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So if you were given 25 million dollars you would automagically make obscene amounts of money with no effort? History shows otherwise with a very high rate of

So if you were given 25 million dollars you would automagically make obscene amounts of money with no effort? History shows otherwise with a very high rate of bankruptcies from lottery winners.

maxerickson 9y ago
You could make $300,000-$400,000 per year putting that in CDs. In the top 1 or 2% of households by income for pretty much doing nothing. Maybe not a literally obscene income though.
- IanDrake 9y ago
  I must not have made my point well. Sure, you could do that and maybe you would. However, most people who didn't earn their money don't. Most of those same people think the rich "do nothing" and make money. It's this kind of ignorance that causes bullshit class warfare where it doesn't exist.
  - maxerickson 9y ago
    Are lottery winners the majority among people that don't earn their money?
    - IanDrake 9y ago
      No, but they are a good example because they are usually not accustom to wealth and thus more likely to believe (like the OP) that wealthy people just sit on a pile of cash and buy exotic sports cars while doing hookers and blow 24/7. You don't often hear wealthy people complain about other wealthy people because they know how hard it is to stay wealthy. It is a skill to make money with money.
      - maxerickson 9y ago
        You switched to a statistical argument (However, most people who didn't earn their money don't.), you need statistical evidence, not examples.
        IanDrake 9y ago
        "70 percent of people who come into sudden money are broke within a few years, according to the National Endowment for Financial Education." Now do we get to argue over the source? Does it somehow not fit your world view that managing wealth is real work?
        maxerickson 9y ago
        It takes discipline to not just piss away a million dollars (the sorts of windfalls that claim includes), it doesn't take enormous effort to set it up in low risk assets that yield income. As a cousin comment points out, it is even possible to buy management services.
        IanDrake 9y ago
        But now I have 25 million and I've heard: - Dump it into the SP500 - Dump it into CDs - Give it to a money manager and hope for the best. If it doesn't work out at least you can blame him/her. Who's advise to take? It's really starting to astonish me the financial ingnorance on HN which must be attributed to younger folks who had no skin in the game in 2000 or 2007 and think investing is easy.
        aninhumer 9y ago
        Yes, because as long as you don't spend too much any of these things will work. The market trends upwards over a long enough period, so as long as you're disciplined enough to handle the downturns, you'll continue to make money while doing no work.
        IanDrake 9y ago
        @aninhumer, I can't reply to your thread, but I feel like people just don't get what I'm saying. Perhaps you could live off 25 million with a drawdown of 1%. That's 250K. So you live like that's your salary. But then the market tanks and 1% of your portfolio is now 120K. That's a big haircut. Do you take 2% now? You've got a 250K lifestyle but you said you'd only take 1%. You've now watched 13 million dollars vanish. Do you stay in the market and hope it goes back up or cut your losses? People here seem to suffer from historical bias because they know the market recovers, but when it happens to you the future will be totally uncertain. Mo money, mo problems. Totally true.
  - jazzyk 9y ago
    A lot (not all) of rich people who inherited money actually do nothing, they have money people managing their wealth (for a good cut of the profits). And making money on your capital in a perma-bull stock market (casino?), engineered by the Fed is not that complicated.
