The Exceptional Wealth Accumulation Ideas and Thinking Thread

MRC & Co said:

I see 5 pages, without one (sorry, there are a few, but not many) idea for the future. Funny considering the name of the thread: The Exceptional Wealth Accumulation Ideas and Thinking Thread.

Where are the ideas and thinking behind them? I don't see any.

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Ok - my 10 cents worth - looking at this in a broader longer term sense so really am not offering a quick fix!

Firstly my take on loosely defining "Exceptional Wealth" is being in a situation where your annual gain in personal equity (Assets - Liabilities) is currently well above $AUD1 million (per year) and your income producing assets eventually allow you to 'retire' (a nebulous concept), lead a comfortable life, and not erode your equity in real terms.

I think there are two aspects to this. The first, mainly focussed on in these forums, is a recipe for gaining the wealth (and I'll discuss this below). The second part though is just as important and that is maintaining and protecting the wealth once gained. This is that part of the financial planning process that includes insurance, estate & succession planning and is part of the risk minimisation process. There are many people who seem to achieve 'exceptional wealth' status but are soon parted from it. This risk minimisation process is worthy of a separate thread at some stage.

In regard to recipes for gaining exceptional wealth my experience from meeting a lot of successful (and otherwise) people is that there really are only three broad methods of gaining it.

1. Inheritance!
Most 'seriously rich' people inherited it (I would class this above the exceptional wealth level). However, many squander it because they do not address the risk minimisation part of the balance.

2. Unique business idea
This is a large group of people, sometimes with poor initial education, that develop a business idea that escalates and they have underlying skills & attitudes that leverage the risk, have a vision, develop the idea and become quite rich. However their initial competitive advantage is often not durable so many have a chequered life - including a bankruptcy or two on the way - and may have little life outside their business. Estate & succession planning are often a longer term problem as well.

3. Professional education
This group is also quite large. They invest significant time and monies into their professional qualification & experience and many earn high incomes. This group includes legal, financial, medical, engineering and other professions. Many equate income to wealth, and do not develop their own financial education and are often led astray by their high cash flow, poor leverage decisions and overzealous financial planners! Those that remain salaried, generally seem to do worst. Some (and it is not a large number) go onto run successful businesses, and are the well paid CEOs and successful entrepreneurs.

I personally use shares as part of 'risk mininimisation' strategy as well as developing some wealth. My underlying asset has come from real estate and my cash flow comes from my professional education. I am seriously developing my own financial education as the 'Financial Planning' sector is in a poor current state.

Sorry - no quick get rich recipe - but there is also much more in life than just money!

Buy an OzLotto ticket

1:45 Mil odds to win first division.

$90 Mil prize.

RR 2:1

GOOD TRADE!

There is a difference between large profits and exceptional wealth.

The only way for main street to achieve exceptional wealth is
through 'compounding' via accumulation and investing.

I’m not seeing 'compounding' returns mentioned in this
thread.

If you can compound your returns at least 15% over the next
30-40years, then you’ll achieve exceptional wealth. And that's the trick.


Most of the posts in this thread are the usual:- "I traded this once, or I
know someone who did this once, or I traded this with ‘NO Risk’…"

NO risk trading….. I’ve heard that before, but sadly it doesn’t exist.

And sadly, no one is probably going to pick Gold going from $250 to
$1000, but they might take chunks out of the trend along the way. And I'm
not seeing too many masters of the universe in ASF.

I’ve read these types of posts many times before, which in the
context of the thread of achieving exceptional wealth mean little.

Once again large profits and exceptional wealth are two totally
different concepts.

A portion of Large profits should be moved into an area that has been set aside to acheive compounding growth over the long term.

Large profits should be used to increase ones own standard of living
'now', but it still doesn't mean that exceptional wealth will be acheived.

Just my thougths

ojm said:

Hindsight gets it right every time.

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Well, i won't go on, but an example is, after losing an exorbidant amount of $$ in the share market last year due to my own stupidity, i came to a cross-roads.

My decision: to stick what i had left into a fixed term deposit account earning <5% interest,

or...

to take the 2nd biggest risk of my life and re-enter the market.

After thinking about it carefully and researching, i decided to take the risk and re-enter the lions cage with greater risk control.

The result? An exponentially larger return on my capital, as opposed to the 4% (on average), i would have received in fixed term interest.

What was going through my head?

"What if i don't?"
"What if i lose more?"
"What if, what if, what if"...

But, i worked out what i was prepared to lose and at what point i would exit the market if it all went against me.

I don't think that what i did was "exceptional". Nowhere near it. As somebody else mentioned, exceptional to me would be doubling my capital in a year or two. However, somebody asked how risks can be taken and my answer is in several ways.

