate, (it’s still smarter to invest $1000 in options than in lottery tickets). A better idea for that $1000 would be to start a business that one day you can sale. With a business, you have the information advantage over anyone else. There is only so much information you can analyze with stocks but with a business you have access to 100% of the information on the assets. Plus, when you start with nothing, a well executed business plan can yield much more than taking safe bets on the stock market. It is possible to sale a business started with only $1000 for $200,000 or more in three to five years. That is the goal. Reinvest the $200,000 for a business type that requires more capital, and is more scalable, than you will never have to worry about money again as long as you can hire the right people that will enable growth.
The stock market is one of the best investment vehicles around but do not make an investment unless you know a thing or two about the company, always read the 10-k and the most recent 8-k. Just reading the SEC disclosures will often put you at an information advantage over the day traders who do not even take the time to do so. I recommend creating a list of no more than 100 companies that you have the time to track and only invest in those companies. Have a good mix of industries as well as large and small cap companies. I would suggest including current or past employers as well as places you are a regular consumer because that will put you at an advantage on information over the investor who just reads the 10-k or worst the investor who only looks at the chart. I would also suggest doing some options and day trading but only on money, you are willing to lose and never more than 10% of your assets.
The less the rate of return the less risky the investment and the less time you need to manage that investment. A business has the potential to have a high rate of return as an investment but it will also require much more time. If you are under 30 you have all the time in the world to manage your own business. Once you get to a certain level in wealth you can live off the interest of investments that do not take much time to manage, but 99% of the population is not in that ballpark. You have to spend time managing your assets at the beginning if you want to get to a level where you do not have to.
People do not see value in small opportunities. Small, seemingly insignificant opportunities are the ones that lead to the great once in a lifetime opportunities. People are always thinking 100 steps ahead instead of just one-step ahead. People care more about the destination then the journey itself. Personally, I like to use wealth of assets to measure how I am doing in life. I do not think how I am going to make a million dollars; I live in the moment and at this point, I focus how I am going to make the next thousand and only the next thousand. I live well below my means. I do not care about the next iphone or the next video game as those assets are very unlikely to earn me my next thousand dollars unless I own Apple of course. In fact assets like those will likely slow my progress to earn the next thousand.
People get comfortable. People stop growing as individuals because they get comfortable. Once an income can pay for a certain degree of comforts people slow down their work ethic and start buying material items that they do not really need.
Do not get comfortable. When you have $100k in assets do not get comfortable. When you have a million in assets don’t get comfortable. Never settle down or retire until your body is physically not capable of work. I am not saying not to have fun, just learn how to have fun in experiences rather than material purchases.
Do not think you have no opportunities to start with. If you live in a first world country, you already have more opportunities available to you than six billion other people do. Those opportunities are often disguised as hard work. Life is though, get used to it. It takes hard work to get to the easy work. It takes an unglamorous lifestyle to get to an ideal lifestyle. It takes thick skin and patience to get to where you want to go. People can only put up with hard work for only so long and that is when they give up and settle for a mediocre lifestyle, a mediocre lifestyle full of passivity and regret. Don’t Quit and Don’t Get Comfortable.
Want to retire early? Just follow these steps.
1) Get a skilled job that involves travel
Our world is getting more complex by the day and there are plenty of opportunities for those who can fix things or operate anything that moves. If you are not getting anywhere with a formal education, than go to a trade school for up to a few months and learn a trade. Preferably, a trade that is in high demand, and can serve as a backup in case you encounter bad luck down the road. Pick a trade that can involve travel, because if you travel for a living you can cut many day-to-day expenses in order to save money.
2) Go independent and focus on sales
By the time, you have saved around $10-20K you are fully capable of acting as a independent sales broker. Sales is the core of any business and by linking together manufacturers of products and distributors you can earn a living by solving problems and delivering solutions to various businesses throughout the economy. You can earn anywhere from 5% to 30% in commission of a sale by just taking advantage of existing opportunities. From your experience working on a skilled trade you probably encountered many problems that can be fixed with new technology or processes you can introduce to your particular niche as an independent sales broker.
3) Start a business that can be saleable
You probably need around $100k in assets to build a business that has a distinct product and can easily attract investors in any field. I would suggest buying an existing business with employees and expanding that business via an affiliate and/or franchise model Your ultimate goal should be to sale the business to a competitor, or go public by selling equity in the stock market
4) Start investing your assets for growth on a full time basis.
