Risk and Wealth - Acedia Way

~insert some kind of quote here talking about money lolz~

My SO and I had a thought experiment
we were wondering, what do the wealthiest people do with their money?
what do they spend it on?
we realized, they’re using all that money to make more money
if they didn’t, they wouldn’t be so rich
so based on that premise:
1) if you are spending your money away, you’re a fool
2) if you’re saving your money away (including in “tax shelters” and “retirement”), you’re a lesser fool
3) if you are acquiring things that can generate more money (assets), then you can actually get somewhere
now based on that premise:
having your money in an SPY fund is not “wrong”, you just have a (variable) ceiling on your returns = roughly 7% or whatever
some people are so risk adverse they can’t stand that ceiling being variable, so they invest in even stabler / more static / known quantities – CD’s, bonds, savings account, gold, whatever dumb bullshit
if you are not one of those people and you are OK with the variance, now it becomes is 7% enough to do anything for you?
it can be, let’s say you are starting with 1m in funds, you put that into SPY, at 5% YOY, you will have $2,653,297 after 20 years. That translates to $82,664 annually. if that is wealthy to you, then congrats! you’ve made it
however, 1) i do not have $1m currently and 2) 82,664 salary is not enough money for me
let’s break those down separately
going from $0 to $1m -> if you think about this strategically, without your personal / emotional bias, how would you accomplish this?
would you really take your $1000 and put it into a 5% interest vehicle? no (it would be $2000 after 20 years).
would you really take your $10,000 and put it into a 5% interest vehicle? no (it would be $20,00 after 20 years).
would you really take your $500,000 and put it into a 5% interest vehicle? even then, no, it would take another 20 YEARS TO GET TO $1,000,000.
so now that that’s clear to you, we’re talking about how quickly we can make $1,000,000, starting from say, $100,000
the reason real estate is a by-default profitable vehicle is because you can purchase a $500,000 home with $100,000 (or even $17,500 with a 3.5 FHA loan). you can now 1) rent out a property that is WORTH 5x (or more) how much cash you put in) and 2) keep all the gains on that house’s value as it appreciates, despite only “paying” for 20% of it. so if your house goes from $500,000 to $700,000 in value, that $200,000 is yours despite the fact that you only put in $100,000. You just 3x’ed your money
now even in that pretense, real estate being a relatively stable known investment (despite what people may have you believe), there is still some kind of ceiling on your returns
you cannot expect a house to double in value in a year, or bring in some disproportionate amount of rent (>$10k), so you’re still waiting for YEARS for your return to come in
again, some people are OK with that now, they are stopping at their “risk-appetite”, and being satisfied with those returns (let’s say double your money after 5-10 years)
you can see how someone can build a portfolio of 10 properties and feel comfortable in that, now you have that 10 x $100,000 investments that will double in 5-10 years.
now let’s say even that’s not good enough, you don’t have 10 years to wait around for your money to double, you want to double in <5 years, maybe 2-3
this is the region where your dollars might not be enough on their own! maybe this means you need to own a restaurant, a laundromat. maybe you need to perform so well at work that they double your pay (in what world?) maybe you have to start selling your body, pics of your body, drawings of pics of your body, etc etc etc
let’s say you don’t want to involve all of that, you want to use just your money to make you money. what are your options now?
framed another way, where can you get cash returns in the magnitude of multiples? legally, it’s betting in general (casino, lottery), trading in general, art value appreciation, wine value appreciation
to reduce it down to even further: where are there examples in the real world where value can be arbitrarily assigned?
digital (AKA new) things will lend itself to this. physical things have been decided upon over years, decades, millennia
the value of a plot of land has increased, sure, but the multiple is not arbitrary – it could never be allowed to double in value quickly because there are so many eyes watching it
so many people have kept the value of land at a certain price for so long, it is near impossible to change everyone’s mind about it
however, a new meme? a new website? a new product, digital or otherwise? can be valued at any arbitrary level, as long as the audience sees it that way
ok i got too far along in that vein, but the idea is that i need returns TODAY / THIS YEAR. not 5 years from now.
so, i need to use the appropriate financial tools to accomplish that goal. i will not be using gold, CD’s, bonds, index funds, real estate for this purpose.
when people are talking about diversify, there’s diversifying within the stratum of the vehicle, and then there’s diversifying among vehicles
so it’s perfectly valid (and potentially smart) to have 5% gold, 5% bonds, 5% CDs, 5% foreign currency, 5% SPY, 5% real estate
that would be diversifying across risk appetites
however, it’s wrong to apply those tools to this goal, which is immediate term wealth
which brings me to my 2nd point
82k a year is not enough for me
i need, at minimum, 100k raw cash that i can use, this year, and every year, to shoot shots at making $1,000,000

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