As we head into the New Year, I want to reflect on an episode that changed the way I think about building wealth…
In the early 1990s, I made my first big haul buying beaten-down junk bonds. And in the mid-1990s, I started making money hand-over-fist in technology stocks. I was making a fortune.
But by late 1998, I’d lost everything. I got wiped out in the markets. And it wasn’t just my money that was gone.
My self-esteem was destroyed. I was so lost, it seemed reasonable for me to take my own life and let my family collect on the insurance policy.
Standing on the edge of the Metro-North platform in Grand Central Station, I made the single-best decision of my life – to not end it.
I don’t know if it was courage or cowardice that backed me off the edge of that platform.
Whatever it was, I sure am grateful for it.
Friends, when you lose a lifetime of hard-earned wealth and become broke… It mentally beats you down.
I couldn’t even work in my industry anymore. In fact, I started working in a restaurant I used to frequent on Wall Street. I had just completely lost my way.
But I learned some valuable lessons going through that dark period.
What caused me to go bankrupt wasn’t my ideas. In fact, they were usually very good and ended up working out.
Instead, it was the enormous amount of leverage I was using and a complete disregard for position-sizing.
You see, when I was wrong – even temporarily wrong – I had so much leverage, it just wiped me out.
Long story short, after a couple of years, I figured out where I had gone wrong and returned to Wall Street.
Armed with a newfound respect for position-sizing and risk management, I remade the fortune I lost… and went on to become far wealthier than before.
But there’s another lesson I learned from that experience. I’ll share it with you today…
How to Build a Self-Reinforcing Money Machine
The first lesson I took from my bankruptcy was to eliminate use of leverage. The second lesson was to focus the bulk of my portfolio positions in safe, income-producing assets.
In the past, my whole portfolio was made up of high-risk assets. I realized that wasn’t a sustainable approach to growing money. But I didn’t want to shun high-risk assets entirely.
This led me to the biggest breakthrough of my career: asymmetric investing.
Let me explain…
Asymmetric investing is a strategy in which you invest tiny grubstakes in ideas with explosive potential.
So let’s say you have a traditional portfolio mix of bonds, stocks, real estate, gold, etc.
You take a small percentage of your overall portfolio (1−5%) and put it in these explosive upside ideas.
And I’m not talking about ideas that double, triple, or even quadruple your money. I’m talking ideas with the potential to return 10,000%, 50,000%, and sometimes 100,000%.
These are binary bets. In other words, they’re going to pay off at 1,000 to 1… 50,000 to 1… or even 100,000 to 1… or go to zero.
As a younger man, I’d see situations like these, and I’d use leverage to take massive positions in them. So even if most of my ideas were right – and they were – if one of these ideas went wrong, it blew up my entire portfolio.
So instead, I carved off 5% of my portfolio and earmarked that money for asymmetric bets. I then started using uniform position sizes across a portfolio of asymmetric candidates.
For instance, instead of putting $10,000 into one asymmetric bet, I’d put $1,000 into 10 of them.
Of course, some will do nothing, and some will go to zero. But what I discovered is a few went up so much in value, they ended up eclipsing the entire value of all my other safe assets.
In some instances, I was doubling my net worth while only risking 2–5% of my portfolio. That’s the essence of an asymmetric bet.
I didn’t stop there, either. I took the strategy a step further.
I realized I could use my safe assets to generate income, and then take that income and buy more asymmetric-risk assets – without putting my current lifestyle at risk.
This concept just blew my mind… It allowed me to safely take larger positions in asymmetric bets without putting my core wealth at risk.
I had, in effect, created a self-funding moneymaking machine that has exploded my net worth to levels I’d never seen before.
And I’ve done all of this while taking a fraction of the risk I used to routinely take.
By creating a safe income stream from your core assets… You can divert more passive income into your asymmetric-risk investments without hurting yourself.
This has been my wealth-building secret.
The Next Big Asymmetric Investment
The biggest wealth-building, asymmetric investment of my life has been in cryptocurrencies.
Since 2016, I’ve recommended 27 crypto picks across my publications that have jumped by more than 1,000%. And I’ve given my readers multiple chances to turn a small stake into six- and even seven-figure payouts.
That’s the power of investing in cryptocurrencies. They give you the opportunity to radically change your lifestyle without putting your current lifestyle at risk.
If you’re looking for smaller cryptos with potentially high upside, I’ve found a project that’s enabling a major trend: the rollout of a central bank digital currency, or CBDC.
You see, the Federal Reserve recently launched a program that could lead to a mandatory recall on the U.S. dollar.
This program could replace the dollar with a new digital version that will be radically different from what you have in your bank account right now.
I put together a briefing to explain what this new digital dollar regime means for you and your money.
You can watch it for free right here.
Friends, the beauty of this idea is you don’t have to risk a lot to make a lot. So it’s another avenue to massively grow a small amount of capital that could end up eclipsing your entire net worth.
Let the Game Come to You!
Big T