A few people have asked why I decided to begin this blog. To be honest, I did it simply to help the people close to me. In speaking with friends and family, I’ve noticed that many do not have the time to research the stock market, were not taught financial management, or have preconceived notions about the difficulty of investing their money. My goal is to simply explain these concepts in a way that makes it easy to understand and gets rid of any fear associated with investing. If this gets to people beyond my immediate circle, that’s fantastic; I would love if everyone in the world understood how money works. But at the bare minimum, if I can help my friends and family, then the time it takes to write these blogs is well worth it. So, if you have questions or topics you would like to learn about, please feel free reach out to me. Maybe I’ll even write a blog about it?
I would also like to point out that the people you are seeing on Instagram, YouTube and TikTok lately, who think they are day traders because they made a little bit of money, are not who you should be listening to. They joined Wallstreetbets a month ago and think they have the market all figured out. They tell you what moves they are making and how much money they made that day. Some take is so far as to try and get you to buy their trading courses and join their investment clubs with catchy titles like “I made a million dollars, you can too”. Newsflash - everyone makes money in a bull market. Second newsflash - if someone is telling you about a “hot stock”, it’s already too late.
Most of these people don’t know the first thing about investing, let alone trading. The second there is a downturn they will be broke and go back into hiding. They are using the market hype and capitalizing on people wanting to get rich quick. I mean, who doesn’t wish they could get rich overnight, quit their job and buy a mansion and a lambo? The reality is, and I hate to break it to you, you are not going to get rich quick. You need patience. You need to learn the basics. You need someone to share their knowledge and experiences with you. If you try and get rich quick, you will go broke. Ask the people who were involved in the Dot Com bubble in 1999-2000, the housing bubble in 2007-2008, the crypto bubble in 2017. They lost their money listening to the hype and the grifters. Don’t fall for the trap. Learn the right way. And more importantly, don’t pay for financial education courses. There’s plenty of free resources online. Including my blogs!
Seriously, that’s why my blogs are absolutely free. I don’t want anything in return for sharing what I’ve learned. The more people know, the more power we have, and the better off we will all be. It would be irresponsible for me to not help my friends and family, or anyone else wanting to learn.
With that being said, I wanted to give you an idea of my knowledge base, I wanted to share my background and investing experience.
Those that know me know that I am an Engineer by trade. I have a degree in mechanical engineering and am currently the Senior Engineering Manager for a large commercial building owner in New York City, personally overseeing a portfolio of 12 properties. Yes I know, commercial buildings in NYC, aren’t you worried? Not really. The company is smart, they will figure out how to survive and take advantage of this situation. I’m a good employee and I have plenty of work right now, so I hope to be part of their bigger picture. But I understand that I am just a number on a piece of paper at the end of the day. They can lay me off tomorrow if it makes their bottom line look better. Any company can, really. So it’s not something I stress over. Especially since I set myself up with a nest egg and investments to fall back on.
That leads me to my investing career; I have been investing since 2008 when I began working for an Engineering firm. I started as an intern and after the internship was complete, I was hired full time. Part of the full time package was a 401k, or retirement plan, where the company would match my investment. Initially, like all 20 year olds, I didn’t want any more money to be taken out of my check. I mean, taxes were already taking 30%, and I wanted as much money as I could get. You see, up until that point, I only knew cash. I had four jobs prior to this internship and I was always paid in cash. And I was taught to save, so half that pay always went directly into a savings account. Therefore, getting more money in my check meant I could save more. At least that was my thinking, a know it all 20 year old.
Luckily, my mother sat me down and explained that the employer match was like receiving free money from the company. I may not see it in my check today, but I would certainly be thankful I did it in the long run. Let’s do some quick math:
Say I made $1,200 before taxes. Assuming a 25% tax rate, that left me with $900 if I didn’t opt into the 401k. Very good money for a 20 year old, no doubt. But there was no money going towards retirement, only into a savings account with little to zero interest. However, if I opted into the 401k, the money goes into the retirement account pre-tax and the employer would match it dollar for dollar at no cost to me. Using the same $1,200 example and a 5% 401k contribution, or $60, that leaves us with $1,140 for the check. Again, assuming the 25% tax rate, I would be left with $855. So only a difference of $45 and still great money for a 20 year old. But here’s the kicker; Since the employer is matching my $60 contribution, there was actually $120 total going into my 401k. It was like the employer actually paying me $1,260.
