|
|
"Anybody with some money should invest now."
-Nicki Minaj
|
The 411 on paying attention to what matters:
- $1 million / $200,000 / $300,000: Thresholds to be classified as an accredited investor (net worth, individual income, joint income, respectively).
- 10+: Number of years that many private equity investments require you to lock your money up.
- 1.74: Average management fee percentage of a buyout fund.
- 0.14/0.05: Average stock index fund/ETF expense ratio, respectively.
- 11: Percentage of all US corporate bankruptcies that were private equity-backed companies
- 7: Percentage of US companies that are private equity-backed
The Most Expensive Financial Mistake Usually Starts with Panic
You've heard the pitch: "Why not invest like the top 1%???"
I'll tell you why: investing like the 1% is a dangerous place for everyday investors.
Not because every private deal is bad. Not because wealthy investors are always wrong. But because the conditions that make those bets survivable for them usually do not exist for everybody else.
Here's how the 1% might be different than you:
Minimums for these investments can be high, and a wealthy investor can afford to gamble and miss. For them, a speculative private deal might be a small slice of a much bigger pie. For an everyday investor, that same miss can delay retirement, wreck a college plan, or blow up years of steady progress.
These pitches tend to find people when they feel behind. That is what makes them so dangerous. They do not just promise returns, they promise relief.
The language does a lot of work. “Private.” “Exclusive.” “Sophisticated.” “Alternative.” All of it makes the investment sound like a brilliant idea before you have even asked whether it fits your actual life.
Most everyday investors do not need rich people strategies. They need clear goals, enough liquidity, and a plan they can stick with when emotions are running hot. Many private equity investments have cloudy goals and timeframes (rich people can comfortably accept murky goals), don't provide liquidity (rich people can also afford to lock up money for a bigger return), and definitely run hot and cold.
Do this in 5 minutes
- Write down one financial goal you are actively investing for right now.
- Under that goal, answer three questions: when do I need this money, what happens if I lose part of it, and how easily do I need to access it?
- Then ask one final question: does this new investment idea actually support that goal, or am I just hoping it will help me catch up faster?
Slightly uncomfortable truth: a lot of investors say they want access to "great deals" when what they really want is a shortcut.
Three quick wins for this week
- Write your annual gap number
What does your life cost for a year, minus any income that will show up no matter what? That "gap" you're trying to fill is the only number that matters right now.
- Do the boring thing that works...get the match, then add 1%
If all you can do is contribute enough to get the match, start there. Then bump it by 1% per year. The boring plan is undefeated. The same amount in a "hot investment"? That could be a trainwreck.
- Put your goal in months, not years
Ten years feels like a punishment. 120 months feels like a plan you can track. Humans love checkboxes. Give yourself some.
Begin with the end in mind
One of the smartest principles here is also one of the least flashy. Before you evaluate an investment, you need to know what the money is supposed to do.
That sounds obvious, but it is amazing how often people skip that step.
They hear about an opportunity first, then try to reverse engineer a reason it belongs in their plan. That is backwards. The plan comes first. The investment comes second.
If the goal is college in a few years, your choices should reflect that.
If the goal is retirement income decades from now, your choices should reflect that.
If the goal is peace of mind, optionality, or sleeping well at night, your choices should reflect that too.
A good investment that does not match your timeline, your need for liquidity, or your tolerance for risk is not a good investment for you.
When you begin with the end in mind, you stop getting hypnotized by the pitch. You start asking a much better question: does this help me reach the destination I actually care about?
That one shift alone can save people from a lot of expensive detours.
Kevin’s Korner
What ordinary investors often miss
One of the biggest problems with private equity is that people often evaluate it backward.
They start with the promise: higher returns, exclusive access, sophisticated strategy. Then only later, if at all, do they ask the harder questions about liquidity, fees, timing, and downside risk.
Pay attention to the big picture.
Because a private investment is not just a bet on a company or idea. It is also a bet on whether you can live with the tradeoffs. Can your money stay tied up for years? Can you handle the possibility that the return is worse than a plain, low cost, fully liquid index fund? Can your plan survive if this investment underperforms or goes belly up?
That is where ordinary investors can get into trouble. Not because they are reckless, but because the story sounds so much better than the structure.
If you do not understand how the investment makes money, how and when you get paid, how and when you can get out, what the fees are, and what happens if things go sideways, you are not looking at an exclusive opportunity. You are looking at an expensive question mark with a marketing department slicker than Doug’s hair on ladies’ night at the Sizzler.
Do this in 5 minutes
- Write down one financial goal you are actively investing for right now.
- Under that goal, answer three questions: when do I need this money, what happens if I lose part of it, and how easily do I need to access it?
- Ask one final question: does this investment idea actually support that goal, or am I just hoping it will help me catch up faster?
Slightly uncomfortable truth: a lot of investors say they want sophistication when what they really want is a shortcut.
Three Quick Wins
1. Start with the goal, not the pitch.
Before you even evaluate an investment, get clear on what the money is for and when you will need it.
2. Use boring questions to pressure test exciting ideas.
How does it work? How do I get out? What happens if it goes badly? Boring questions usually save real money.
3. Build trust at work the same way you build wealth.
Stay steady. Be useful. Play the long game. Those habits compound too.
“If you've got a clear understanding of where you want to go, then it's a lot easier to figure out what tools you need to get there.”
-OG
That works for portfolios, careers, and just about everything else that matters.
YouTube Premiere: How To Find Your Next Great Idea
“If you've got a clear understanding of where you want to go, then it's a lot easier to figure out what tools you need to get there.”
-OG
That works for portfolios, careers, and just about everything else that matters.
Putting it all together
Here’s my big takeaway: shiny is not the same as smart.
The longer I do this, the more I think the best decisions usually look a little boring at first. They do not come wrapped in urgency. They do not need exclusivity to sound important. They are built on clarity, patience, and the willingness to ask simple questions before doing something hard to undo.
That same principle works outside your portfolio too. The people who build strong careers, strong finances, and strong lives are usually not the ones chasing every flashy move. They are the ones who know where they are going and keep making solid decisions long enough for those decisions to compound.
That is not exciting in the moment.
It is just how real progress tends to work.
Latest Stacking Benjamins Podcast Episodes:
Private Equity for Regular People: Higher Returns or a Very Expensive Lesson? (SB1813)
Listen here →
|
|
GREATEST HITS WEEK Investing Rules for a Sky-High Stock Market SB1812
Listen here →
|
Want More Than Just the Newsletter?
Good decisions rarely look exciting in the moment. More often, they look steady, disciplined, and maybe even a little boring. That is true with investing, with work, and with most things that actually compound over time. The goal is not to chase what sounds sophisticated. It is to build a life sturdy enough that you do not need shortcuts.
I’ll see you back here next week for the next installment.
|
|
Joe & Kevin
Visit Us!
Listen To The Podcast
|