Once you have $1 million in assets you can be an accredited investor, which opens doors to high yielding financial opportunities that the rest of the world does not have access to. The more your wealth grows the freer you become. Live well below your means and you will never have to work another day in your life when you reach this phase. Just keep an eye on your money and shoot for benchmarks. Never spend any of the principal except to buy more assets and live off the interest payments.
You cannot get rich quick. From the time you get into a skilled trade to the time you are an accredited investor can take anywhere from five years to twenty depending on your ability to live below your means and market conditions. However, this is the easiest process to grow wealth from nothing. Do not get comfortable. Do not aim for jobs that have a salary cap. It’s simple get a skilled job, than move into independent sales, than into entrepreneurship, and then into investing as a trade.
To be a rebel is a risky life, but with great risk comes great reward. If you spent a great deal of your childhood in the principal’s office or grounded at home for days on end than congratulations you were probably born a rebel. At some point along the way most people change, they start following the status quo, and the safe bet at a mediocre life. I say fuck that.
Make no mistake you will experience the highest of highs but be forewarned, you will also experience the lowest of lows and it takes very thick skin to be able to walk away from the ashes of your failures and rebuild. You will fail, get over it, in fact failure at least once is almost a guarantee in the life of a rebel. Failure is a rite of passage into the brotherhood of those who dare to be different. I have failed at least 1000 times at ventures I’ve tried because I see every attempt at a new experience as a venture. The lowest of my lows I will probably take to my grave, but I have had my car towed twice, been in two accidents, had the shit knocked out of me, been broke ($100 to my name), had serious thoughts of suicide, lost a case in small claims court (dismissed), and had a report card with straight F’s. But I have also experienced the highest of highs which include calling into work sick with the Himalayas in sight, being in first class on multiple long haul flights, winning a student government election, making the honor roll, seeing the look on my managers face when she was fired after numerous unsuccessful attempts at trying to get me fired, winning a case in traffic court, and being a part of a football team that made it to the state championships (but lost).
My secret at not being afraid of taking risk probably revolves around my worst fear. For most people their worst fear is death. That is not the case with me; although it is a good idea to avoid death, my worst fear is living some 80 years and feeling unfulfilled after all that time and opportunity to live a fulfilled life. I would much rather die on my feet than live on my knees. I would much rather die an early death doing something I love, than die being safe and square on a bed when I am 80. Realizing your worst fear is the first step towards liberalization, it is the first step to freedom, it the first step to being a rebel.
How do you start being a rebel? Question everything and everyone. Never be afraid to live beyond your comfort zone. I am not saying to jump off a bridge, at least not right away. I would suggest start small by trying food you would not normally try, work your way up by reading about ideas you would not normally read about, take sick days and go on day trips, travel to a country you have never heard of. Then move up to some of the riskier moves like quitting your job and taking a trip to India on the idea you can always get another job when you get back. Trust me every risk will usually work out in one way or another but no matter what, every risk will always lead to personal development.
Our current economic system is corrupt. The Keynesian economic system, which is endorsed by all the central banks that matter in this world, is complicated to manage correctly and can easily be taken advantage of from institutional sized players (big banks, sovereign funds, etc.) The Keynesian economic system is not sustainable with the corruption present and will eventually collapse; it’s not if, it’s when. The problem with the Keynesian system is that the complex nature of the system requires technical knowledge to understand and therefore the public at large cannot benefit from the system over a sustained period. I talk with people that can barely understand personal finance let alone know how money flows throughout the world.
Look at the billionaires on the Forbes list, and you will find a good number of the self-made billionaires achieved their wealth via the financial industry. Very few of the self-made billionaires achieved their wealth by creating something innovative to the world like operating systems with Bill Gates and discount retail with the Walton’s. Most publicly named high net worth individuals achieved their wealth through finance and investing because they learned how to game the Keynesian system of economics. Worst is that since the Keynesian economic system is based on public pressure and not natural economic indicators, there are high net worth individuals who have the ability to hide their wealth. Hiding wealth does not matter for the average person but when your wealth reaches a certain level it can actually affect economic decisions made by the central banks in the Keynesian system. The Forbes list of billionaires is likely missing at least 100-200 names that are able to hide their wealth by means that are not publicly accountable like in commodities, private equity, sovereign wealth funds in authoritarian nations, and secret banks.
