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The Kickass Entrepreneur's Guide to Investing: Three Simple Steps to Build Massive Wealth with Your Business's Profits Kindle Edition
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What he is writing about is how we–you and I–can grow our wealth rapidly and safely in a world of change. Basically, we are to diversify our money into three “buckets,” not unlike the Talmudic advice: cash/bonds, real estate, equities (businesses). With some diversification within the buckets, one has a relatively simple strategy that is likely to succeed. If you are an entrepreneur, he alerts you to some added subtleties. A feature of his Kindle book is an Excel spreadsheet to help with computations.
“Cash is king,” you’ve heard it said. You can use cash to buy groceries, pay off debts, invest in a property or a stock. When you are out of cash, you are in trouble. A bond is easily convertible to cash and pays a bit of interest while you hold it, although its value decreases as inflation increases. Many financial advisors recommend you have a half-year’s expenses in cash and cash equivalents.
Real estate and other tangible, negotiable (sellable) property, will increase in value roughly with inflation, having risen about 3% per year for the past seven decades. Wiener likes to buy and manage buildings that produce more than this when he fixes them up and collects rents, though being a landlord has some risks and can be a headache at times. Those of us who own homes are in that way invested in real estate, though your home should not really be viewed as an investment, as you are enjoying its use, like a commodity. It does figure in your net worth.
I would add, though Wiener might not agree, that the mortgage you have on your home serves as another form of diversification, as the value of the money you pay in interest will decrease with inflation.
If you have some inclination to invest in rental properties, Wiener’s extensive coverage of this option will be of particular value. I’m not.
Almost all of us are invested in businesses, either directly in the stock market or as owners of an enterprise, or indirectly through our retirement funds, such as 401(k)s and pension plans.
Wiener’s important message to business owners, entrepreneurs, is that they usually have much more than 1/3 of their funds tied up, at risk, in the business and should take this into account by reducing their exposure to other equity investments. While that will help even out the allocation among the three major categories, the buckets, it will lessen the diversification available within the equity category.
For those of us who are not entrepreneurs, I think Jeff Wiener would agree with me that investing in exchange-traded funds (ETFs) of stock market indexes, such as the SPDRs that follow Standard and Poor’s 500 Index, is a sound way to combine diversification with liquidity in an investment you can follow daily (by noting the S&P 500 Index values). Investopedia.com tells me that the average return of the S&P 500 from 1928 to 2017 was 10%, or 7% corrected for inflation. [10%/year is doubling every 7 years.] If you are going to pick a limited number of stocks, rather than go with a broad index fund, then Wiener advises you chose some that tend to be oppositely correlated, some that go up for certain business conditions and some that go down for those same conditions. As for timing, he seconds Warren Buffett’s contrarian posture: being greedy when others are fearful and fearful when others are greedy.
Jeff Wiener likes real estate more than I do, but to give him his due, I have to admit that when I compared the price appreciation of my former floor-through condo in Boston’s Back Bay, an apartment that I sold in 1983, versus the price appreciation of the S&P 500 Index from 1983 to the present, the condo value increase outpaced that of the Index. Both exceeded 10%/year however, and I did not have to pay real estate taxes and condo fees nor attend condo board meetings while my S&P 500 fund appreciated.
Dalio’s All-weather Portfolio
An alternative strategy is the “All-Weather Portfolio,” by billionaire hedge-fund manager, Ray Dalio, which allocation Wiener describes as follows, noting it is not designed for the typical entrepreneur:
40% Long-term US Bonds
15% Intermediate US Bonds
He indicates this allocation might be suitable for the non-entrepreneur investor. Note that 30% is in stocks, close to the 1/3 of the “bucket” allocation, and 15% is in tangible assets (gold and commodities); another 15% in intermediate bonds is arguably cash, and presumably one holds some more cash as well.
As We Age
Other financial advisors recommend that we apportion our bonds and stock allocations so that they reflect our age, for example 50% bonds and 50% stocks at age 50 and 60% bonds and 40% stocks at age 60, as any down-turn in our stock market holdings will have less time to recover as we get older. Since I am planning to live to 100, I am a bit more aggressive….
This short, lucid, easily readable book is of real value not only to entrepreneurs but to the rest of us, as well. Jeff Wiener retired at 49, financially secure, and now enjoys having part-time “work” that is more like play for him. He wants the rest of us to be able to do much the same. Following his advice will increase our chances of retiring early and comfortably.
Jeff opens his brief but cogent book with a bit of his own history in the field of business and entrepreneurship and then turns his attention to the reader interested in his far-reaching advice: Investing as an Entrepreneur As a small-business owner, you may be at a stage where you’ve successfully grown your company and have achieved a level of profitability, but are stuck wondering how to invest your profits. Or, you may still be growing your business and are looking for investment strategies specific to entrepreneurs to help you in that process. No matter what stage, if you’re an entrepreneur, you’re likely always looking for strategies on how to create and build wealth— and if you’re not, you should be. To do so, perhaps you’ve spoken with an investment advisor— or a few for that matter— and are getting the sense that they just don’t understand how entrepreneurs think or how their needs differ from those of other investors. (Worse yet, many advisors are compensated by investing and trading your cash in order to justify their high fees.) Most financial advisors will look at the amount of cash you have available to invest, check the optimal investment strategy and investment horizon for someone your age, come up with a percentage of stocks and bonds based on your available cash, and then design a supposedly “perfect” asset allocation model for you. There’s just one problem: that conventional asset allocation model doesn’t work for entrepreneurs. Your investment and cash requirements are different from the regular investor’s, as you already have a large percentage of your wealth tied up in your business, which is equity. A downturn in the market will result in a downturn not only in your stock portfolio, but if the economy enters a recession, there’s a good chance your business will be in need of extra cash. Most financial advisors simply don’t understand that. They also fail to take an appropriate approach to asset allocation. Entrepreneurs must understand how to make risk-appropriate decisions when it comes to both investing and their businesses overall. As a business owner, when you invest in yourself and your business you take control of the outcome. You also maintain control by finding your own opportunities and capitalizing on them. With careful diligence, planning, research, and education, you can influence the outcome of your investments without having to rely on the stock market.’ The direction is set!
In an entirely accessible manner Jeff explains the steps he has found successful - Jump start your portfolio’s growth, Build massive wealth on autopilot and Achieve compounded returns with less overall portfolio risk. The manner in which he explains each step is easy to understand, backed by fine references and tables and graphs that underline his points, and by the end of the short book the serious reader will fell empowered. Well-written and important knowledge here! Grady Harp, June 18
This book, the opposite. There’s a wealth of information and it’s presented very accessibly. Terms are defined, concepts are explained, prior knowledge is not assumed.
This is a great primer from the ground up, which let’s face it, is generally what entrepreneurship is about.
If I have any criticisms they are two. The first is very minor: the formatting is a little unprofessional; paragraph indents aren’t conventional in this style of book it suggests a novice publishing effort. But that’s ok; it’s a book about investing, not about publishing.
The second is that a bunch of data is contained in an Excel sheet which one must download. Now, this is easy, and if one can’t handle an Excel sheet one has no business trying to do any kind of investing, but still, it’s information that seems static enough that it could have just been included in the book itself. I suspect the reason for the download is for the extra marketing opportunity it allows.
But neither of those two things change that this is an excellent book that is exactly what it claims to be and will teach an entrepreneur a very good grounding in investing, very quickly. For that reason, five stars.