By preparing yourself mentally and working out a plan that incorporates risk and reward. And, setting a bottom line... No pain, no gain, lol. Also, don't take your eye off the ball like i have today.

nunthewiser said:

anyways on a side note

once in a country city there was a nightclub area with no food available in 5 kms........ an opportunity sticking out like dogs nuts ......... stayed like that for 5 years! ....... then some bogan put a humble establishment outside nightclubs and killed the so called pig

same city

taxi plates and car . 150k . weekly take on said car average 3k ........ tax advantages too many too mention .do the maths

same city

same bogan used to sit on his front porch all redeyed and watching the port loading iron ore and building sheds and storage for a lil midwest iron ore co .....he thought wow there doing something here so he went and checked it out . same bogan poured all cash available and more into said unknown lil listed co and waited .......... waited , waited , waited .watched co grow FUNDAMENTALLY and as an actual bizzness

silly bugga had over 50% of his stock portfolio in said co that he had watched grow from a seed

returned 20 bags on the oppies and 12 on the mother stock

moral of story is ...OPEN YA EYES have a look , grow some nuts and give it a go

dont have to spend a million to make one

amen

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Good stuff

skyQuake said:

Buy an OzLotto ticket

1:45 Mil odds to win first division.

$90 Mil prize.

RR 2:1

GOOD TRADE!

Click to expand...

How did it get that large? So large I'd guessed it was probably +ev at that stage. I'm in it .

Frank D said:

There is a difference between large profits and exceptional wealth.

The only way for main street to achieve exceptional wealth is
through 'compounding' via accumulation and investing.

I’m not seeing 'compounding' returns mentioned in this
thread.

If you can compound your returns at least 15% over the next
30-40years, then you’ll achieve exceptional wealth. And that's the trick.


Once again large profits and exceptional wealth are two totally
different concepts.

A portion of Large profits should be moved into an area that has been set aside to acheive compounding growth over the long term.

Click to expand...

This is the critical part in a long term strategy - and the big difference that you get from 'just' having your money in a superfund earning perhaps 4.5% real return (if you are lucky) versus more active share & property investment strategies. With only 1,000 at 15% for 30 years will be $57,575 whilst at 7.5% (assume 3%CPI) only $8,144 ! That is a massive difference!

And 15% is not that hard to achieve. Since I started looking at this 10 years ago I have attained an average of 22% annual growth in income assets (despite the last two years being negative), and 12% increase annually in equity.

tasmart said:

This is the critical part in a long term strategy - and the big difference.... Since I started looking at this 10 years ago I have attained an average of 22% annual growth in income assets (despite the last two years being negative)...

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Nice work!!!

And that's the trick, and that's why I love when bear markets come
around.

It's time to add value stocks at cheaper prices (accumulation), which is a
big difference to 'trading' stocks.

Sometimes traders can't seperate the two, therefore they don't
employ 'wealth creation' via compounding returns over the long term.

Frank D said:

It's time to add value stocks at cheaper prices (accumulation), which is a
big difference to 'trading' stocks.

Sometimes traders can't seperate the two, therefore they don't
employ 'wealth creation' via compounding returns over the long term.

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Could you clarify, as I might have misunderstood. Are you suggesting that a shorterm trader should be making longterm investments? Is his trading not a longterm investment itself, compounding returns?

Take a portion of your profits, say between 10-20% per year and put
aside into a compounding strategy.

For example, buying banking stocks or any stocks that have a decent
div yield which helps increase the return over the long term. You don’t
need the cash for the div, take the extra shares

Then apply long term charts and BUY into major pullbacks each year.
This will help increase the return in the long run, as it allows you to
purchase more. And keep repeating the process every year.

Just make sure you’re not buying the ‘tops’ of the market, which is
easy to do if you don’t understand the Primary trends of the market.

It will take about 13 years for the strategy to kick into gear, but you’ll be
on your way after that.

That’s just an example for a long term compounding strategy, by using
a portion of trading profits or savings and investing and accumulating for
the long term.

For main street, the trick is accumulation, & not trading.

Mr J said:

Are you suggesting that a shorterm trader should be making longterm investments? Is his trading not a longterm investment itself, compounding returns?

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No, that's income, which is based on standard of living.

What is that trader doing with the income from trading?

Investing it, or spending the proceeds on cheap wine and expensive women, or expensive women and cheap wine?

That trader hasn't set him or herself up with a compounding strategy, just
a lot of hangovers.

That is good advice for some, but it's not something I would consider for myself at this point in time. In theory it sounds good - use unused portions of capital for capture some nice longterm growth. In reality - and I'm only speaking for myself - those long-term profits will be insignificant to the gains of my short-term trading, and time spent on the long-term strategy would be better spent (for me) on more short-term trading.

I also find long-term positions extremely inefficient, as there's no reason to be holding a stock during a pullback. If I'm going to be selling those pullbacks, then it becomes a medium-term strategy. I could argue the same about that medium-term strategy since I'm already in the markets every day; and now I'm back to short-term trading.

Compounding isn't an issue, as I'll compound no matter what timeframe I trade.

For main street, the trick is accumulation, & not trading.

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Main Street equals the public? Possibly. I have no idea whether they would have been better off trying to ride booms and sell busts compared to just buy and hold. Trading is obviously the trick for traders though.

No, that's income, which is based on standard of living.

What is that trader doing with the income from trading?

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You reinvest by not withdrawing all trading profits. The way for traders to get rich is to try and minimise the profits they withdraw (allowing for massive compounding), or to trade OPM (other people's money). No-one ever said that a trader has to spend all of their profit. I intend only to spend a fraction.