So, at the end of one year, I could either have an additional $2,340 in my savings account earning 0% interest, or $6,240 in a 401k earning around 8% interest. The choice was obvious, but if I didn’t have someone to show me this, I would have definitely taken the cash up front. Meaning I wouldn't taken advantage of free money and I wouldn't have started my retirement fund for at least a few years. And those years would have had a great affect on my money’s ability to compound over the long term. I was so fortunate to have someone enlighten me, and from that point on, I looked at money completely different.
Now to be honest, the first few years, I didn’t really pay attention to the market. I just knew I was maxing out my 401k contribution and taking advantage of my pre-tax money. It was 2008-2009, so I knew we were in a recession, but I didn’t truly understand it at the time. I would hear the older guys in the office talking about their retirement accounts and how they lost 50% of their money due to the market. Which meant they couldn’t retire yet. It was mind boggling to me to think that their retirement hinged on the stock market, but I had forty five years to go so I just wasn’t interested.
That all changed in 2011. I was working on a project in downtown NYC and there was a protest in Zuccotti Park called Occupy Wall Street. It lasted over a month with people camping out in this park that was just a few blocks away from my project. At first, just like my 401k, I paid no attention. Then, after the protest going on for a week or two, I began hearing those same guys who were complaining about not being able to retire, calling these kids lazy and entitled. It really made me think. These protestors were there to bring attention to the wall street elites who crashed the markets and caused a recession, but weren’t being held liable. Yet the guys in my office, who were directly affected by the actions of these wall street execs, weren’t mad at the 1%, they were mad at the people protesting. It was surreal to see middle class and the poor fighting, while the rich laughed their way to the bank. We should have all been on the same side, but they were conditioned to hate the poor instead of the rich.
This changed my perspective on life in general, but for the sake of this blog, it made me pay attention to the financial world. I began researching the cause of the housing crash and market collapse of 2008. I read books by well known investors. I watched financial movies and documentaries. And most important, I began paying attention to the economy, the markets and more personally, my own investments. There was no way I was going to let wall street control my fate.
In 2012, I joined a union. The benefits were unbelievable. Aside from the medical and pension, for every hour worked, the employer would pay a set hourly rate into an annuity, essentially another form of retirement account. The annuity contribution equated to approximately 10% of my wages, but unlike the 401k, zero dollars came out of my paycheck. It was all paid for by the employer. As a matter of fact, the total benefits equated to additional 45% on top of my pay. Zero dollars out of my check. So, for all you anti-union knuckleheads, try finding any non union job where you don’t pay money out of your check towards your benefits.
But I digress. With the union job, I also had some more money in my pocket. If I hadn’t learned about the financial world, I probably would have just parked my money in a savings account. Thankfully, that was not the case. I already had a 401k and I wanted access to the money without a penalty, so an IRA didn’t work at the time. I decided to put that money into a self managed investing account. I was still living at home, working absurd hours, and I really wasn't spending any money. All my money went into this account. It was the perfect time to invest, the market was rebounding from the recession and stocks rose approximately 26% that year. I made about 40% on my money with certain investments outpacing the market. I could have started a YouTube page, charging people to learn from me. But, I’m not an asshat. Instead, I took those gains and used them as a down payment on a condo in 2013. Of course I did have to pay a capital gains tax, but I still made around 32% after taxes.
With the mortgage and associated costs in owning a property, I couldn’t put as much money into the account, but I made it a point to put a minimum amount in per month. At the same time, my annuity was growing via my employer contributions and my 401k was growing simply from the market rising. I was very fortunate to have started early and be in a good position job wise.
While I purchased a condo in 2013, I also had perhaps my biggest miss as an investor that same year. An engineer brought Bitcoin to my attention and explained it as the “currency of the internet.” Like most people, I wrote off the project and his research as a scam. I sure wish I hadn’t. Bitcoin was around $300 at the time and as I write this, one Bitcoin is $50,000. That’s a nearly 16,600% increase. Oh, the possibilities! I was still able to get in relatively early a few years ago, so I’ve done fine, but I still should have listened with an open mind.
