So you made some money, great! Now comes the tough part though: not losing it! What should we do with all our hard earned $$ so we keep them and maybe even make more and/or generate some “passive income”. What seems like a simple question actually turns out to be tricky. What follows is my personal opinion. I don’t claim to have the game solved, but I hope I can give you some ideas on top of which you can build your research and further education on.
Start with yourself before you even look into outside options. You won’t achieve as high ROIs in the markets. Invest in your health: Don’t save money on your nutrition, do some sports, work on your mindset. Invest in your home: Increase energy efficiency (state of the art windows, efficient heating system), install LEDs, look into solar power systems. Invest in your well being: Do that within reason of course, but you will not be able to achieve peak performance without a good working environment. Invest in your education and embrace lifelong learning: Attend a school or university, read books (!), join online courses or workshops, you name it. You will simply not be able to achieve those multiples anywhere else.
Invest in what you are good at and what you deeply understand. If you made significant money in e.g. affiliate marketing, chances are you probably know your craft. Expand your business and scale that s**t up! You have probably read multiple times that “you need to diversify your investment portfolio”. First, over time that will happen eventually as you explore more and more options down the road and you will want to avoid having all your risks/eggs in one single basket. Second, I’ll borrow Warren’s view on that issue: “Diversification is protection against ignorance. It makes little sense if you know what you are doing.” According to Buffett you are better off zooming in on those few niches where you have an information advantage and focusing your efforts instead of establishing a portfolio across a broad array of sectors.
It is a difficult balancing act to do only what you know well and tying all risks vs starting to diversify early on. When your main business is a venturous endeavour with risks outside your control (political, market, legal), I think it cannot hurt to put a significant part in low risk projects to keep a balance. You probably heard stories about those who put all their resources into one project and became filthy rich. Did you hear about all the others who did too but did not succeed? When in doubt, I personally let my entrepreneurial gene decide and err on the side of taking calculated risks.
Look into asset classes and niches thereof that fit your personality and risk tolerance. Fundamentally we distinguish between three main ones: bond market (fixed income), stock market (equities) and alternatives (commodities, private equity, real estate). Given low interest rates, I assume our audience will not be too thrilled about low yield bonds. For high yield junk bonds we probably don’t understand them well enough and cannot assess their risks properly (the same applies to commodities).
Stock picking should only be done by those who have a fundamental idea about reading and analysing annual statements and want to take enough time to formulate a clear strategy. For those who want to perform like the market, a low cost index fund can be highly recommended (book review on that topic to come). Whatever you do, just don’t touch your securities too often as fees and taxes will hurt your bottom line a lot. Don’t act as a trader, act as a long-term investor instead.
Real estate or investments in privately held companies can be found under the roof of the alternatives. We will cover both options in later blog posts in more depth.
Let me close this post with a quote by Benjamin Graham, author of the classic The Intelligent Investor: “Investment is most intelligent when it is most businesslike.”
My one-line pitch is: I am a business addict. In my early 20s, I graduated in Business Administration with a major in Entrepreneurship. Recently, now in my early 30s, I successfully completed a program on Venture Capital and Private Equity.
While formal education certainly does not hurt, I do not think that it is essential for entrepreneurial success. I have a strong opinion on gaining experience in projects or companies by having "own skin in the game". There are just so many skills a business school or university cannot teach us.
From 2008 to 2013 I enjoyed a professional career in playing some of the world’s most popular card games. Yes, these are skill games and you can even make a few $$.
While playing millions of poker hands (mostly online, but towards the end also offline in casinos) I worked as a content video producer and coach for the biggest online poker school. Beyond that I also offered private coachings to players around the world. My blog posts and strategy videos had > 1,000,000 views from platform members. Even though I quit contributing to the blog in 2013 it still is #1 in terms of all-time views on the English site.
At the end of my career I wrote a book (The Education of a Modern Poker Player) with JB, who is a math professor in Nottingham, UK, and Manu, who - fast forward three years - is now the BO$$ of Adefy. As JB tricked me into writing a book with him, I tricked Manu into moving to Vienna in order to join forces with us and work on our united mission.
Things are moving at an enormous pace and we are living in exciting times. My way of experiencing and influencing our world is mainly through my entrepreneurial lenses. Especially since 2013 I dived into full-time business mode and I don't see that changing anytime soon. For my passive stakes I try to mostly invest in companies that generate a positive and sustainable impact, mostly in the energy industry (consulting, renewables, energy efficiency). While I might be below average in many skills, I consider mindset, adaptability, competitiveness and work ethics my biggest strengths.
Interested in: Poker. Venture Capital and Private Equity. Renewables. Energy efficiency. E-mobility. Performance Marketing. Finance. Management. Investing.
Hobbies: Golf. Tennis. Badminton. Reading. Racing. Snowboarding.
Connect with me: