11 ms·

Rethinking 'Fuck You' money

164 points by herdrick 16y ago

troygoode 16y ago
The first 3/4 of this article is fucking terrifying.
- Super_Jambo 16y ago
  If you are not fucking terrified at the moment you're not paying attention.
  - apphacker 16y ago
    There's nothing to be terrified of. Just live your life and do your best. If you're going to live your entire life with fear about retirement or debt, then by the time you reach retirement age you'll have lived most of your life in fear. Which is worse? Working during retirement age or living the vast majority of your life in fear? If things get really really bad you can always put a hole in your head or jump off a bridge. So don't worry about it. Just work hard, enjoy your life, and be happy if you want to be.
    - vaksel 16y ago
      yeah live your life at the fullest,,,everything eventually works out. And if worse case scenario it doesn't...and you are broke at 55-60....go rob a bank. If you succeed you get some cash...if you fail you get free room, food and health care.
    - mkramlich 16y ago
      > " If things get really really bad you can always put a hole in your head or jump off a bridge. So don't worry about it." That philosophy might work if you're a single person. That philosophy suddenly does not work so well if you have a spouse, children, and aging parents, perhaps sick or dependent families. Suddenly the whole "oh well, I can always just shoot myself" solution isn't so clean and practical.
    - davidw 16y ago
      I'm certainly not the only one to remember all the survivalist BS from the 80ies. Maybe that'd be a good business to be in these days. "Survive in the woods with only your wits and a loin cloth!" "Bob and Doug's guide to finding beer after the apocalypse!" and so on...
  - marvin 16y ago
    Why don't you just put your money in a global index fund instead? No one forces you Americans to invest your savings in your own country..in fact, that seems like a pretty bad idea in the first place, since this means that when the economy is bad and it is hard to find jobs is the same time it is a very bad idea to take money out of your investments. Seems pretty obvious to me that the American economy as a whole has so much shenanigans going on that investing broadly in it is a bad idea. Is it really that hard to move your money to a foreign currency`
    - lsc 16y ago
      they say when America gets a cold, the whole world gets the flu. Sure, the US economy is in pretty bad shape right now. but where else do you suggest we invest? this isn't a localized problem.
    - noonespecial 16y ago
      Seems pretty obvious to me that the American economy as a whole has so much shenanigans going on that investing broadly in it is a bad idea. Is it really that hard to move your money to a foreign currency The terrifying part is that what you say is true, but America is still the best place to invest. Burying pirate treasure on an uncharted island is actually starting to look good.
    - nostrademons 16y ago
      Which country? Europe is worse-off than America, China likely has their own bubble. Japan has been in a funk for 20 years. Russia has recently been cracking down on political freedoms in a worrisome way, there's no guarantee that you'll be able to take your money out once you put it in. Same for many Latin American countries.
      - nileshtrivedi 16y ago
        How about India? Indian economy has bounced back some time ago. Here is sensex over last 5 years. http://in.finance.yahoo.com/q/bc?s=^BSESN&t=5y&l=on&z=m&q=l&c= http://in.finance.yahoo.com/q/bc?s=^BSESN&t=5y&l=on&... Risk-free return rate is still at around 8%: http://www.bajajcapital.com/gss/nsc.html http://www.bajajcapital.com/gss/nsc.html
  - lsc 16y ago
    eh, it's been a long time coming. corruption is endemic to the system; shareholders have outsourced management of their companies without providing any supervision. there's really no way that is sustainable.
  - jacquesm 16y ago
    Terrified of what? The bogeyman? Everybody reading this still has internet access, which is not exactly one of the prime requirements for living. You've got very little to be terrified of, other than your lack of self confidence in your ability to make the best of a mediocre situation.
- pvdm 16y ago
  Guess George Foreman is going to give you the thumbs down once he looks you over. [see longshoreman comment above ]
vaksel 16y ago
I think after you get fuck you money, your goal should be to create a lifestyle business. Something that can more or less run on autopilot and generate money for you to live on. If you are a web guy, you can create some software product(or pay someone to build one for you). Then charge $50 a month...and you only need to make 6 sales a day(via adwords) to make $100K/yr. If you are not...you can buy a franchise...i.e. McDonalds franchises make something like 1-2 million a year. And you as an owner don't need to do anything...just hire a good manager...and it'll more or less run on autopilot(from your perspective)
- troygoode 16y ago
  If you can make something that makes you $100k/yr why wait until you have already made your fuck you money?
  - vaksel 16y ago
    because a lot of these niche $100K/yr products...hit the ceiling at 150-200K. So you have no security like you do when you have 5-6 million in the bank. Anything can happen...Google might slap your adwords account, someone might release a competing product etc. And starting a lifestyle business with FU money, means that you can tough it out as it grows from 1 sale every other day, to 1-2-3-4-5-6 sales a day.
    - lsc 16y ago
      If you can build a $100K/year product, why not do that, and then use that money as your runway while you build your five million dollar product? building a company is /much/ easier if you don't have to worry about where rent is coming from three months from now.
      - vaksel 16y ago
        because at that point it's very easy to get complacent...and building up to $100K for a niche business still takes time and money.
SamAtt 16y ago
His premise seems flawed to me. He says people should forget about F@#$ You Money because you can't depend on it to grow in this bad economy. That's reasonable. But then he suggests you aim for “f@#$ you influence and credibility” because it "allows you to charge $30k+ for a 1 hour speaking engagement". But I know people who used to make $10k per speaking engagement and they aren't getting much work lately. In my experience the first thing people cut in a bad economy are the expensive speakers and while influence can probably get you a magazine column I wouldn't expect that to pay much at all. So if the problem was finding a stable income in a bad economy his solution really didn't solve it.
- astine 16y ago
  He's saying you should forgt about a few million and go for a few billion.
  - SamAtt 16y ago
    I don't think it is what he's saying. He specifically says "give up on F@#$ You Money." Not "Go for a billion dollars because a million isn't enough F@#$ You Money" What he's saying is influence is a better strategy than money and I'm disagreeing with the truth of that statement.
- deleted 16y ago
  [deleted]
- lsc 16y ago
  eh, I dono. To a certain extent, credibility can be transformed in to money... e.g. if you write a technical book, you will have a much easier time getting a job later on. On the other hand, I think most things that get you a lot of money also gets you a lot of credibility, so going from just f-ck you money to f-ck you money plus f-ck you credibility isn't going to take much effort; you just have to be a bit more public, a bit more vocal about what you are doing.
- jacquesm 16y ago
  I agree with you fully, the first thing to go when the economy isn't all that great is the stuff that you can do without. So, no more lavish all employee trips to tropical islands and no more expensive speakers. Time to get up and do some more work instead of talking about your previous successes. And about dying penniless, who cares, you can't take it with you anyway. If you plan on passing your wealth to your kids better do it while you are alive and scale back accordingly. In plenty of countries that's the better strategy tax wise anyway.
smalter 16y ago
what's the moral of this story? you most likely, even if you make a good amount of money, will not escape the anxiety associated with money. or, escaping the anxiety associated with money is not accomplished by making money. the idea of fuck you money is for kids. being able to say fuck you to anyone is more about what you've got on the inside than what you've got on the outside.
- MisterWebz 16y ago
  being able to say fuck you to anyone is more about what you've got on the inside than what you've got on the outside. Sure, but the consequences will be different.
  - roel_v 16y ago
    "Sure, but the consequences will be different." Well I guess that with that reply you missed the whole point of the comment...
