Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
This is part two of the interview. If you missed part one, you can find it at Millionaire Interview 305.
My questions are in bold italics and their responses follow in black.
Let’s get started…
INVEST
What is your investment philosophy/plan?
I am mostly a passive investor as my investment plan calls that 80% of my money will be invested in passive investments (buying and holding index funds, etfs). However, I allow some flexibility in that I can invest 20% of my money in active accounts (individual stocks, buying and selling when I feel like values are low/high). I have a finance degree and a deep interest in stock analysis and valuation and that 20% allows me to have fun with that interest.
I also call for a 10% cash max within my allocation (so basically 50% of my active accounts) to make sure I’m almost always invested with at least 90% of my stock allocation and not timing the market. However, it does give me the flexibility to sell stocks and free up some cash when I feel like valuations are stretched. That’s part of the reason we have more cash than we should right now.
I figure this allows me to play around with stocks but always keeps me invested since I’m fully aware that timing the market is very hard and the best long-term bet is to stay invested.
My asset allocation on the retirement and taxable accounts are:
- 42.5% large cap
- 10% U.S. Mid Cap
- 10% U.S. Small Cap
- 10% U.S. REITs
- 15% International Developed
- 5% International Emerging
- 7.5% bonds
On my wife’s side, she’s similar but 100% passive.
Overall, the plan is to max out our tax-advantaged accounts wherever we can then invest the rest in low-cost index funds.
For the active part, I just trade on various platform but even those are mostly passive as I invest for the long term and rarely buy and sell unless things suddenly shoot up 5x and I can’t make sense of the valuation.
Outside of stocks, I do have investments in crypto but that’s purely a speculative asset and I don’t see that as an active part of any allocation. I’m not currently buying any but letting it ride to see where it can go.
What has been your best investment?
Honestly, probably crypto. I’ve had 10x+ returns in a year on some of my crypto holdings.
I’ve also had good luck with stock trading and have gotten 25%+ returns in the past 10 years on my 20% active allocation. That’s been a boon to my portfolio growth.
Recently I’ve dabbled in SPACs which for a time offered a relatively low risk way to speculate on stocks but those have gotten beaten down lately and become a lot less appealing. There was a brief few months period where you could double your money on certain names in a few months if you actively played them.
However, on the opposite end, if you held those too long, you could easily lose half your money as the market corrected. The recent correction in growth and small cap has hit those particularly hard but luckily, I’m mostly out of that space (but not fully).
I’ve also had good luck with buying early on the bigger tech names like Apple which have returned multiples of the original investment in a couple of years and now pay dividends that continue to compound my original investment.
What has been your worst investment?
I think any time you play in the active space, you tend to make some terrible investments, get caught up in the hype and/or hold on too long (or too short).
For example, in the SPAC trade I mentioned above, I bought some Paysafe stock that I thought was a good deal around $8 in September only to have it fall to $4 right now. That’s a quick 50% loss.
Luckily, I generally make these speculative plays very small positions so their impact to my portfolio is very small.
On the opposite ends, some of my worst moves have been selling too early.
For example, my Apple position could have been double what it is now, but I took profits along the way when it doubled. That’s the risk with active investing and why passive investing is often better as sometimes you make moves when you shouldn’t and sometimes you don’t make moves when you should.
That’s why having a mostly passive investing style makes sense for me and I think for most people. It’s just stay passive with most of our investments since active investing while rewarding can also be very punishing.
What’s been your overall return?
I’d say around 20%. It’s hard to gauge because I only started tracking everything around 2016.
I would say that number is fantastic and I’m proud of it, but I’d also say that post 2008 world has been the easiest to build your wealth in quite some time.
Someone who invested in the S&P on January 1, 2009 would have had a 16% annual return. It’s been an absolute monster run that has led us to this spot and I can’t imagine that it can continue at this level forever.
How often do you monitor/review your portfolio?
I check everything monthly and direct my purchases towards whatever asset class is underweight. The nice thing about having a 7.5% bond allocation is that I was barely buying any stocks for the last few months and now that we’ve had a minor correction, I was able to get some stocks at what I say are more fair prices and more likely to produce good long-term returns.
I do think the markets are still somewhat expensive but checking things monthly allows me to direct money into things that are under-allocated in relation to other assets and helps overall returns in the long run.
NET WORTH
How did you accumulate your net worth?
I would say it’s a combination of investing well and being content without spending a ton of money.
My average salary in my life has been just shy of $80,000(north of that now, south of that a few years before now) which means I’ve earned just north of $1M in my life. My individual portfolio is worth more than that now which really speaks to the power of compound interest. It’s crazy that I can invest and have more money now that I’ve ever earned in my life despite spending a ton of it along the way.
