I made my first big haul in the early 1990s, buying beaten-down junk bonds.
I was 19, and before the year was out, my junk bond play would make me over $250,000… That’s about $500,000 in today’s money. The year before, I had made just $8,000.
That began a wild ride of moneymaking that had me making $54,000 in one day by the time I was 22.
When the mid-’90s rolled around, I made money hand-over-fist in technology stocks. I was young and making a fortune while living my American Dream. I would love to tell you I embraced my success with calm and sober-minded maturity.
I didn’t. I let the money make me an arrogant jackass.
And by late 1998, I’d lost it all. You see, I made a terrible mistake…
I took massive stakes instead of taking small bets on high-risk, high-reward ideas.
By the time the 1997 Asian financial crisis rolled around, I’d built up a substantial short position. A short position is when you bet on a stock or an index going lower.
I was 100% correct on my bearish call. The market tanked on the Asian crisis. But I stuck around too long and got too greedy.
And when the market went against me, I made bigger and riskier bets against the market. I lost all perspective and invested for my ego, not my bank account.
Within three weeks, I lost everything I’d made and more. I went from wealthy to poor in less than a month. And ultimately, I was compelled to file for personal bankruptcy.
It was a stunning reversal. Here I was, the golden boy who finally got his comeuppance.
My American Dream turned into a nightmare. I lost my career, my wife, my family, my self-respect, and for a brief moment, I even lost my will to live. It was a dark time in my life.
There were many lessons, but my biggest investment lesson was I could not build all my investments solely on high-risk, high-reward plays.
The next thing I learned was I had to build multiple streams of safe income, so I’d always have a pool of self-sustaining assets from which to build wealth.
Here’s how that helped me get rich again…
After my bankruptcy, I started rebuilding my net worth. I worked like the devil was on my back. I took every available penny and invested it into safe income-generating investments.
I then moved the income generated from my safe investments into well-researched high-risk, high-reward plays. This approach magnified my wealth very quickly.
The best part was getting wealthier without putting my current lifestyle at risk.
I call this asymmetric risk investing. Think of it this way: Symmetrical risk is where you risk $41 to make $1. Asymmetric risk is where you risk $1 to make $100.
This type of investing allows you to take a small amount of money and greatly amplify it.
If you position-size right, the potential gain far outweighs the risk. A recent example of this is when I made $75,000 from a $700 investment back in 2017. Another investment helped me make as much as $1.2 million from just $1,000.
The key lesson to remember is that you can’t build your whole portfolio on ideas like this because those types of investments can go to zero from time to time.
If that were to happen now, I wouldn’t sweat it because I only use the money generated from my safe investments.
That means if I blow all my safe income this year on risky asymmetric bets, 100% of that money gets replenished next year from the dividends and interest from my safe money.
This is the key to getting really rich, really quickly, without ever blowing yourself up.
Here’s the approach I took…
Here’s How to Start Building Your Wealth Now
To truly build long-lasting wealth, you need to generate multiple, reliable streams of income – so you can fund your higher-paying, riskier strategies without risking your financial health.
Here are the steps I recommend you take:
Focus on increasing your ability to earn more money by improving your work ethic and work skills.
Choose to live well below your means so you can save over 60% of your monthly income.
Put no more than 5% (if you’re below 30, you can bump this up to as much as 20%) of your liquid net worth into asymmetric investments.
Put the rest of your money into conservative, income-producing investments and strategies.
Reinvest a portion of your safe income back into well-researched asymmetric investments.
Repeat until you’re rich.
More Income = Faster Wealth
It may seem paradoxical. But the more “safe” income you build, the more “free” income you’ll have to speculate on high-risk, high-reward plays that can change your life right now, not 20 years from now.
It’s never too early or too late to begin building your wealth. The sands of time will continue to slip away, regardless of your actions.
So why not make the choice today to do something different… Put yourself on the road to happiness and security in 2022 and live the dream life you want for yourself and your family.
Let the Game Come to You!
Editor, Palm Beach Daily