startuprules 16y ago
A very easy solution to this: Go live in a cheaper country. Go now, before the heavily debted countries lock down money transfers (In which case, buy gold/silver)
- wallflower 16y ago
  Off-topic but don't you think that the owners of that debt have a slightly vested interest in avoiding complete collapse/keeping the system going, even if it is barely functional to get some of their ongoing interest payments? Or will the environment rapidly devolve to: http://ferfal.blogspot.com/ http://ferfal.blogspot.com/
  - startuprules 16y ago
    I agree, but just like a bubble crash, when one major party loses confidence and sells his stake, all the other parties panic and sells as well.
- rortian 16y ago
  How does crazy paranoid stuff get up-voted here? Very Sad. Cheaper countries can be fun, but there's lots of downsides as well. If you are asocial, it could be your dream to live there. I'll always want a vacation there, but not to live there.
  - harscoat 16y ago
    Berlin is pretty social ;)
    - rortian 16y ago
      I concur. Not known for being super cheap I'd imagine though.
      - startuprules 16y ago
        I have a feeling you've never traveled to other countries. How sad.
hrabago 16y ago
$5M is definitely not retirement money if you're only 30 years old. I figured at that age you'd need about $15M, and even at that you'd need to make sure you invest it properly to at least keep up with inflation. I've always thought that FYM and retirement money are two different concepts. If I had FYM, I can quit my job. I would still be looking for what's next, but I can take my time. (Usual disclaimers apply re: deadlines)
- CapitalistCartr 16y ago
  I'd have no problem extracting 250,000 in annual income from 5 million, after it's been invested for a year. Whether or not that's enough t decide to go walkabout depends on the person.
  - jmillerinc 16y ago
    What would your strategy be to get that 5%?
    - adammichaelc 16y ago
      Tax free municipal bonds.
      - jerf 16y ago
        Come back and tell me about dumping all your money into tax-free municipal bonds in two years.
        adammichaelc 16y ago
        <neutral question> What is the reasoning behind your comment?
        jerf 16y ago
        See btilly's comment that mentions them. There is a lot of chatter about bankruptcy. It's still just chatter, with a small number of exceptions. Let us all hope it stays that way. Mind you, I'm not guaranteeing they'll all go away, but it won't take very many bankruptcies for your returns to go below inflation. (Or worse.) I might invest in specific municipalities, if that's possible for a mere mortal investor, but I wouldn't think it's necessarily a safer assert class than anything else right now.
myoung8 16y ago
Slightly myopic given that we're still very much in a recession, but good points nonetheless. I would have to disagree, though, because fame and influence fades. You still have to work hard to maintain it.
wallflower 16y ago
Repost but a quote from George Foreman about longshoremen. What is real wealth?: Mr. Foreman, who stared down financial collapse as an adult despite a troubled, impoverished childhood, said he knew real wealth when he saw it. “If you’re confident, you’re wealthy,” he says. “I’ve seen guys who work on a ship channel and they get to a certain point and they’re confident. You can look in their faces, they’re longshoremen, and they have this confidence about them...I’ve seen a lot of guys with millions and they don’t have any confidence,” he says. “So they’re not wealthy.”
- deleted 16y ago
  [deleted]
- lsc 16y ago
  in entertainment and sales, confidence is almost everything. The thing is, outside those fields, confidence is dramatically less useful. (granted, sales skills have a pretty wide applicability, but my point is there are jobs that don't involve much sales, where confidence doesn't matter that much.)
  - BrandonM 16y ago
    Confidence doesn't have to tie directly to the work you do. One aspect of confidence is knowing that you have the skill to find work, or the smarts and personality to get a new job and learn the necessary skills quickly. A person like that never needs to fear poverty, which is one aspect of wealth.
    - lsc 16y ago
      Not fearing and not needing to fear are two different things. Confidence can help get you jobs, but without competence, you will have a hard time keeping it.
yewweitan 16y ago
Well, there must be some correlation between money and influence. If Paul Graham is right, then the guy who has $5M at 30 by virtue of a startup exit has created enough value to be compensated as such. Which of course, leads to influence. FYM in it's old-world sense (retirement) is probably getting more obsolete anyway. As Tim Ferriss put it, "The goal isn't to work less. It is to live more."
gcheong 16y ago
What about dividend paying stocks? Good companies are usually very reluctant to cut dividends even in bad times and with stock prices suppressed, this should lead to higher dividend yields. Probably not a total solution but should be looked at.
- philwelch 16y ago
  In theory, shouldn't all stocks be dividend paying? If your stock doesn't pay dividends, what makes it any different from baseball cards as an investment?
  - gcheong 16y ago
    In theory yes, that's essentially the dividend discount model of stock value.
    - gwern 16y ago
      But is it correct? I mean, AAPL is priced sky-high along with Google, and it apparently last paid out any dividends 15 years ago (http://finance.yahoo.com/q/ks?s=AAPL http://finance.yahoo.com/q/ks?s=AAPL). What on earth dividends are people expecting in the future to push the share so high, especially considering that Apple has said nothing whatsoever about any planned dividends? (And at 9B in profit according to Wikipedia, it certainly could if it wanted to.)
  - astrofinch 16y ago
    It's different from baseball cards because a given baseball card can't start paying dividends if all the people who own the card have a vote and decide it should. I used to spend a lot of time playing Railroad Tycoon 2, and in that game a good way to get rich is 1. Put all your money in to a railroad you control. 2. Grow your railroad. As your railroad grows, the value of your stock in it grows. This causes your purchasing power to rise, allowing you to borrow money to buy more stock in your railroad. 3. Eventually you're in a ton of debt, but you've also got a ton of stock in your (presumably successful) railroad. Then raise the dividend paid by your railroad's shares and rake it in. The problem with raising the dividend paid by your shares early on is that it will give your railroad less capital to expand with. So you only want to execute step 3 when your railroad is making more money than you know what to do with. I think there's a good argument to be made that companies like Google know what to do with the money they're making.
harscoat 16y ago
maybe it safer strategy not to think of retirement at all and try to find what really motivates/fulfills you. If you get good at it whatever it is, there will always be a way to make money with it.
strlen 16y ago
8% ROI is unrealistic, but a 2-4% is certainly possible especially with municipal bonds and insurance annuities. The former are also exempt from federal taxes, state taxes (if you live in the same state) and even local taxes (if you live in the same city). Both have guarantees against inflation (at the cost of lower yield) . Nonetheless, I do think the is somewhat overrated. If I had fuck you money, I'd... write code, read books and papers. I'd have more freedom on how I write my code during working hours (and it's important not to understate importance of that, but the more senior you get, the more choice you have in what you work on what tools you use), but I'd also not have the focus that comes from working on systems that solve actual problems that individuals and organizations have; nor would I be solving these problems at scale that makes them much more interesting. On the other hand, I'm pretty confident that if I were to spend my time chasing a big payoff I'd be working on problems that are far less interesting and more frustrating (which is almost axiomatically why these problems have the payoff). There's very few early-stage startups doing systems programming (and I'm speaking loosely here i.e., beyond just operating system kernels and file systems). For web companies systems programming only becomes needed as a scalability becomes a problem (in most cases it never does). The idea that may be I'll be able to go back to doing what I enjoy most of the time if the business succeeds won't be enough to drive me: I already do that (perhaps that's why so few "home run" startups have come out of Google?) Keep in mind that while stock options after product/market fit (pre-IPO startups, public companies) account for only a tiny percentage, the chance of a payoff is much higher (which, again, is why it's a tiny percentage: you're no longer taking a risk). That payoff is certainly no fuck you money (except in rare cases e.g., Google in early 2000s), but it's often sufficient in terms of giving you more freedom e.g., to go back to school for a Ph.D. Were I to have a vision for a business (rather than a science project, which most of my ideas have been) based upon interesting technology (i.e., not a website) I'd certainly consider pursuing it, but even then I'd have no illusions: I suspect, I'd spend more of my time doing what I don't like (general business operations) than what I do (coding); it would be the vision of bringing forth new technologies that solves real problems that would let me pull through that (as opposed to pure research or solving business problems with well known existing technologies) .
- btilly 16y ago
  8% ROI is unrealistic, but a 2-4% is certainly possible especially with municipal bonds and insurance annuities. Amusingly, municipal bonds are in the top 4 likely candidates for our next set of major financial problems. The others are default on consumer ARM mortgages, debt on commercial real estate, and repayment on private equity. Interestingly, the largest class of investors in private equity funds this time around are government pension funds, which will just compound the risks for the munis. (The last time there was a bubble the investors were Savings and Loans institutions, the result was the S&L crisis of the late 80s/early 90s.)
pg 16y ago
Does the rule that you should get out of the stock market when random people tell you stocks are sure to go up apply in reverse? If so, this is a pretty encouraging sign.
- rokhayakebe 16y ago
  Isn't that what managers who buy undervalued stock do? Finding a stock everyone thinks is not going to do well (or much better), and buy a controlling stack of it.
- riffer 16y ago
  Probably better to wait until people consider you weird for your investment thesis.
  - jey 16y ago
    There are far more ways to be weird than ways to be right.
- startuprules 16y ago
  Not when we're in a great worldwide depression. When the US baby boomers, the world's biggest/baddest consumers, are retiring or being too expensive to be hired. When automation/free software have permanently reduced human worker needs. When the developed countries - the ones with trillions of debt and aging population - have willingly given up their factories to the emerging countries, and are desperately searching for other ways to pay back their debt besides financial engineering.
  - jacquesm 16y ago
    I get sick & tired of all this doom talk about a worldwide depression. It's depressing. If you play it smart then this 'depression' is an opportunity in disguise, more of a correction than a true depression. The 1929 stock market crash set the stage for World War II, and it took until well after World War II before the world had finally recovered from it. That was a depression. The current situation is, compared to that, a mere bump in the road. As long as we're not seeing hyper-inflation, the general population still has food on the table and you can actually think about where you're going to take your holiday this year we're not even close. The really bad effects of what is going on in the market are still limited to a number of markets, mostly financing and the more expensive consumer items. There are knock on effects that hurt other industries but so far without the nightmare scenarios coming true. One thing is for sure, the time of 'easy money' from stocks or real estate investments is going to be over for a while.
webwright 16y ago
A couple of folks are tossing in that you can get 2-4% returns nowadays. Here's the historical rate of inflation (scroll down for the recent years): http://www.usinflationcalculator.com/inflation/historical-inflation-rates/ http://www.usinflationcalculator.com/inflation/historical-in... Looks like about 2-4%. :-(
- nostrademons 16y ago
  If we get deflation, as many people are predicting, then you can get several percent "interest" just by holding your money in cash. That's built into the interest rate expectations for a lot of securities right now. You wouldn't see these near-zero interest rates unless people were expecting the dollar itself to become more valuable in the near future.
  - francoisdevlin 16y ago
    The Fed, with all of the T-bills out there, will never allow deflation. It's not in the government's interests.
Charuru 16y ago
IMO Fuck you money is not just when you have enough for a life of mindless consumption, but enough for when you can do the things that you really really want to do. eg save the world from malaria, build that skyscraper with your face on it, start an iron and blood revolution (there are a few governments that I would want to overthrow).
istari 16y ago
People who think 6-10% returns are unrealistic are sheep, and know nothing about real estate. A friend of mine, a complete novice, was able to buy a multifamily unit in downtown San Jose for 500K and rent it out for 5000 a month. His down payment is 100K. His expenses(400K mortgage, insurance, taxes, etc) is 2500 a month. His rate of return is (5000-2500)x12/100K = 30% or so. He did this while violating the #1 rule of real estate investing: you never buy at market price. You pay 70% of what stuff are going for on the MLS. I invest in courthouse foreclosure auctions, and manage about 40% cash on cash returns. Investing in real estate is a skill, just like building companies or coding. Imagine how much a typical person know about building web apps. That is how much a typical person know about real estate investment.
- hugh3 16y ago
  So because your friend managed to get a crazy-good deal on one property, everyone else is sheep? Arbitrage opportunities do exist in the current market due to the current craziness, but the present foreclosure pace can't last forever. I don't know how long "70% of MLS" has been "the #1 rule of real estate investing", but how easy was it to snap up properties for those prices in 2005?
  - istari 16y ago
    My point isn't that my friend got a crazy good deal. My point is that arbitraging 12% rental income against a 5% mortgage rate is so easy right now you can do it by buying right off the MLS at market rates, in one of the most expensive(price to rent wise) cities in the US. The original poster was moaning about how hard it was in TODAY's environment to make money off of several million dollars in cash(!). I wanted to provide a counterpoint to that attitude.
    - Eliezer 16y ago
      If what you say is true, why is all this free money still lying around? Is there some systematic reason for why hedge funds don't do it, or why too few people bid on courthouse auctions?
hugh3 16y ago
If you ask me, the best way to invest the $2 million mentioned in the article in order to retire comfortably would be rental property. Take your $2 million and buy four $500K houses (or eight $250K houses, or whatever's appropriate). Pay an agent to take care of them, or do it yourself, depending on how much involvement you want. That should yield maybe $8,000 a month in rent, which after you've taken care of all the extra costs should still be enough to live on quite comfortably. Any capital gains you enjoy (and if you're smart you'll have invested in an up-and-coming area) are a bonus. The best part is that you don't need to leave some money on the table to hedge against inflation, since in the long term rent will pretty much keep pace with inflation. There are areas where this is a completely terrible idea due to rent controls and other landlord-unfriendly policies, obviously you shouldn't do it there. Also, avoid any area where you're likely to get undesirables as tenants.
- brc 16y ago
  Improvement on that is avoid family housing and go for industrial/commercial. You can get a quality property with minimal leverage for your $2million. You will get a blue chip tenant like a national retailer or even a government department, and they'll sign a 10 year lease with mandated, upwards only, CPI-indexed increases each year. You won't even have to fork over 8-10% on a property manager because the tenant will maintain the property. And at the end of it, you'll have a property worth much, much more than what you paid for it. Compare to a portfolio of houses, this strategy is higher return, lower risk and much lower management. The problem with family housing is that they are full of families, with all the associated problems that brings. Families split up, move out, get into trouble, have parties - blue chip businesses just keep their place tidy, make money and get on with life.
  - roel_v 16y ago