To put it straight the Keynesian system allows central banks to artificially manage prime interest rates from public and ownership pressure and not naturally from real economic indicators such as new commodity creation (mining, real estate development, etc.). If the prime interest rates are lower than the natural inflation rates then the banks that own the central banks have nearly a 100% chance of profit as long as they are able to re-lend the money somehow (“0%” variable rates). That is how new money is created in a nutshell.
But recently in the past twenty years the system has become corrupt and out of control as the central banks have kept prime interest rates artificially low and that really only benefits the players who see the money first (big banks, sovereign funds). The system allows money to be created out of thin air providing devastating consequences (rapid inflation or deflation) for the majority of the population.
People like to blame politicians for the public deficit, but they are merely scapegoats. The real root cause of the public deficit is our reliance on the Keynesian economical system. The system is already too powerful to be defeated by political means, that is why I gave up my interest in politics and that is why I think sensible entrepreneurship is a better roadmap to change the world for the better.
If you can’t beat them, join them. The system can only be defeated by players in the economic system, learning how not to be corrupt and seeking the best solutions for the population at large and for themselves. It’s game theory, if institutional players in the economic system are not doing what is best for themselves and best for everybody else, than the system is not sustainable and will eventually collapse harming every stakeholder.
Entrepreneurship provides for a change in business practices over time but there are many barriers for entry. The biggest barrier is simply the mind believing an average person is not capable of establishing something bigger than his or herself. That’s why even with all of the recent economic growth in the rest of the world the U.S. remains the most entrepreneurial nation since we obviously have the biggest ego in the world. But, there is one thing that is holding back small business development in the U.S. and that is taxes. There are people who believe corporate taxes and income taxes should be raised in the U.S., but I do not see the point, as we are already the highest taxed nation on earth. People are naive to think that if corporate taxes are raised than they will have to pay less in taxes. That is not the case since corporations do not have some magical bean stock, to pull money out from, but rather they pass on the taxes to the consumer. Worst yet higher corporate taxes mean the little guy such as entrepreneurs have greater barriers since the big companies can afford the taxes and know their smaller competitors can’t afford the taxes so it keeps them number one with no incentive to innovate since their competition can’t survive the high taxes.
There is a common misconception that Scandinavians pay the most in taxes but that is not the case. Scandinavians pay a higher income tax but they do not pay a host of other taxes called by other names (capital gains, estate, sales). If you look at tax revenue divided by population than you will find that the U.S. has the highest tax rate in the world. The federal tax revenue last year was 2.7 trillion USD. Divide that by the population you get roughly $6,500 per person. Look at Denmark, which has one of the highest income tax rates, their tax revenue was 140 million USD. Divide that by the roughly 5 million people living in Denmark you get $25 per person. $6,500 vs $25 and we think our taxes are low? That $6,500 does not even count state and local tax in the U.S. and does come close to what we pay on inflation to artificially created money via the Keynesian system.
My advice is if you want to change the world, forget politics, look at what sector of the economy where you can be an entrepreneur, and focus with every action you take on being the best for every stakeholder and not the biggest, that will change the world faster than playing the political theater game or worst by working for the corrupt system your entire life.
