Greatest Hits: Volume 14

Greatest Hits

Happy Saturday everyone!

I’ll be the first one to admit that Saturday mornings are pretty enjoyable in the BoF household.

A big family breakfast, followed by a lot of horsing around with the kids, followed by taking said kids to various sports activities.

Afterwards, we usually head down to the local farmers’ market and treat ourselves to some tasty burgers in the park.

Checking our investment accounts isn’t on the agenda – or top of mind.

That being said, if I did happen to check my ISA one Saturday morning, I probably wouldn’t be too upset to find $5bn (yep, you read that right) just casually sloshing around there.

This is exactly the high-quality problem Peter Thiel is facing at the moment.

The account in question is called a Roth IRA, and it is pretty similar to an ISA here in the UK.

It seems that back in the 90s, Pete funded his Roth IRA with just $2k – and used the proceeds to buy a meaningful stake in PayPal (which he co-founded).

When eBay acquired PayPal a few years later, Pete found himself with about $28m in his Roth IRA.

However, instead of withdrawing from that mean piggy bank and living happily ever after, he seems to have used some of the money to buy a stake in another unlisted startup.

To be precise – he spent $500k and got himself a meaningful stake in Facebook.

Which is exactly how we get to $5bn today.

Now clearly, you can argue that tax-deferred vehicles weren’t designed to be used for that sort of thing.

Then again, how would you feel if you were in his shoes?

Nothing stops us from using our hard-earned cash to make risky investment bets. Nothing should stop us from enjoying the fruits of those investments either.

That being said, I suspect the rules around tax-deferred vehicles may change over time.

At first, the caps will be very high. But once you’ve got the concept of a cap in place, it’s very easy to tighten the screws.

One would only hope that the rules are not changed retroactively. In the meantime, let’s make sure we all invest as the billionaires do.

We might not always have access to the hottest investments, but we all have access to tax-efficient investment vehicles.

And now, let’s jump into this week’s collection of posts on building, retaining, and enjoying your wealth.

Have a wonderful weekend all!

From Yours Truly

The Pitfalls of Experience

The Fastest Way To Save £100k

And finally, the controversial one:

Is It Time To Pay Attention To Crypto?

Building Wealth

Risk management is an integral part of building wealth.

Sadly, it is also the toughest one.

Idiots, Maniacs, And The Complexities Of Risk – A Wealth Of Common Sense

Harder Than It Looks, Not As Fun As It Seems – Morgan Housel

It’s Too Late To Get Into Buy To Let – Monevator

Earlier this week, Credit Suisse published its annual 2021 Global Wealth Report.

It makes for interesting reading.

Those who know their maths will find the mean / median graphs on p12 quite insightful.

But the charts that fascinate me the most are the ones below:

Having a net worth of $1m+ puts you squarely into the top 1.1% of people in the world.

With 56m members, an exclusive club it isn’t, as quite a few readers of this blog can attest.

We do, however, get into rarefied territory rather quickly, especially after we pass the $5m mark:

There are about 7m individuals with that kind of net worth in the world. That’s about 0.001% of the total population.

Now that is an exclusive club indeed.  And if you are a member (even an entry-level one), you can definitely retire early.

Crypto Mini-Special

While I’m not about to turn this blog into crypto central, it seems I am not the only one starting to pay attention to crypto.

JL Collins, one of the personal finance heavyweights out there, featured a guest blogger on the same topic recently.

The comments are just as insightful as the post, with responses that ranging from very technical to highly emotional.

The Top 9 (Bad) Arguments Against Bitcoin – JL Collins

There are some people in the game. Then there are others, way ahead of the game.

Suffice it to say that the below article was first published in NY Times seven years ago.

Sadly, the original link no longer works but I managed to locate a pdf version:

Why Bitcoin Matters – Marc Andreessen (see below for more background on Marc)

Incidentally, it seems that many of you would agree, having voted with your feet a few years later:

About 2.3m Britons Hold Cryptocurrencies Despite Warnings Of Risk – The Guardian

New Blogger Feature

Over the past few months, I’ve found myself increasingly drawn to posts by Incognito Money Scribe.