    Commercial property is much more sensitive to cyclical downturns than family housing. 10 or 15 year leases are mostly in either downtown, prime location property (with very limited supply) or in new developments, where you only get them once. After that you're left to the market. As usual, I think diversification if best for a stable portfolio. Mix various types of property, in various locations with various target markets, and then real estate is very sensible investment option.
Harj 16y ago
"His belief was that it was likelier to get worse before it got better and that it could be 10 years or more before the economy bounced back. “I think we’ll see Dow 4,000 before we see Dow 12,000,” he told me." sure but as long as you believe the economy is going to bounce back over 10 years then if you took a good piece of your $5m and simply put it into an index fund now, in ten years (retirement) time you'd have a very healthy return on it. i don't agree that now is a bad time to invest. i believe now is a bad time to invest for returns over the shorter/medium term but if you're talking about investing over a retirement time scale then it's during periods like the one we are in where big returns can be made.
betterlabs 16y ago
I know of a couple of entrepreneurs who made a good few mil by selling their startup and were looking to start a business as a lifestyle cashflow only business. When I asked him why, he said they did not want to dip into their savings for daily expenses and wanted to have a business that was sure to make them just enough money without way too much effort. I think this is not a bad strategy unless you just don't want to work, which I think is rare. In terms of growth, I think its wiser to invest in BRIC where the core domestic markets are getting stronger and the stock market returns are a lot better, though choppy. Also if you diversify into real estate (recurring income), CDs (monthly income), and such other opportunities, then you can strike a balance for yourself. Influence is VERY tough though. I wouldn't count on it as an indefinite opportunity to earn money when needed, assuming you are able to cut through the noise and build credibility (which itself may be tougher than having a decent exit. Plus it is not for everyone). New influencers constantly displace current influencers and it would take a lot more work to maintain it unless you founded Google or something.
lizzard 16y ago
More like 'fuck other people over" money.
ehsanul 16y ago
Two words: permanent portfolio. http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-historical-returns/ http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-... http://crawlingroad.com/blog/tag/permanent-portfolio/ http://crawlingroad.com/blog/tag/permanent-portfolio/
- barmstrong 16y ago
  I keep seeing this pop up on HN and I'm intrigued. Any wealthy people out there using this who can comment?
- illumin8 16y ago
  I haven't heard of this before, but thanks for sharing. This is a remarkably simple yet well balanced portfolio that should work for retirement at any age.
brianbreslin 16y ago
am I the only one who sees a flaw in the math here? I mean I wasn't a math major in college, but i did take financial math, and think he's forgetting a key thing called compound interest.
- starkfist 16y ago
  I can't figure out his math, either. In his second example, if you put $4M in a bank account that gets 2%, and can still save $10K a year you'll have $7.6 mil in 30 years. If you can get 8% (which I think you can, all arguments to the contrary) you will have $41M. Maybe he just means once you get the cash, you quit your job, put the money under the mattress and spend it all?
  - brianbreslin 16y ago
    yeah, he ignores the money growing on its own.
mattmaroon 16y ago
It's actually silly to think that stock market ROIs won't rise again. They're abnormally low now, but we've seen it many times before. Market returns are based on the amount investors need to take the inherent risks. Unless stock market investing gets considerably less risky (seems quite unlikely) investors will leave the market for less risky vehicles until rates return to the amounts needed to justify taking the risk, which have historically been around 7-10%. Stocks, real estate, bonds, and all other market-based investment vehicles will always have returns in-line with risks in the long run. Nobody should ever retire hoping to get a steady income from the stock market or real estate or other volatile investments. By the time you're ready to retire, you should be entirely in FDIC-insured CDs and the like. If your retirement plan is contingent on 6% annually you're asking for trouble, and you're probably going to get it if you live long enough.
- logicalmind 16y ago
  One thing that worries me, and I'd love to hear other people's opinions, is that as baby boomers retire they will be removing their retirements from the stock market. Whether they move their money to other non-stock investments or whatever. But don't you think the transfer of money out of stock-related investments by such a large percentage of people is going to cause some problems for those of us who still have money in stocks in the market?
- ewald 16y ago
  The author also seems to forget about dividends. If the market doesn't move at all in a period of time, it doesn't mean the companies I've invested in won't pay any dividends. It is important to buy companies based on their fundamentals.
ww520 16y ago
I come to this thread late but couple points: 1. Low return on money. That's because money itself worth more now; the Fed has destroyed whole bunch money via credit tightening. We have gone through an asset deflation phrase and the money you have can buy more assets now. It's ok to have low return on money for now. 2. Asset allocation. Should not just put your FU money in stocks or Treasury. Read up on asset allocation. Have better downfall protection and better return. 3. 4% withdrawal rate. Studies and simulations have found that annual 4% withdrawal rate of a portfolio can make it last for very long time adjusted for inflation. 4% of 2M is 80K, which can provide a nice living. 4. Count net worth, not just cash. That 80K makes a big difference with a paid-for house. 5. Don't discount Social Security/Medicare/IRA/401K/Pension. The discussion of couple millions of PRESENT day often ignores the age restricted retirement funds. Those can be substantial.
exit 16y ago
this may be good advice for people who have the potential to earn fu money. the corollary to average people seems to be that it's no longer possible to retire. how did we go from an age in which average people could hope to retire, to one in which someone with 5M needs to worry?
euccastro 16y ago
FU money can be just enough to buy a patch of land and build one of these: http://earthship.com/ http://earthship.com/
motters 16y ago
Personally, I'm not at all motivated by money so long as I can pay the bills and have some modest standard of living. If I had been interested in accumulating money I would have taken a quite different career path.
vgurgov 16y ago
ok, thats all nice, but if author is so much worried about his financial perspectives in US, he should look at other markets. Hey in Asia, even somewhere Europe after some research you can easily find that 6-8% safe investment opportunities. So retirement with 2M is still no problem if you are willing to open your eyes, and see that there is something going on outside US.
Vivtek 16y ago
I have a really hard time believing that there will be no investments for 30 years.
ahoyhere 16y ago
Oh yes, you shouldn't sit on your ass after banking a wad of cash and expect to live forever, not doing a thing. But neither should you rely on influence and credibility, because those things still imply gatekeepers. You have to have influence and credibility... to convince somebody else. Why not just rely on yourself? Why not foster the ability to make money in any circumstance? I cashed out my IRA because, so far, the money I've put into my SaaS has paid back itself 1000%, not 10%. Based on that, and my other efforts/products, I know I could easily earn 7K euros a month just by working a few days. Training is lucrative. My information products are lucrative. I'm about to open my "your first product" launch class again - last time it made $25k (as I was building it!), this time I aim to double that. Shouldn't be too hard. Sometimes I sit back and think about it, and I can't help but laugh (in a nervous way), that I can earn more in a few weeks than one of my parents' yearly salaries from when I was a kid. Now, back to my influence/credibilty/gatekeepers argument - the perceptive HNer will point out that I am using my credibility to bring in customers. That's true, at a few hundred bucks a pop -- which is a far cry from hoping somebody will hire you for a sweet job (which means, of course, that you have to work that job), and miles away from trying to use your credibility to get millions in investment. My way is very do-able for a normal person, the other is incredibly hard and requires much luck in addition to a full-out effort.

