In the United States today, there are almost 11 million individuals with a net worth of $1,000,000 or more, excluding the value of their primary residence (the figure tops 20 million if you count primary home equity in the calculations). With a population slightly above 300 million, this means that one out of every twenty-five Americans is a millionaire. You might wonder then: Why doesn’t it feel like one out of every 25 people you encounter has that type of wealth?
The short answer is that they don’t want to be noticed, and the media doesn’t want to find them.
Seven out of ten American millionaire households earn less than $200,000 per year. Two out of ten make less than $90,000 per year. You know where the wealth comes from? A high savings rate.
A misleading aspect of the content I publish on my site is that I have spent … Read the rest of this article!
You also have to guard yourself against those instances in life where rational decision-making on your part creates perverse incentives for counterparties that you may encounter. For example, I don’t think most people realize a danger that arises when you try to pay off your home mortgage early. If you ever lose a job, take a pay cut, or encounter some difficulty with making your mortgage payment once a good chunk of the principal has been paid off, the bank is going to be less likely to work with you if they have clarity that they will make a profit.
This clarity doesn’t exist when most of the loan amount is still due. If you run into trouble after just twelve payments, the bank has a heavy incentive to work with you because foreclosure proceedings will require significant fees that will nearly guarantee losses for the bank. The repayment of … Read the rest of this article!
I include below five factors that I consider when evaluating a mutual fund offering that are a little bit different than the standard/conventional advice that is repeated ad nauseam on the topic:
#1. Pay attention to the manager rather than the fund when calculating performance history. Most people rely on a fund’s performance history when reviewing the 3, 5, and 10 year history for a mutual fund. But you should care about the specific person. For the past five years, it’s not that there has been something magical about “center fielder for the Los Angeles Angels.” Instead, Mike Trout is the magic player, and he happens to be center field. People fall into the trap of following the track record of the fund name rather than the manager. It is the manager who selects the stocks, and that is the track record you should study.
#2. Examine the fund for … Read the rest of this article!
I do not like art as a long-term investment. Why?
Artwork not generate any cash flow. Strike One.
Artwork costs money in storage fees. Strike Two.
Artwork costs insurance. Strike Three.
Artwork sales require expert opinions on authenticity and valuation. Strike One.
Artwork can be damaged for a 100% loss with a toss of coffee. Strike two.
Artwork contains high transaction fees to buy. Strike three.
Artwork is taxed at a rate over ten percentage points higher than the capital gains rate. Strike one.
Artwork cannot be divisible as part of inheritance planning. Strike two.
Artwork is highly illiquid and takes approximately six months to sell. Strike three.
That’s the end of the inning.
For these reasons, I have an extreme bias against artworking investing.
I want you to acquire cash-generating assets that allow you to wake up on a lazy Saturday morning and see $583 … Read the rest of this article!
In 1900, it required a net worth of $39,000 to be classified as America’s top 1%. The median factory worker earned just shy of $500 per year. At the end of the Gilded Age, it would have been a fair claim to suggest that the United States resembled an aristocracy, as over half of America’s richest 1% received at least $20,000 in inheritance. Statistically speaking, if you were at the top crest of America’s wealth distribution, it was more likely than not that your wealth could be tied to receiving something from your parents.
Modern America, with all of its hand-wringing over the role that intergenerational wealth transfers play in creating systemic unfairness at a minimum and consolidated political power at a maximum, overstates the extent to which calcified wealth is present in the United States today.
The best work I’ve encountered that really dives into the data points is … Read the rest of this article!