Food For Thought On Money...

I read an interesting thing today while reading one of Bob Proctors books on wealth.

Just thought id share this, food for though.

In 1923, at the Edgewater Beach Hotel in Chicago, eight of the world’s wealthiest financiers met. These eight men controlled more money than the United States’ government at that time. They included:

The president of the largest independent steel company;

The president of the largest gas company;

The greatest wheat speculator;

The president of the New York Stock Exchange;

A member of the President’s cabinet;

The greatest “bear” on Wall Street;

The head of the world’s greatest monopoly;

The president of the Bank of International
Settlement.


Certainly, one would have to admit, that a group of the world’s most successful men was gathered in that place; at least, men who had found the secret of “earning money.” Now let’s see where these men were twenty-five years later:

The president of the largest independent steel company, Charles Schwab, lived on borrowed money for five years before he died bankrupt.

The president of North America’s largest gas company, Howard Hopson, went insane.

The greatest wheat speculator, Arthur Cutton, died abroad, insolvent.

The president of the New York Stock Exchange, Richard Whitny, was sent to Sing Sing Penitentiary.

A member of the President’s cabinet, Albert Fall, was pardoned from prison so he could die at home.

The greatest “bear” on Wall Street, Jesse Livermore, died a suicide.

The head of the greatest monopoly, Ivar Krueger, killed himself.

The president of the Bank of International Settlement, Leon Fraser, also died a suicide.


Cheers

Mick
 
Ahh yes, the old age "it's the journey not the destination" thing.....

I would prefer a joyous road to hell, than a miserable path to heaven ;)

But, as an agnostic, I can say that with gleeful abandonment :D
 
It doesn't surprise me when self-made rich people go broke, as many of them are risk takers, which is how they made their money in the first place.

Of course, many such people are highly skilled and work hard, but risk management will only take you so far.
 
It doesn't surprise me when self-made rich people go broke, as many of them are risk takers, which is how they made their money in the first place.

Of course, many such people are highly skilled and work hard, but risk management will only take you so far.

So what key ingredient do self made rich people have that dont go broke?

Is it just luck?

Cheers

Mick
 
It doesn't surprise me when self-made rich people go broke, as many of them are risk takers, which is how they made their money in the first place.

Of course, many such people are highly skilled and work hard, but risk management will only take you so far.
Sometimes it's gets out of their control when the market slumps anyone that bought into the ASX at the 4800-4900 levels would be starting to understand how the margin lending system works,the only way to understand risk is too buy something..willair..
 
They make the decision to focus on risk management rather than accumulation.

Fully agreed keithj, but only after they have reached their "enough" level....which varies enormously with each individual.

Trouble is, sometimes things go wrong when still on the accumulation phase. The person that drops out early and starts concentrating on the risk management phase will probably tutt-tutt the other, but they just had a lower "enough" lower....not necessarily a better strategy.

Of course, if things don't go wrong, the higher pointing risk taker looks like a guru and makes the tutt-tutter in comparison look foolish.

....but then, looks count for nothing.
 
They make the decision to focus on risk management rather than accumulation.

I would think that it would be a combination of always striving to accumulate, but combined with a close eye on the risk management.

I liken it to golf; I want to shoot at the flag to get birdies, but if the flag is close to the water on the left side of the green, I'll shoot for the safe side out to the right, nearer to the middle of the green, and hope to sink the longer birdie putt. Occasionally I sink one.

This strategy shows a desire to keep on moving forward and getting better, but avoiding the disasters along the way.

The guy who shoots straight for the flag every time may get more birdies, but he has a much bigger chance of hitting it into the water and losing plenty.
 
So what do we do, focus on accumulation and throw caution to the wind regarding "risk assessment" and only consider it once we have enough wealth worth risking?
An advisor would probably say focus on accumulation, with risk management as a lower priority. If you lose the lot it's no biggie, starting again will only cost you a few years. OTOH, after taking 10+ years to accumulate significant assets and then continuing to take relatively high risks and losing the lot will put you back 10 years.

In the accumulation phase, it's normal (& higher risk) to x-coll everything, and have high leverage, variable IRs(?), borderline +ve c/f, and no buffer, and leave a lot of control with 3rd parties (like your lender & RBA & employer). If you're lucky, you'll be fine.... if you're unlucky, then you've lost little. But when you get to the 'comfortable' phase, the thought of losing the lot (eg lose job, banks withdraw support, IRs rise to much) is scary, and taking lower risks becomes a much higher priority.

The longer you focus on accumulation to the detriment risk management you luckier you have to be.

I would think that it would be a combination of always striving to accumulate, but combined with a close eye on the risk management.
Absolutely - accumulation still happens, but only when it's especially safe to do so, or can be done in isolation from the rest of the portfolio.
 
So what do we do, focus on accumulation and throw caution to the wind regarding "risk assessment" and only consider it once we have enough wealth worth risking?

Cheers

Mick

You accumulate on the basis of managing risk to the existing portfolio. At least, that's what I'm doing. Throw caution to the wind and sooner or later you will likely suffer substantial losses.

Remember that for all those who accumulate large sums, there are those who tried and failed. Mindset and ability will take you so far, but there are still external factors beyond your control, and these are risks you have to identify and manage. It all comes down to your position to accept losses or deferred profits, and as you start to get a decent sized asset base, this is no longer just psychological.
 
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