164 points by herdrick 16y ago

troygoode 16y ago

The first 3/4 of this article is fucking terrifying.

Super_Jambo 16y ago
If you are not fucking terrified at the moment you're not paying attention.
- apphacker 16y ago
  There's nothing to be terrified of. Just live your life and do your best. If you're going to live your entire life with fear about retirement or debt, then by the time you reach retirement age you'll have lived most of your life in fear. Which is worse? Working during retirement age or living the vast majority of your life in fear? If things get really really bad you can always put a hole in your head or jump off a bridge. So don't worry about it. Just work hard, enjoy your life, and be happy if you want to be.
  - vaksel 16y ago
    yeah live your life at the fullest,,,everything eventually works out. And if worse case scenario it doesn't...and you are broke at 55-60....go rob a bank. If you succeed you get some cash...if you fail you get free room, food and health care.
  - mkramlich 16y ago
    > " If things get really really bad you can always put a hole in your head or jump off a bridge. So don't worry about it." That philosophy might work if you're a single person. That philosophy suddenly does not work so well if you have a spouse, children, and aging parents, perhaps sick or dependent families. Suddenly the whole "oh well, I can always just shoot myself" solution isn't so clean and practical.
  - davidw 16y ago
    I'm certainly not the only one to remember all the survivalist BS from the 80ies. Maybe that'd be a good business to be in these days. "Survive in the woods with only your wits and a loin cloth!" "Bob and Doug's guide to finding beer after the apocalypse!" and so on...
- marvin 16y ago
  Why don't you just put your money in a global index fund instead? No one forces you Americans to invest your savings in your own country..in fact, that seems like a pretty bad idea in the first place, since this means that when the economy is bad and it is hard to find jobs is the same time it is a very bad idea to take money out of your investments. Seems pretty obvious to me that the American economy as a whole has so much shenanigans going on that investing broadly in it is a bad idea. Is it really that hard to move your money to a foreign currency`
  - lsc 16y ago
    they say when America gets a cold, the whole world gets the flu. Sure, the US economy is in pretty bad shape right now. but where else do you suggest we invest? this isn't a localized problem.
  - noonespecial 16y ago
    Seems pretty obvious to me that the American economy as a whole has so much shenanigans going on that investing broadly in it is a bad idea. Is it really that hard to move your money to a foreign currency The terrifying part is that what you say is true, but America is still the best place to invest. Burying pirate treasure on an uncharted island is actually starting to look good.
  - nostrademons 16y ago
    Which country? Europe is worse-off than America, China likely has their own bubble. Japan has been in a funk for 20 years. Russia has recently been cracking down on political freedoms in a worrisome way, there's no guarantee that you'll be able to take your money out once you put it in. Same for many Latin American countries.
    - nileshtrivedi 16y ago
      How about India? Indian economy has bounced back some time ago. Here is sensex over last 5 years. http://in.finance.yahoo.com/q/bc?s=^BSESN&t=5y&l=on&z=m&q=l&c= http://in.finance.yahoo.com/q/bc?s=^BSESN&t=5y&l=on&... Risk-free return rate is still at around 8%: http://www.bajajcapital.com/gss/nsc.html http://www.bajajcapital.com/gss/nsc.html
- lsc 16y ago
  eh, it's been a long time coming. corruption is endemic to the system; shareholders have outsourced management of their companies without providing any supervision. there's really no way that is sustainable.
- jacquesm 16y ago
  Terrified of what? The bogeyman? Everybody reading this still has internet access, which is not exactly one of the prime requirements for living. You've got very little to be terrified of, other than your lack of self confidence in your ability to make the best of a mediocre situation.
pvdm 16y ago
Guess George Foreman is going to give you the thumbs down once he looks you over. [see longshoreman comment above ]

vaksel 16y ago

I think after you get fuck you money, your goal should be to create a lifestyle business. Something that can more or less run on autopilot and generate money for you to live on. If you are a web guy, you can create some software product(or pay someone to build one for you). Then charge $50 a month...and you only need to make 6 sales a day(via adwords) to make $100K/yr. If you are not...you can buy a franchise...i.e. McDonalds franchises make something like 1-2 million a year. And you as an owner don't need to do anything...just hire a good manager...and it'll more or less run on autopilot(from your perspective)

troygoode 16y ago
If you can make something that makes you $100k/yr why wait until you have already made your fuck you money?
- vaksel 16y ago
  because a lot of these niche $100K/yr products...hit the ceiling at 150-200K. So you have no security like you do when you have 5-6 million in the bank. Anything can happen...Google might slap your adwords account, someone might release a competing product etc. And starting a lifestyle business with FU money, means that you can tough it out as it grows from 1 sale every other day, to 1-2-3-4-5-6 sales a day.
  - lsc 16y ago
    If you can build a $100K/year product, why not do that, and then use that money as your runway while you build your five million dollar product? building a company is /much/ easier if you don't have to worry about where rent is coming from three months from now.
    - vaksel 16y ago
      because at that point it's very easy to get complacent...and building up to $100K for a niche business still takes time and money.

SamAtt 16y ago

His premise seems flawed to me. He says people should forget about F@#$ You Money because you can't depend on it to grow in this bad economy. That's reasonable. But then he suggests you aim for “f@#$ you influence and credibility” because it "allows you to charge $30k+ for a 1 hour speaking engagement". But I know people who used to make $10k per speaking engagement and they aren't getting much work lately. In my experience the first thing people cut in a bad economy are the expensive speakers and while influence can probably get you a magazine column I wouldn't expect that to pay much at all. So if the problem was finding a stable income in a bad economy his solution really didn't solve it.

astine 16y ago
He's saying you should forgt about a few million and go for a few billion.
- SamAtt 16y ago
  I don't think it is what he's saying. He specifically says "give up on F@#$ You Money." Not "Go for a billion dollars because a million isn't enough F@#$ You Money" What he's saying is influence is a better strategy than money and I'm disagreeing with the truth of that statement.
deleted 16y ago
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lsc 16y ago
eh, I dono. To a certain extent, credibility can be transformed in to money... e.g. if you write a technical book, you will have a much easier time getting a job later on. On the other hand, I think most things that get you a lot of money also gets you a lot of credibility, so going from just f-ck you money to f-ck you money plus f-ck you credibility isn't going to take much effort; you just have to be a bit more public, a bit more vocal about what you are doing.
jacquesm 16y ago
I agree with you fully, the first thing to go when the economy isn't all that great is the stuff that you can do without. So, no more lavish all employee trips to tropical islands and no more expensive speakers. Time to get up and do some more work instead of talking about your previous successes. And about dying penniless, who cares, you can't take it with you anyway. If you plan on passing your wealth to your kids better do it while you are alive and scale back accordingly. In plenty of countries that's the better strategy tax wise anyway.

smalter 16y ago

what's the moral of this story? you most likely, even if you make a good amount of money, will not escape the anxiety associated with money. or, escaping the anxiety associated with money is not accomplished by making money. the idea of fuck you money is for kids. being able to say fuck you to anyone is more about what you've got on the inside than what you've got on the outside.