    - IanDrake 9y ago
      The inheritors you speak of aren't making money with money, they are spending money and will have none when they're done. I don't think I ever claimed that wasn't easy. >"Perma-bull stock market". Uhg. If it were only that easy. Making money on paper is easy right? Any idiot can see through every little dip in the market over the last ten years and not get rattled and ride it all the way to the top and then have the 6th sense to see the next dip for what it is, a crash, and move all their money to another asset class just before it happens. No, that's not what happens. People ride it all the way back down and often end up with less than they started with. Then someone who knows very little about investing tells them, at least you should make 8% on average historically as consolation. Tell me when to yank my money out if it's so easy. It's not. A correction is coming, but when, how will I know, and what to do when it does?
klibertp 9y ago
What? "Ruling class" is not about how much you currently have, but how you got what you have and what are your means of obtaining more in the future. Winning a lottery is a one time happening, and we can write it off as a balance for the random chance of getting hit by a car.
- IanDrake 9y ago
  Ok, let's see where this leads. How did the "ruling class" get their money and what is their means of obtaining more in the future? I certainly want in on it.
aninhumer 9y ago
Yes, one could put it in an S&P index fund and by all historical trends, they would make an average of 2 million per year (8%) without doing anything. That is an obscene amount of money. Or if you're more conservative, you could put it in bonds and still be making many times the average salary, still without doing anything. (And lottery participants are highly likely to be less well informed about managing money, since otherwise they wouldn't be lottery participants.)
- IanDrake 9y ago
  You're not factoring in market timing and drawdowns. Average is great if you're living 10 lives at 10 different moments in history, but we only get one. Put 25 million in the S&P 500 (qqq) in March of 2000 and draw 2 million a year on it. You are out of money inside of 4 years. There is no 100% safe place to stick that much money and live off of it. The world is too dynamic and it takes real skill and work to make money work for you.
  - aninhumer 9y ago
    As far as I can see, QQQ seems to perform a fair bit worse than the S&P 500 itself? Maybe it's an unfair metric, or maybe it's just a fair commentary about the risks of index funds. But in any case, I said you'd make that much on average, not that you could withdraw that much every year. In reality, you would draw down a smaller fraction of that (but still an immense salary for no work). And since your capital would be growing on average, you could increase your drawdown over time accordingly.
    - IanDrake 9y ago
      Sorry, how does one invest in the SP500 with "no work" without using an index fund? I need to draw 2 million a year because my Porsche, Hummer, NetJets subscription, mansion and constant vacations are expensive and you said I'd have 2mill on average. I don't work and I need to pay these bills with my 8% average. So what do you recommend I do in 2001? I'm supposed to be living large like you promised but the market tanked. Am I now supposed to live off of 100k when you said 2 million? I already bought this stuff on a payment plan! Seriously, think about it. You have 25 million and someone tells you you'll make 8% on average, but you can't actually spend it? Try to really think what you could do with 25 million and no effort. Not much.