Another big part of that is luck. I started working in 2008 right before the market crash and was able to keep my job during it and grow my salary after it. Those were some of the best years to invest in history and while I wasn’t making a lot, since I was splitting costs with roommates, I was still able to invest a decent amount and that number only grew as my salary grew.
Now in recent years, I’ve been able to save more than 1/3rd of my income and that has really helped that number grow combined with good returns in the market especially with some of the growth names I’ve picked with my active portfolio.
I have no inheritance and am a first-generation immigrant, so we certainly didn’t come from much but growing up in a household that made ~40-50k for the four of us taught me a lot about being content without needing much. I took that mindset into my adult life and was lucky to meet a great woman who shared my thoughts around money and that’s the biggest part of being able to grow wealth.
Building wealth is all about spending less than you make and investing it smartly and I’ve done both of those and now we do it together with my wife which makes it even easier.
The best thing about this lifestyle is that you don’t need a ton of money to make a million, you just need to start early and save diligently. Making more money certainly helps and I’m aware that I make more than most and am grateful for that, but I didn’t start that way.
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?
My greatest strength is investing because I’ve been able to take my financial background and enjoyment of investing and beat market returns handily with my active portfolio. That’s certainly helped my portfolio grow faster than it would if I just invested in regular index funds. Those would have done well still but adding a bit of extra juice has been a boon.
Save would be next because I simply don’t spend a lot. Most of our money goes towards our home and making our home a better place to live because we’re indoor cats and enjoy the solitude that comes with being at home. We don’t need a lot to be happy and most of our hobbies aren’t expensive and/or can be accessed for free or at reduced costs using resources like the library. We play board games, video games, hike, read and do other simple things.
We could certainly save more as we do spend extra on restaurants, some travel and some entertainment but I also believe live must be lived in the now because the future is uncertain, so I want to make sure I’m enjoying everything I want to enjoy today because that’s the only guarantee we have. I certainly want to make the most of the time I have with my wife right now.
Earn is probably my biggest weakness. While I’ve done a good job negotiating my salary and getting to a good spot right now, I probably could have done more and could still do more to earn more today. I just value a low stress work environment with a great work life balance more than money and I’m happy to stay where I am even if it means sacrificing a bit on the salary front.
My wife is the same way and gives up salary potential for a job environment that doesn’t overwhelm her.
After all, I want to spend as little time as possible at work and making more money often means a sacrifice on that front and that’s not one I’m willing to make.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
We have some health issues that do impact our ability to save a bit. I must spend a decent chunk of my budget on good health insurance and a variety of yearly doctor visits and tests as does my wife. We also take a bunch of supplements that are beneficial for our conditions.
This certainly impacts our ability to save but I also know that spending said money is a good thing for our future selves since that’s who we’re saving for. Luckily, none of these are life ending but they do make our work lives harder in certain ways.
While these road bumps probably impacted certain things, they also made this path clearer for both of us because we want to have the option to get out of the rat race earlier and not be stuck there due to a need for health insurance or something like that.
What are you currently doing to maintain/grow your net worth?
We’re both still working and saving as much as we can. We try to max out the tax-advantaged accounts when we can, and I save more into my taxable accounts.
We re-invest all dividends. I have this idea of my dividends being a little employee that works for me so I always re-invest them to try to make my dividend employee Steve a better worker and just keep plugging along with our investment plan.
We did buy a house recently which means monthly payments are going towards growing our net worth instead of rent payment which is nice BUT we’re also spending a lot more on home bills and home improvements that likely impact our savings rate negatively.
It’ll certainly be nice to not have a payment in the future once we pay off our mortgage but that’s a while away.
Outside of that, we try to keep it simple and don’t invest in real estate or anything that requires a lot of upkeep. I like stocks because often I can set it and forget it and build wealth that way. I really don’t want to deal with other people like I would if I bought a rental property of example even if I know that’s a good way to build wealth. It’s just not for us.
Do you have a target net worth you are trying to attain?
I’m 37 right now and am aiming to retire by 45. I think it’d be nice to have about $100,000 per year in income (which would mean around $80,000 after taxes) so that’d be in the $2.5-$3M range depending on my withdrawal rate. That’s higher than our current expenses but I we’ll have to pay a bit more on the health insurance front at that point and I want to leave some flexibility as well.
Not sure if we can hit that at this pace but we’ll see, a lot of that will depend on future market returns and any future raises/job changes.