MisterWebz 16y ago
being able to say fuck you to anyone is more about what you've got on the inside than what you've got on the outside. Sure, but the consequences will be different.
- roel_v 16y ago
  "Sure, but the consequences will be different." Well I guess that with that reply you missed the whole point of the comment...

startuprules 16y ago

A very easy solution to this: Go live in a cheaper country. Go now, before the heavily debted countries lock down money transfers (In which case, buy gold/silver)

wallflower 16y ago
Off-topic but don't you think that the owners of that debt have a slightly vested interest in avoiding complete collapse/keeping the system going, even if it is barely functional to get some of their ongoing interest payments? Or will the environment rapidly devolve to: http://ferfal.blogspot.com/ http://ferfal.blogspot.com/
- startuprules 16y ago
  I agree, but just like a bubble crash, when one major party loses confidence and sells his stake, all the other parties panic and sells as well.
rortian 16y ago
How does crazy paranoid stuff get up-voted here? Very Sad. Cheaper countries can be fun, but there's lots of downsides as well. If you are asocial, it could be your dream to live there. I'll always want a vacation there, but not to live there.
- harscoat 16y ago
  Berlin is pretty social ;)
  - rortian 16y ago
    I concur. Not known for being super cheap I'd imagine though.
    - startuprules 16y ago
      I have a feeling you've never traveled to other countries. How sad.

hrabago 16y ago

$5M is definitely not retirement money if you're only 30 years old. I figured at that age you'd need about $15M, and even at that you'd need to make sure you invest it properly to at least keep up with inflation. I've always thought that FYM and retirement money are two different concepts. If I had FYM, I can quit my job. I would still be looking for what's next, but I can take my time. (Usual disclaimers apply re: deadlines)

CapitalistCartr 16y ago
I'd have no problem extracting 250,000 in annual income from 5 million, after it's been invested for a year. Whether or not that's enough t decide to go walkabout depends on the person.
- jmillerinc 16y ago
  What would your strategy be to get that 5%?
  - adammichaelc 16y ago
    Tax free municipal bonds.
    - jerf 16y ago
      Come back and tell me about dumping all your money into tax-free municipal bonds in two years.
      - adammichaelc 16y ago
        <neutral question> What is the reasoning behind your comment?
        jerf 16y ago
        See btilly's comment that mentions them. There is a lot of chatter about bankruptcy. It's still just chatter, with a small number of exceptions. Let us all hope it stays that way. Mind you, I'm not guaranteeing they'll all go away, but it won't take very many bankruptcies for your returns to go below inflation. (Or worse.) I might invest in specific municipalities, if that's possible for a mere mortal investor, but I wouldn't think it's necessarily a safer assert class than anything else right now.

myoung8 16y ago

Slightly myopic given that we're still very much in a recession, but good points nonetheless. I would have to disagree, though, because fame and influence fades. You still have to work hard to maintain it.

wallflower 16y ago

Repost but a quote from George Foreman about longshoremen. What is real wealth?: Mr. Foreman, who stared down financial collapse as an adult despite a troubled, impoverished childhood, said he knew real wealth when he saw it. “If you’re confident, you’re wealthy,” he says. “I’ve seen guys who work on a ship channel and they get to a certain point and they’re confident. You can look in their faces, they’re longshoremen, and they have this confidence about them...I’ve seen a lot of guys with millions and they don’t have any confidence,” he says. “So they’re not wealthy.”

deleted 16y ago
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lsc 16y ago
in entertainment and sales, confidence is almost everything. The thing is, outside those fields, confidence is dramatically less useful. (granted, sales skills have a pretty wide applicability, but my point is there are jobs that don't involve much sales, where confidence doesn't matter that much.)
- BrandonM 16y ago
  Confidence doesn't have to tie directly to the work you do. One aspect of confidence is knowing that you have the skill to find work, or the smarts and personality to get a new job and learn the necessary skills quickly. A person like that never needs to fear poverty, which is one aspect of wealth.
  - lsc 16y ago
    Not fearing and not needing to fear are two different things. Confidence can help get you jobs, but without competence, you will have a hard time keeping it.

yewweitan 16y ago

Well, there must be some correlation between money and influence. If Paul Graham is right, then the guy who has $5M at 30 by virtue of a startup exit has created enough value to be compensated as such. Which of course, leads to influence. FYM in it's old-world sense (retirement) is probably getting more obsolete anyway. As Tim Ferriss put it, "The goal isn't to work less. It is to live more."

gcheong 16y ago

What about dividend paying stocks? Good companies are usually very reluctant to cut dividends even in bad times and with stock prices suppressed, this should lead to higher dividend yields. Probably not a total solution but should be looked at.

philwelch 16y ago
In theory, shouldn't all stocks be dividend paying? If your stock doesn't pay dividends, what makes it any different from baseball cards as an investment?
- gcheong 16y ago
  In theory yes, that's essentially the dividend discount model of stock value.
  - gwern 16y ago
    But is it correct? I mean, AAPL is priced sky-high along with Google, and it apparently last paid out any dividends 15 years ago (http://finance.yahoo.com/q/ks?s=AAPL http://finance.yahoo.com/q/ks?s=AAPL). What on earth dividends are people expecting in the future to push the share so high, especially considering that Apple has said nothing whatsoever about any planned dividends? (And at 9B in profit according to Wikipedia, it certainly could if it wanted to.)
- astrofinch 16y ago
  It's different from baseball cards because a given baseball card can't start paying dividends if all the people who own the card have a vote and decide it should. I used to spend a lot of time playing Railroad Tycoon 2, and in that game a good way to get rich is 1. Put all your money in to a railroad you control. 2. Grow your railroad. As your railroad grows, the value of your stock in it grows. This causes your purchasing power to rise, allowing you to borrow money to buy more stock in your railroad. 3. Eventually you're in a ton of debt, but you've also got a ton of stock in your (presumably successful) railroad. Then raise the dividend paid by your railroad's shares and rake it in. The problem with raising the dividend paid by your shares early on is that it will give your railroad less capital to expand with. So you only want to execute step 3 when your railroad is making more money than you know what to do with. I think there's a good argument to be made that companies like Google know what to do with the money they're making.

harscoat 16y ago

maybe it safer strategy not to think of retirement at all and try to find what really motivates/fulfills you. If you get good at it whatever it is, there will always be a way to make money with it.