The author describes his blog as one that “explores the mystery and meaning of money”.

In other words, less about the numbers, more about the psychology – with a refreshing take on things.

“Follow Your Passion” Is Good Financial Advice – Incognito Money Scribe

Lifestyle Design

This is probably one of the most poignant reads on this week’s list.

I’m successful because I don’t yearn for more.

I have my wife and my boys and my freedom.

I’m good.

I have a unique appreciation of what I have because I already lost everything when my mother died.

Now I have everything I need and everything I want.

Blink – Michael Batnick

And another good one on How To Remember You Are Alive by Raptitude

All Around

If you know a thing or two about technology, you know that Marc Andreessen is a force to be reckoned with.

For those of you who don’t, you may want to read this.

Marc’s track record as an entrepreneur, executive, investor, and visionary cannot be understimated.

Here’s an optimistic view on how good we have it coming out of the pandemic – and the opportunities ahead:

Technology Saves The World – Marc Andreessen

Americans Are Quitting Their Jobs In Droves – The Economist

Recommended Books

As always, let’s finish off with some top-notch books on life, money, and happiness:

The Happiness Curve: Why Life Gets Better After Midlife – Jonathan Rauch

Zero to One: Notes On Startups, Or How To Build The Future – Peter Thiel (that’s right, the $5bn guy)

And finally, the best £1.49 you will ever spend:

The Almanack Of Naval Ravikant: A Guide To Wealth And Happiness – Eric Jorgenson

Happy weekend all!

 

P.S: Attention New Bloggers:

if you are a personal finance blogger who hasn’t yet been featured on Greatest Hits, I would like to hear from you.

Please send an email to bankeronfire at gmail dot com with a blog post you would like to submit for consideration.

The key criteria for inclusion are as follows:

(i) Content that will be interesting or beneficial to the readers of this blog (I hope you will forgive me for reserving judgment on this one)

(ii) Your blog must be at least 6 months old, with regular posts. Too many bloggers flame out early, and I don’t want the readers here to follow a bunch of dead links.

I look forward to hearing from you.

 

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Banker On FIRE is a London-based M&A (mergers and acquisitions) investment banker.  I am passionate about capital markets, behavioural economics, financial independence and living the best life possible.

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6 Comments

  1. That wealth report was interesting. I also saw one this week that said (I think) there are 2.5m people with a networth above a million dollars in the UK (that’s dollars nite not £) . That really didn’t seem that many out of 70m people considering the cost of houses in the UK. Is there really that many people with barely any equity?

    • I think that makes sense actually?

      Few people have their houses completely paid off and for many, house equity is the biggest component of net worth, with some pensions / ISAs sprinkled on top.

      So a £1m house that’s 50% paid off and a few hundred k in investments won’t get folks into millionaire territory just yet.

  2. Why Bitcoin Matters – Marc Anderson

    It was written in 2014 and 7 years later Bitcoin is in the same state, you could write that same article today word for word.

    Then you could argue that many of the use cases were based on assumptions of status quo, low fees assumes there are no exit fees or that existing fees aren’t reduced in response.

    I’m a technologist, I love this stuff but I can’t ignore the evidence and see the weaknesses in arguments.

    • Don’t disagree on Bitcoin, but then the Bitcoin blockchain was only designed to do one thing – Bitcoin.

      I believe that Bitcoin’s greatest benefit is that it has given rise to many other blockchains, many of which will be far more interesting / lucrative than the original.

  3. I wonder how it would feel just having $5 billion in my tax advantaged accounts. One day I wake up and BAM. There’s this guy who thought he was a trillionaire because Coinbase made a mistake or something. Except Peter Thiel is actually a legit billionaire haha.

    Maybe I should be taking my Roth IRA more seriously…

    • Perhaps! Especially given that 401(k) plans aren’t nearly as generous as workplace pensions over here in the UK (which makes pensions the best default vehicle for saving unless you want to retire early)

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