I’m not sure if my wife will be ready to retire by then so she might keep working but I want to make sure that both our expenses are covered since I want to make sure she has the option to retire along with me if she’d like to do that. However, she’s got a curious mind and likely will want to do something and she enjoys the engineering career since it allows her to be creative and make things.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I was 35 so we’ve seen a big jump in recent years. I do think hitting that $1M really showed me how this growth can happen quickly and that’s especially obvious that I’m hitting $1.5M just two years later. A good part of that has been ridiculous market returns especially on the growth side so I wouldn’t be surprised if those numbers trend down in the near term and the market corrects.
If that happens, I’d consider that a good thing despite it hitting the spreadsheet negatively because I would be able to buy at much lower prices.
I think hitting that $1M and then $1.5M number really made me realize that I’m on target to retire by 45 and to really start to firm up those plans and talk about it more with my wife. However, beyond that, I didn’t really change anything and continued down the path we were going.
We still spend about the same although this year we spent a bit more due to the house purchase and various things that went along with that. Perhaps knowing we had that much made me feel a bit more comfortable in spending a bit more for our house too and getting one in our preferred neighborhood.
Generally, I rarely think about money in my day to day life which I am aware is privilege. I’ve gotten to a good spot with my mindset about investing in that market drops don’t really impact me and just make me want to buy more when assets get to an interesting spot.
I’ve seen my portfolio go up and down 75k in a month and that doesn’t make me nervous because I know I’m still a long way away from needing that money and lower prices are better for me.
What money mistakes have you made along the way that others can learn from?
I think I’d invest more right off the bat. Even when I was making 45k/year, I still had extra cash sitting around and there was no real need for it, I could have invested it because money made when you’re 23 is worth so much more when invested than the money I make today.
On top of that, I think I’d hold on to things longer. There were plenty of times when I sold a great company for a 20% return and now it’s 10x what it was when I bought it in 2009. I know things don’t always work out that way so it’s not something I beat myself up too much especially since a 20% profit is still a profit.
However, the benefit of being a passive investor is that you just do what makes sense; hold on to things and not worry about the day-to-day price movements.
It’s hard to know that when you’re 23 or 24 and just starting to invest in the market but market crashes are often the best opportunities to stock up on quality companies. I’m not talking about some random stock some random person is shilling on Twitter but companies like Microsoft or Apple or even ETFs and index funds that are going to be around and be able to weather most market conditions.
I think most people learn this lesson but reading a lot and learning about the market is going to do you a lot of good in the long run. I dabbled in things like options or high risk small-cap stocks before I knew what I was doing because some one on twitter said something and that never led to good results.
Stick to the basics until you know how to read financial statements, and 10-Qs and investor presentations. If you have no interest in learning about any of that then individual stock trading may not be for you and that’s perfectly fine. Like I said the S&P 500 has returned 16% annually with dividends re-invested since 2009 and that’s an amazing return and probably beats most active investors.
I was lucky enough to jump on the growth train when it was still reasonable and was able to beat the market that way, but I am fully aware that was mostly luck and not some individual prowess as an investor. If people tell you otherwise or tell you that active trading is easy and try to show of their returns, they’re likely trying to sell you something. It’s been somewhat easy to do with growth stocks in the last 5 years but that’s a short-term return. It’s not easy in the long run.
What advice do you have for ESI Money readers on how to become wealthy?
Spend less than you earn and invest the rest in index funds. Know that stock markets can drop 50% and mentally prepare for when that happens. Many investors will start to sell at that time when you should be buying.
Set up an asset allocation you’re comfortable with whether it be 100% stocks (can drop 50% quickly but will provide better long-term returns) or some combination of stocks and bonds (will cushion those drops but provide lower long-term returns).
Don’t chase prices on individual stocks that are soaring and are getting mentioned on social media because while you may win sometimes, in the long run, you’ll get burned. It’s a mental game in the end and that’s why it’s so hard to win against the market in the long run. Buying at the right time and selling at the right time is hard.
Those that set their investments and forget it often end up with equal or better returns than those who spend hours a day watching the ticker and stressing about the ups and downs.
Remember if your timeline is long, you don’t have to worry about what’s happening in the market tomorrow, you just want to make sure your investments are there for you when you need them years away. As you get closer to retirement, you might want to revisit that mindset.
That may mean changing your asset allocation to be a bit more conservative (more bonds or cash) as you get older but beyond that keep it simple and just live your life while you let your money do the work behind the scenes.
FUTURE
What are your plans for the future regarding lifestyle?
I plan to retire by 45-ish. I don’t hate my job or anything, but I just want more time for myself. Not sure what I’ll do then but still plan to do something to keep my mind fresh.
I don’t think I’ll work unless it’s something I’m passionate about. I’d like for my wife to have the same option but right now it seems like she’s keen on continuing to work as she enjoys her job and what she does.
What are your retirement plans?