strlen 16y ago

8% ROI is unrealistic, but a 2-4% is certainly possible especially with municipal bonds and insurance annuities. The former are also exempt from federal taxes, state taxes (if you live in the same state) and even local taxes (if you live in the same city). Both have guarantees against inflation (at the cost of lower yield) . Nonetheless, I do think the is somewhat overrated. If I had fuck you money, I'd... write code, read books and papers. I'd have more freedom on how I write my code during working hours (and it's important not to understate importance of that, but the more senior you get, the more choice you have in what you work on what tools you use), but I'd also not have the focus that comes from working on systems that solve actual problems that individuals and organizations have; nor would I be solving these problems at scale that makes them much more interesting. On the other hand, I'm pretty confident that if I were to spend my time chasing a big payoff I'd be working on problems that are far less interesting and more frustrating (which is almost axiomatically why these problems have the payoff). There's very few early-stage startups doing systems programming (and I'm speaking loosely here i.e., beyond just operating system kernels and file systems). For web companies systems programming only becomes needed as a scalability becomes a problem (in most cases it never does). The idea that may be I'll be able to go back to doing what I enjoy most of the time if the business succeeds won't be enough to drive me: I already do that (perhaps that's why so few "home run" startups have come out of Google?) Keep in mind that while stock options after product/market fit (pre-IPO startups, public companies) account for only a tiny percentage, the chance of a payoff is much higher (which, again, is why it's a tiny percentage: you're no longer taking a risk). That payoff is certainly no fuck you money (except in rare cases e.g., Google in early 2000s), but it's often sufficient in terms of giving you more freedom e.g., to go back to school for a Ph.D. Were I to have a vision for a business (rather than a science project, which most of my ideas have been) based upon interesting technology (i.e., not a website) I'd certainly consider pursuing it, but even then I'd have no illusions: I suspect, I'd spend more of my time doing what I don't like (general business operations) than what I do (coding); it would be the vision of bringing forth new technologies that solves real problems that would let me pull through that (as opposed to pure research or solving business problems with well known existing technologies) .

btilly 16y ago
8% ROI is unrealistic, but a 2-4% is certainly possible especially with municipal bonds and insurance annuities. Amusingly, municipal bonds are in the top 4 likely candidates for our next set of major financial problems. The others are default on consumer ARM mortgages, debt on commercial real estate, and repayment on private equity. Interestingly, the largest class of investors in private equity funds this time around are government pension funds, which will just compound the risks for the munis. (The last time there was a bubble the investors were Savings and Loans institutions, the result was the S&L crisis of the late 80s/early 90s.)

pg 16y ago

Does the rule that you should get out of the stock market when random people tell you stocks are sure to go up apply in reverse? If so, this is a pretty encouraging sign.

rokhayakebe 16y ago
Isn't that what managers who buy undervalued stock do? Finding a stock everyone thinks is not going to do well (or much better), and buy a controlling stack of it.
riffer 16y ago
Probably better to wait until people consider you weird for your investment thesis.
- jey 16y ago
  There are far more ways to be weird than ways to be right.
startuprules 16y ago
Not when we're in a great worldwide depression. When the US baby boomers, the world's biggest/baddest consumers, are retiring or being too expensive to be hired. When automation/free software have permanently reduced human worker needs. When the developed countries - the ones with trillions of debt and aging population - have willingly given up their factories to the emerging countries, and are desperately searching for other ways to pay back their debt besides financial engineering.
- jacquesm 16y ago
  I get sick & tired of all this doom talk about a worldwide depression. It's depressing. If you play it smart then this 'depression' is an opportunity in disguise, more of a correction than a true depression. The 1929 stock market crash set the stage for World War II, and it took until well after World War II before the world had finally recovered from it. That was a depression. The current situation is, compared to that, a mere bump in the road. As long as we're not seeing hyper-inflation, the general population still has food on the table and you can actually think about where you're going to take your holiday this year we're not even close. The really bad effects of what is going on in the market are still limited to a number of markets, mostly financing and the more expensive consumer items. There are knock on effects that hurt other industries but so far without the nightmare scenarios coming true. One thing is for sure, the time of 'easy money' from stocks or real estate investments is going to be over for a while.

webwright 16y ago

A couple of folks are tossing in that you can get 2-4% returns nowadays. Here's the historical rate of inflation (scroll down for the recent years): http://www.usinflationcalculator.com/inflation/historical-inflation-rates/ http://www.usinflationcalculator.com/inflation/historical-in... Looks like about 2-4%. :-(

nostrademons 16y ago
If we get deflation, as many people are predicting, then you can get several percent "interest" just by holding your money in cash. That's built into the interest rate expectations for a lot of securities right now. You wouldn't see these near-zero interest rates unless people were expecting the dollar itself to become more valuable in the near future.
- francoisdevlin 16y ago
  The Fed, with all of the T-bills out there, will never allow deflation. It's not in the government's interests.

Charuru 16y ago

IMO Fuck you money is not just when you have enough for a life of mindless consumption, but enough for when you can do the things that you really really want to do. eg save the world from malaria, build that skyscraper with your face on it, start an iron and blood revolution (there are a few governments that I would want to overthrow).

istari 16y ago

People who think 6-10% returns are unrealistic are sheep, and know nothing about real estate. A friend of mine, a complete novice, was able to buy a multifamily unit in downtown San Jose for 500K and rent it out for 5000 a month. His down payment is 100K. His expenses(400K mortgage, insurance, taxes, etc) is 2500 a month. His rate of return is (5000-2500)x12/100K = 30% or so. He did this while violating the #1 rule of real estate investing: you never buy at market price. You pay 70% of what stuff are going for on the MLS. I invest in courthouse foreclosure auctions, and manage about 40% cash on cash returns. Investing in real estate is a skill, just like building companies or coding. Imagine how much a typical person know about building web apps. That is how much a typical person know about real estate investment.

hugh3 16y ago
So because your friend managed to get a crazy-good deal on one property, everyone else is sheep? Arbitrage opportunities do exist in the current market due to the current craziness, but the present foreclosure pace can't last forever. I don't know how long "70% of MLS" has been "the #1 rule of real estate investing", but how easy was it to snap up properties for those prices in 2005?
- istari 16y ago
  My point isn't that my friend got a crazy good deal. My point is that arbitraging 12% rental income against a 5% mortgage rate is so easy right now you can do it by buying right off the MLS at market rates, in one of the most expensive(price to rent wise) cities in the US. The original poster was moaning about how hard it was in TODAY's environment to make money off of several million dollars in cash(!). I wanted to provide a counterpoint to that attitude.
  - Eliezer 16y ago
    If what you say is true, why is all this free money still lying around? Is there some systematic reason for why hedge funds don't do it, or why too few people bid on courthouse auctions?

hugh3 16y ago

If you ask me, the best way to invest the $2 million mentioned in the article in order to retire comfortably would be rental property. Take your $2 million and buy four $500K houses (or eight $250K houses, or whatever's appropriate). Pay an agent to take care of them, or do it yourself, depending on how much involvement you want. That should yield maybe $8,000 a month in rent, which after you've taken care of all the extra costs should still be enough to live on quite comfortably. Any capital gains you enjoy (and if you're smart you'll have invested in an up-and-coming area) are a bonus. The best part is that you don't need to leave some money on the table to hedge against inflation, since in the long term rent will pretty much keep pace with inflation. There are areas where this is a completely terrible idea due to rent controls and other landlord-unfriendly policies, obviously you shouldn't do it there. Also, avoid any area where you're likely to get undesirables as tenants.

brc 16y ago
Improvement on that is avoid family housing and go for industrial/commercial. You can get a quality property with minimal leverage for your $2million. You will get a blue chip tenant like a national retailer or even a government department, and they'll sign a 10 year lease with mandated, upwards only, CPI-indexed increases each year. You won't even have to fork over 8-10% on a property manager because the tenant will maintain the property. And at the end of it, you'll have a property worth much, much more than what you paid for it. Compare to a portfolio of houses, this strategy is higher return, lower risk and much lower management. The problem with family housing is that they are full of families, with all the associated problems that brings. Families split up, move out, get into trouble, have parties - blue chip businesses just keep their place tidy, make money and get on with life.
- roel_v 16y ago
  Commercial property is much more sensitive to cyclical downturns than family housing. 10 or 15 year leases are mostly in either downtown, prime location property (with very limited supply) or in new developments, where you only get them once. After that you're left to the market. As usual, I think diversification if best for a stable portfolio. Mix various types of property, in various locations with various target markets, and then real estate is very sensible investment option.