So if you were given 25 million dollars you would automagically make obscene amounts of money with no effort? History shows otherwise with a very high rate of bankruptcies from lottery winners.

maxerickson 9y ago

You could make $300,000-$400,000 per year putting that in CDs. In the top 1 or 2% of households by income for pretty much doing nothing. Maybe not a literally obscene income though.

IanDrake 9y ago
I must not have made my point well. Sure, you could do that and maybe you would. However, most people who didn't earn their money don't. Most of those same people think the rich "do nothing" and make money. It's this kind of ignorance that causes bullshit class warfare where it doesn't exist.
- maxerickson 9y ago
  Are lottery winners the majority among people that don't earn their money?
  - IanDrake 9y ago
    No, but they are a good example because they are usually not accustom to wealth and thus more likely to believe (like the OP) that wealthy people just sit on a pile of cash and buy exotic sports cars while doing hookers and blow 24/7. You don't often hear wealthy people complain about other wealthy people because they know how hard it is to stay wealthy. It is a skill to make money with money.
    - maxerickson 9y ago
      You switched to a statistical argument (However, most people who didn't earn their money don't.), you need statistical evidence, not examples.
      - IanDrake 9y ago
        "70 percent of people who come into sudden money are broke within a few years, according to the National Endowment for Financial Education." Now do we get to argue over the source? Does it somehow not fit your world view that managing wealth is real work?
        maxerickson 9y ago
        It takes discipline to not just piss away a million dollars (the sorts of windfalls that claim includes), it doesn't take enormous effort to set it up in low risk assets that yield income. As a cousin comment points out, it is even possible to buy management services.
        IanDrake 9y ago
        But now I have 25 million and I've heard: - Dump it into the SP500 - Dump it into CDs - Give it to a money manager and hope for the best. If it doesn't work out at least you can blame him/her. Who's advise to take? It's really starting to astonish me the financial ingnorance on HN which must be attributed to younger folks who had no skin in the game in 2000 or 2007 and think investing is easy.
        aninhumer 9y ago
        Yes, because as long as you don't spend too much any of these things will work. The market trends upwards over a long enough period, so as long as you're disciplined enough to handle the downturns, you'll continue to make money while doing no work.
        IanDrake 9y ago
        @aninhumer, I can't reply to your thread, but I feel like people just don't get what I'm saying. Perhaps you could live off 25 million with a drawdown of 1%. That's 250K. So you live like that's your salary. But then the market tanks and 1% of your portfolio is now 120K. That's a big haircut. Do you take 2% now? You've got a 250K lifestyle but you said you'd only take 1%. You've now watched 13 million dollars vanish. Do you stay in the market and hope it goes back up or cut your losses? People here seem to suffer from historical bias because they know the market recovers, but when it happens to you the future will be totally uncertain. Mo money, mo problems. Totally true.
- jazzyk 9y ago
  A lot (not all) of rich people who inherited money actually do nothing, they have money people managing their wealth (for a good cut of the profits). And making money on your capital in a perma-bull stock market (casino?), engineered by the Fed is not that complicated.
  - IanDrake 9y ago
    The inheritors you speak of aren't making money with money, they are spending money and will have none when they're done. I don't think I ever claimed that wasn't easy. >"Perma-bull stock market". Uhg. If it were only that easy. Making money on paper is easy right? Any idiot can see through every little dip in the market over the last ten years and not get rattled and ride it all the way to the top and then have the 6th sense to see the next dip for what it is, a crash, and move all their money to another asset class just before it happens. No, that's not what happens. People ride it all the way back down and often end up with less than they started with. Then someone who knows very little about investing tells them, at least you should make 8% on average historically as consolation. Tell me when to yank my money out if it's so easy. It's not. A correction is coming, but when, how will I know, and what to do when it does?

klibertp 9y ago

What? "Ruling class" is not about how much you currently have, but how you got what you have and what are your means of obtaining more in the future. Winning a lottery is a one time happening, and we can write it off as a balance for the random chance of getting hit by a car.

IanDrake 9y ago
Ok, let's see where this leads. How did the "ruling class" get their money and what is their means of obtaining more in the future? I certainly want in on it.

aninhumer 9y ago

Yes, one could put it in an S&P index fund and by all historical trends, they would make an average of 2 million per year (8%) without doing anything. That is an obscene amount of money. Or if you're more conservative, you could put it in bonds and still be making many times the average salary, still without doing anything. (And lottery participants are highly likely to be less well informed about managing money, since otherwise they wouldn't be lottery participants.)

IanDrake 9y ago
You're not factoring in market timing and drawdowns. Average is great if you're living 10 lives at 10 different moments in history, but we only get one. Put 25 million in the S&P 500 (qqq) in March of 2000 and draw 2 million a year on it. You are out of money inside of 4 years. There is no 100% safe place to stick that much money and live off of it. The world is too dynamic and it takes real skill and work to make money work for you.
- aninhumer 9y ago
  As far as I can see, QQQ seems to perform a fair bit worse than the S&P 500 itself? Maybe it's an unfair metric, or maybe it's just a fair commentary about the risks of index funds. But in any case, I said you'd make that much on average, not that you could withdraw that much every year. In reality, you would draw down a smaller fraction of that (but still an immense salary for no work). And since your capital would be growing on average, you could increase your drawdown over time accordingly.
  - IanDrake 9y ago
    Sorry, how does one invest in the SP500 with "no work" without using an index fund? I need to draw 2 million a year because my Porsche, Hummer, NetJets subscription, mansion and constant vacations are expensive and you said I'd have 2mill on average. I don't work and I need to pay these bills with my 8% average. So what do you recommend I do in 2001? I'm supposed to be living large like you promised but the market tanked. Am I now supposed to live off of 100k when you said 2 million? I already bought this stuff on a payment plan! Seriously, think about it. You have 25 million and someone tells you you'll make 8% on average, but you can't actually spend it? Try to really think what you could do with 25 million and no effort. Not much.