I think I want an income in the $100,000 range to be near what I earn right now. That might need to adjust up for inflation. I want to continue a lifestyle I’m accustomed to and cover any issues that may arise. If my wife continues to work at the time, then my portfolio would just be able to grow a little bit longer.
As far as activities goes, I think I’ll spend more time on my blog and YouTube channel. If I ever get a substantial income from those, I’d like to work with charities I like to help make the world a better place. After all, my income should cover my lifestyle so an extra income would be able to go elsewhere.
On a personal level, I want to learn to cook better, walk and hike more, read more books, maybe even write one. I’d like to learn to play the keyboard and learn a language to help make travel to certain countries easier, travel more (especially once the wife retires) and just take a deep breath and enjoy not having to wake up early on a Monday.
On the travel side, I’d really like to take longer trips. Right now, when we travel, it’s like 2 weeks max because of PTO and a need to return to work. In the future, I’d like to just stay in a new country for a month or two to really experience it.
I think it’d be cool to teach some classes as well, especially about finance, a topic I’m passionate about.
I already don’t have enough time in the day to do everything I want so It’ll be great to spend more time on all my hobbies.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
The main issue is healthcare. Right now, we have that through our employer but would have to buy it on the exchange once we retire.
Hopefully those are still around and kicking and at our incomes it may be possible to get a small subsidy, but I also want to make sure we have high quality healthcare and don’t have to worry about it which is why my income needs are higher than they probably need to be. I’m risk averse and want to make sure our needs are covered.
MISCELLANEOUS
How did you learn about finances and at what age did it “click”?
I was a finance major in college simply because I enjoyed the subject and got into stock investing as a hobby at an early age. However, I really didn’t have much money to invest until I was about 22.
I read the Bogleheads Guide to Investing around then and it really set the foundation for a lifetime of passive investing (with some active fun on the side).
After that it was just a matter of reading a lot and learning through practice. I’m a much better investor now than I was in my 20s simply because my mental attitude to gains and losses is much healthier. Perhaps some of that comes with the fact that I have a bigger stash now, but a bigger stash also means a big market correction might cause me to lose hundreds of thousands of dollars in a few weeks so I’m not sure it’s just that.
Who inspired you to excel in life? Who are your heroes?
I think my parents were a big part of who I am today. They worked hard and seeing them come to this country when I was a young kid to find a better life for us and do all the did to make sure we were taken care of gave me a different idea of life and what it entails. It wasn’t all about things but about relationships and appreciating the simple things in life.
On the financial side, I’m a big fan of Vanguard’s John “Jack” Bogle. Anyone who makes investing simpler and more affordable for casual investors is an ok guy in my book and he was one of the main reasons I can benefit from such easy and low-cost options today.
Do you have any favorite money books you like/recommend? If so, can you share with us your top three and why you like them?
My favorite is The Bogleheads Guide to Investing. It’s just a simple book that covers the basics of money and lays out a path towards a good investing future.
One up on Wall Street by Peter Lynch is a good one too, a good entry towards active investing and how easy and/or hard it can be. It’s not all that relevant today but I love reading about historic market crashes and performance and that one is as good as it gets on that front.
My active investor side also liked The Five Rules for Successful Stock Investing. It’s a good entry to the world of financial analysis.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
Yes, I generally throw that into my random category and plan to grow that as I get older and don’t need to invest money anymore. I figure if my portfolio grows big enough, I can have more to donate to good causes later by letting it compound today.
I do it because I think it’s important to support causes that I think are worthy and to help others who weren’t as lucky in life as I am. I do believe that a lot in life comes down to luck and that includes our ability to invest and be successful.
I was lucky to be born healthy(ish), intelligent and to a family that stayed together and wasn’t abusive. I grew up in a country coming out of communist control and we were lucky enough to get visas to come to the United States as a family (low chance right there). I had a decent upbringing, not fancy by any means but one that allowed me to see the hard work that is required to support a family in this country (and to send money back to our home country). I found a job and went to a local college, so I didn’t have debt then found a job and kept it during the 2008 crash.
Sure, a lot of that is driven by choices I’ve made but it all started with some lucky things I had no control cover and many people don’t get that starting point.
Right now, my donations are in the 2-3% range to certain charities but hopefully that can be bigger later in life.
I also donate and plan to donate all the profits from my blog and YouTube channel (which isn’t monetized yet) to charity as well which boosts that number.
Do you plan to leave an inheritance for your heirs (how do you plan to distribute your wealth at your death)? What are your reasons behind this plan?
Ideally, I’d spend it all down in life but if it doesn’t happen, it’d first go to my wife and then if she’s not an option I’d probably leave it to a combination of my niece and nephew and various charities.
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