Harj 16y ago

"His belief was that it was likelier to get worse before it got better and that it could be 10 years or more before the economy bounced back. “I think we’ll see Dow 4,000 before we see Dow 12,000,” he told me." sure but as long as you believe the economy is going to bounce back over 10 years then if you took a good piece of your $5m and simply put it into an index fund now, in ten years (retirement) time you'd have a very healthy return on it. i don't agree that now is a bad time to invest. i believe now is a bad time to invest for returns over the shorter/medium term but if you're talking about investing over a retirement time scale then it's during periods like the one we are in where big returns can be made.

betterlabs 16y ago

I know of a couple of entrepreneurs who made a good few mil by selling their startup and were looking to start a business as a lifestyle cashflow only business. When I asked him why, he said they did not want to dip into their savings for daily expenses and wanted to have a business that was sure to make them just enough money without way too much effort. I think this is not a bad strategy unless you just don't want to work, which I think is rare. In terms of growth, I think its wiser to invest in BRIC where the core domestic markets are getting stronger and the stock market returns are a lot better, though choppy. Also if you diversify into real estate (recurring income), CDs (monthly income), and such other opportunities, then you can strike a balance for yourself. Influence is VERY tough though. I wouldn't count on it as an indefinite opportunity to earn money when needed, assuming you are able to cut through the noise and build credibility (which itself may be tougher than having a decent exit. Plus it is not for everyone). New influencers constantly displace current influencers and it would take a lot more work to maintain it unless you founded Google or something.

lizzard 16y ago

More like 'fuck other people over" money.

ehsanul 16y ago

Two words: permanent portfolio. http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-historical-returns/ http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-... http://crawlingroad.com/blog/tag/permanent-portfolio/ http://crawlingroad.com/blog/tag/permanent-portfolio/

barmstrong 16y ago
I keep seeing this pop up on HN and I'm intrigued. Any wealthy people out there using this who can comment?
illumin8 16y ago
I haven't heard of this before, but thanks for sharing. This is a remarkably simple yet well balanced portfolio that should work for retirement at any age.

brianbreslin 16y ago

am I the only one who sees a flaw in the math here? I mean I wasn't a math major in college, but i did take financial math, and think he's forgetting a key thing called compound interest.

starkfist 16y ago
I can't figure out his math, either. In his second example, if you put $4M in a bank account that gets 2%, and can still save $10K a year you'll have $7.6 mil in 30 years. If you can get 8% (which I think you can, all arguments to the contrary) you will have $41M. Maybe he just means once you get the cash, you quit your job, put the money under the mattress and spend it all?
- brianbreslin 16y ago
  yeah, he ignores the money growing on its own.

mattmaroon 16y ago

It's actually silly to think that stock market ROIs won't rise again. They're abnormally low now, but we've seen it many times before. Market returns are based on the amount investors need to take the inherent risks. Unless stock market investing gets considerably less risky (seems quite unlikely) investors will leave the market for less risky vehicles until rates return to the amounts needed to justify taking the risk, which have historically been around 7-10%. Stocks, real estate, bonds, and all other market-based investment vehicles will always have returns in-line with risks in the long run. Nobody should ever retire hoping to get a steady income from the stock market or real estate or other volatile investments. By the time you're ready to retire, you should be entirely in FDIC-insured CDs and the like. If your retirement plan is contingent on 6% annually you're asking for trouble, and you're probably going to get it if you live long enough.

logicalmind 16y ago
One thing that worries me, and I'd love to hear other people's opinions, is that as baby boomers retire they will be removing their retirements from the stock market. Whether they move their money to other non-stock investments or whatever. But don't you think the transfer of money out of stock-related investments by such a large percentage of people is going to cause some problems for those of us who still have money in stocks in the market?
ewald 16y ago
The author also seems to forget about dividends. If the market doesn't move at all in a period of time, it doesn't mean the companies I've invested in won't pay any dividends. It is important to buy companies based on their fundamentals.

ww520 16y ago

I come to this thread late but couple points: 1. Low return on money. That's because money itself worth more now; the Fed has destroyed whole bunch money via credit tightening. We have gone through an asset deflation phrase and the money you have can buy more assets now. It's ok to have low return on money for now. 2. Asset allocation. Should not just put your FU money in stocks or Treasury. Read up on asset allocation. Have better downfall protection and better return. 3. 4% withdrawal rate. Studies and simulations have found that annual 4% withdrawal rate of a portfolio can make it last for very long time adjusted for inflation. 4% of 2M is 80K, which can provide a nice living. 4. Count net worth, not just cash. That 80K makes a big difference with a paid-for house. 5. Don't discount Social Security/Medicare/IRA/401K/Pension. The discussion of couple millions of PRESENT day often ignores the age restricted retirement funds. Those can be substantial.

exit 16y ago

this may be good advice for people who have the potential to earn fu money. the corollary to average people seems to be that it's no longer possible to retire. how did we go from an age in which average people could hope to retire, to one in which someone with 5M needs to worry?

euccastro 16y ago

FU money can be just enough to buy a patch of land and build one of these: http://earthship.com/ http://earthship.com/

motters 16y ago

Personally, I'm not at all motivated by money so long as I can pay the bills and have some modest standard of living. If I had been interested in accumulating money I would have taken a quite different career path.

vgurgov 16y ago

ok, thats all nice, but if author is so much worried about his financial perspectives in US, he should look at other markets. Hey in Asia, even somewhere Europe after some research you can easily find that 6-8% safe investment opportunities. So retirement with 2M is still no problem if you are willing to open your eyes, and see that there is something going on outside US.

Vivtek 16y ago

I have a really hard time believing that there will be no investments for 30 years.

ahoyhere 16y ago

Oh yes, you shouldn't sit on your ass after banking a wad of cash and expect to live forever, not doing a thing. But neither should you rely on influence and credibility, because those things still imply gatekeepers. You have to have influence and credibility... to convince somebody else. Why not just rely on yourself? Why not foster the ability to make money in any circumstance? I cashed out my IRA because, so far, the money I've put into my SaaS has paid back itself 1000%, not 10%. Based on that, and my other efforts/products, I know I could easily earn 7K euros a month just by working a few days. Training is lucrative. My information products are lucrative. I'm about to open my "your first product" launch class again - last time it made $25k (as I was building it!), this time I aim to double that. Shouldn't be too hard. Sometimes I sit back and think about it, and I can't help but laugh (in a nervous way), that I can earn more in a few weeks than one of my parents' yearly salaries from when I was a kid. Now, back to my influence/credibilty/gatekeepers argument - the perceptive HNer will point out that I am using my credibility to bring in customers. That's true, at a few hundred bucks a pop -- which is a far cry from hoping somebody will hire you for a sweet job (which means, of course, that you have to work that job), and miles away from trying to use your credibility to get millions in investment. My way is very do-able for a normal person, the other is incredibly hard and requires much luck in addition to a full-out effort.