We have all the opportunity in the world to be the greatest generation humanity has ever seen to this point but there is one weakness that is holding us back and that is our fore found sense of entitlement. We believe just because the country you are born in you are entitled to a certain way of life, just because the wealth of your family you are entitled to a better life, just because of the degree on your diploma you are entitled to a dream job. Well that is not the case in reality. We young people think everything is eventually going to be handed over to us and we will never have to any actual grunt work for a life well lived. I feel we get that attitude from our parents who come from the baby boomer generation. Our parents never really had a hard life up until these times and they are paying for it now with the uncertainty of the retirement that was supposedly promised to them. Our parent’s parents or our grandparents in fact did experience a hard life. Our grandparents lived through the Great Depression and World War 2 and for the most part they did not cause any of the problems that led to those events rather they were the generation that fixed things and made the world a better place for their children which is our parents. Our grandparents built the highway system, put a man on the moon, and made college a priority for their children. Our grandparents learned how to spend money wisely and seek peace rather than war in international relations (for the most part after WWII). They passed on their wealth to their children, and because our parents never experienced a hard life at the beginning, they never learned how to spend money wisely since they did not have to. Almost all of the problems in today’s world have been caused by the baby boomer generation, or our parents and it is up to us to fix things. It bothers me that certain jobs are too good for us. We are afraid to do grunt work. We are wimps. Life is not easy, get used to it. You will never get fulfillment from a status quo life anymore. You will never know how the real world operates unless you do the grunt work at the beginning. You cannot learn how the real world operates from any teacher or textbook. I see many people in my generation who are way above holding a job while in college, who think certain jobs like truck driving are only for the lowest class of people. We do not see opportunity when it presented to our faces because we judge certain opportunities as a step back. A job in of itself at McDonalds may not lead anywhere but it is an opportunity to move laterally to jobs that pay better and offer more fulfillment. I think getting a job is one of the easiest things to accomplish, yet the unemployment rate for young people is embarrassing. You will go through rejection but your skills will get better with rejection. Almost everybody has a phase in their life where they cannot get an interview, they graduate to the phase where they can’t get a job offer, than they get to the phase where they can’t get a good job offer and then decide to create their own job to solve the problems of the world. Most people learn how to get comfortable, settle, become passive, and never get to that last phase of wanting to create your own job, your own business and your own creation. There are those in my generation who think perhaps bigger government and more taxation is the answer to our problems. The government really only has one role in the big picture and that is to be the entity that has a monopoly on the legitimate use of violence, that’s it. In most cases the government is merely the middle man between private industry and taxation which is a form of forced labor. All your taxes minus the government employee salaries and the costs of extravagant lifestyles of our politicians go back to private industry or are simply wasted. Why do we need a middle man that uses violence to force labor upon us? I think wealth can be better redistributed through the advancement of technology and science, but many people in our society want to go backward and have larger governments than are needed. Technology and science will advance to the masses via entrepreneurship and hard work, but if we are lazy we will never advance as humans to bigger and brighter things.
One time when I circumnavigated the globe in less than 80 hours, I managed to spend $60 for three beers and a plate of sushi.
I had three twenty U.S. dollar bills for incidentals on the trip and I made the mistake of converting the currency at each country. I visited Japan, Thailand, Denmark, and Germany which involved four currencies and four exchange booths. I had my usual plate of Sushi at Narita Airport, and a beer at Thailand, Denmark, and Germany. Because of the exchange rates and commissions, it cost me $60. Let’s say an average airport beer is $6 and a plate of sushi is $12. That meant $30 went to the items and $30 fell victim to the financial system.
What’s my strategy with cash while traveling internationally now?
It depends on the region of travel. In first world countries (U.S. Europe, Japan, etc.) it is generally best to withdraw the foreign currency from the ATM. You will pay the ATM’s transaction fee and possibly a fee from your bank, but you will get the bankers rate of exchange, which is generally the best.
In second world countries (Eastern Europe, China, India, Thailand, etc.) it is generally best to bring a good portion of cash in your banking countries currency to the exchange booth at the airport. The exchange rates at the border and at the airport of these countries are mostly government regulated and you will get a good rate. For the majority of these types of countries there is no commission. With no commission and good exchange rates the transaction fees are usually higher with ATM’s so avoid them.
In third world countries (most of Africa, Central America (outside the touristy areas), and some countries in Asia and S. America) it is generally best to exchange the majority of the currency you bring in at a bank in the capital city. Corruption in these countries is usually highest at the borders and airports. Touts like to scam newcomers to these countries just to profit off of ignorance. The biggest bank in the capital city will usually give you the best exchange rate. Try not to use an ATM in these countries as that could set off red flags that may freeze your account. By every third world, country there is usually a second world country not far away, so if you are on a long trip try to get your cash from these countries.
Cash management is important when you travel frequently internationally as if you are not careful you could be just giving away your hard earned money to financial institutions when you don’t have to, if you just manage your cash properly. Whatever you do, do not buy or trade foreign currency in the United States. U.S. banks are the greediest in the world for consumers and Americans do not travel much so there is no completion and therefor no market for foreign currency in the U.S.. If it is possible to pay for a transaction with a credit card than do so as you get the bankers rate and the merchant is paying for the transaction fee. Most of the world still handles the majority of transactions with cash, so just learn the system and you will be able to stretch your dollar further while exploring what the world has to offer.