The thread reads:- exceptional Wealth accumulation.

One of the only proven methods of wealth creation is via
compounding returns.

$12,000 invested annually @ 11% compounding by 30th year is over
$ 2 million

by the 30th year it’s 4.5 mill

by the 40th year it’s 7.8 mill

7.8mill returning 6% yield is over 450k per year for doing nothing, but
simply starting a compounding strategy when you had the chance.

The sooner you start the better.

Mr J said:

those long-term profits will be insignificant to the gains of my short-term trading, and time spent on the long-term strategy would be better spent (for me) on more short-term trading.

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I don't think so!


Question Mr J:- How long have you been trading?

nunthewiser said:

anyways on a side note

once in a country city there was a nightclub area with no food available in 5 kms........ an opportunity sticking out like dogs nuts ......... stayed like that for 5 years! ....... then some bogan put a humble establishment outside nightclubs and killed the so called pig

same city

taxi plates and car . 150k . weekly take on said car average 3k ........ tax advantages too many too mention .do the maths

same city

same bogan used to sit on his front porch all redeyed and watching the port loading iron ore and building sheds and storage for a lil midwest iron ore co .....he thought wow there doing something here so he went and checked it out . same bogan poured all cash available and more into said unknown lil listed co and waited .......... waited , waited , waited .watched co grow FUNDAMENTALLY and as an actual bizzness

silly bugga had over 50% of his stock portfolio in said co that he had watched grow from a seed

returned 20 bags on the oppies and 12 on the mother stock

moral of story is ...OPEN YA EYES have a look , grow some nuts and give it a go

dont have to spend a million to make one

amen

Click to expand...

Hey Nun! that bogan, watching the Iron Ore get loaded was you wasn't it?!

Question Mr J:- How long have you been trading?

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Not long, but this is a mathematical debate, not one that requires an extensive experience of trading.

One of the only proven methods of wealth creation is via
compounding returns.

Click to expand...

Yes, and like I said I compound every day with my trading capital. I'm not sure why you think this isn't possible. It's the same as what is done with investing, just on a far shorter timescale.

I don't think so!

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That 11%pa might take little of my time, but so would just one more short-term trade per day. Over the course of the year, those extra shorterm trades would be worth more than 11%, and with far less exposure. I'd prefer to turn 300% into 330% than 300% with an extra 11% from the investment portfolio.

What happens if main street bought Citi or Lehman?

What about finding a great money manager with tight risk controls (i.e. hedge fund)?

My take of the thread was to find exceptional trades to create wealth, not a longer-term plan. But now I see I may have missed the point of the topic.

P.S Nice work Nun ya bogan!

As highlighted previously in this thread, there have been some spectacular rises in a number of different markets for a varitey of reasons. If you had the knowledge/foresight that these markets could grow to start a large state, you would be happy to invest while keeping Risk at a level you are happy with.

In the future, we will be moving from Technology Age, to the BioTechnology Age. This will provide a variety of opportunities for businesses, as well as investors in those businesses.

Some areas I think will boom in the future are:
- Nanotechnology (both in manufacturing, technology and health)
- Space Related businesses (Tourism, Mining)

The hard part is identifying which companies (some which may not exist yet) will be able to benefit, and when. We have already seen Virgin Branch into this area, Universitites doing lots of research around it, so it will happen, I just don't know when it will really take off.

MRC & Co said:

What happens if main street bought Citi or Lehman?

What about finding a great money manager with tight risk controls (i.e. hedge fund)?

My take of the thread was to find exceptional trades to create wealth, not a longer-term plan. But now I see I may have missed the point of the topic.

P.S Nice work Nun ya bogan!

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its got nothing to do with boganism but must admit we are very special

its all to do with ones outlook i spose . opportunities EVERYWHERE one looks if one keeps there eyes open

currently here in geraldton , just off top of head

needed ....... limousine service

more short term accomodation

more taxis

seaweed recycling/cleanups(into fertilizer)

quad bike hire

jet ski hire

watersports galore



man and thats without thinking to hard

have a look around where YOU live .....opportunities abound if one can see past what they dont know

and dont say .yeah yeah thats already done here ........... nothing left .blah blah blah .......

make your own idea ......

could always become a rock star if all else fails

nunthewiser said:

its got nothing to do with boganism but must admit we are very special

its all to do with ones outlook i spose . opportunities EVERYWHERE one looks if one keeps there eyes open

currently here in geraldton , just off top of head

needed ....... limousine service

more short term accomodation

more taxis

seaweed recycling/cleanups(into fertilizer)

quad bike hire

jet ski hire

watersports galore



man and thats without thinking to hard

have a look around where YOU live .....opportunities abound if one can see past what they dont know

and dont say .yeah yeah thats already done here ........... nothing left .blah blah blah .......

make your own idea ......

Click to expand...

And a flipping pizza joint on the north side.

It used to piss me off to drive all the way from Wandina to (I can't remember the suburb, but across the road from Bunnings) to wait 45 minutes get a lousy pizza...