For the past 7-8 years, I have continued to manage my investments regularly, paying close attention to the economy and researching with any free time I have. I have diversified my portfolio, investing in stocks, cryptocurrencies, REITs, upstarts through angel investing and of course, my very own company. I’ve seen bull runs, bubbles, market crashes, bankruptcies, recessions, everything you can think of. And if I haven’t seen it personally, best believe I have done the research. I believe history may not repeat itself, but it often rhymes.
I take my financial education seriously. And the reason is not that I want to be wealthy. I want the freedom that comes with the wealth. That’s what drives me. If I can have my investments cover my monthly costs completely, then I can achieve that freedom. I can retire. That's my dream - be able to do what I want when I want. And I want the same for you! Because that American dream, it's a fucking nightmare.
You know, that ideal life that is ingrained in our heads from the day we are born; a white picket fence, perfect family, a career, blah, blah, blah. To some, that really is the dream life. To me, it’s a fucking nightmare. From the mundane aspect to the financial aspect.
Let’s stick with the financial aspect. You are fully expected to take on debt and consume, buying things you don’t need to impress people you don’t like, from the age of 18. You turn 18 and are forced to take out student loans. Did you know that as of 2019, the average student loan debt is $32,731? So right off the bat, you’re fucked. Then let's say you are lucky enough to find a job in your field. You work 8am to 6pm everyday, because apparently that's the new norm now. Maybe you move out, if you can afford to. You meet your significant other and one of you proposes with an engagement ring that costs 2 months of your salary because that's the expecation. Two months salary? We all know that's going on the credit card with 20% interest. Then you have a wedding for 150 of your closest friends and family. A wedding that will show how much you love each other, and how much money you have. You don't really have that money, but it needs to look like you do, so you take out a loan for $65,000. For one day of your life! Maybe you make half that money back from wedding gifts and decide to buy your first home. The average first home price is $300,000. Yay, more debt!
By the time you are 30-35, you are expected to be in $400,000 worth of debt. That’s by design. By having that debt and having the obligation to repay the debt, it forces you to have to work forever. And this is before the cost of children, new cars, a bigger home and all the other bullshit we buy to keep up with the Joneses. The system is rigged against you from the start. If you didn't take on debt, you wouldn’t need that job and your employer couldn’t exploit you. But now, they know you need this job to survive, and they use it against you every day until you are 65 and can retire.
But the truth is retirement is not some arbitrary age of 65 years old. Retirement is when your assets can pay for your lifestyle. For some, it’s 40 years old. For others, it’s never. That's the reality. What you do now determines your retirement age. You can minimize debt and maximize your investments, Or you can maximize your debt and minimize your investments. Your choice.
Now, retiring might not mean never working again. It just means not being forced to work for someone else. You can do whatever you want. Ultimately, that’s my dream. And I sincerely hope I can make it a reality.
If you want to find your freedom number as I like to put it, simply take your monthly expenses and multiply by 12 to get your yearly expenses. Divide that by your portfolio’s current dividend percentage. If you don’t have a portfolio, or are unsure of its dividends, you can use 4% as an average. So, let’s say your monthly bills total about $4,000 per month. If your portfolio has a 4% dividend, you will need approximately $1.2 million in assets to accomplish this. Meaning that you have the ability to retire when your portfolio reaches this amount. Life is always changing, so this number may go up or down based on your current situation, but it gives you a rough idea of where you need to be.
Once you have that figure, you can start planning accordingly. Consistently add money to your account. Reinvest those dividends. And, I can not stress thing enough, be patient. It is going to take a while for that investing or retirement account to build up. It won't grow overnight. And it certainly won't grow from you staring at it everyday. Give it some time and you will begin to see the amazing power of compounding.
Remember, don't compare yourself to anyone else. I began investing when I was 20, so I may be able to reach my goal a lot sooner. Just find a realistic timeline for you. Ten to fifteen years is a whole lot better than the next forty years at a job you hate, no?
I think that about wraps up this blog. No charts. No revolutions. Just my reasons for doing this. Hope you enjoyed, and I’ll catch you on the next one.