How do you make a lot of money?

[Greebe]

Originally posted by KvHagedorn
If I knew, do you think I'd tell you?

I'd be busy doing it.

You already do that, and unless you hook up a webcam and start charging sickO's, doubt you'll ever make anything... doing it!

[az]

KvH, the recipe for becoming a millionnaire is selling the recipe to become a millionnaire for 5 DM

AZ

[Umfriend]

I have lots of equity in my home, >£100k. Is it a bad time to use that for something?

Might make sense to talk to an estate planner, taking into consideration equity, income, expenditure, pension, future plans etc.

I would not mind advising, but I'm not alowed, and frankly, it might not help as I tend to be rather conservative.

Seek professional help, and don't do anything until you understand what it is about.

On really getting rich? no clue.

[Helevitia]

Hi Fat Tone, if you are really serious, I can explain some of things that I am doing. But here is some things to think about to get started. Oh wait, before I continue, I think you live in the UK, so I can't guarantee some of things I am doing apply to the UK. With that said, here is my immediate suggestions.

Pay off any consumer debt you have before you consider investing.(Mortgage and some student loans are the only debt consdiered 'good debt')

Start tracking your credit score(does that exist in the UK?) and fix any problems that may be on it. People don't put enough emphasis on how important your credit rating is. I personally guard mine with my life as I know it is THAT important. If you plan on taking out any kind of loans in the future, your credit score matters a lot!

Once the above two things are in good working order, then you can move onto investing.

OK, now for the crappy part. There is no such thing as a get-rich-quick-scheme. You must think of everything in long term investments(also depends on your age). 10-20-30 years! Think of it as a get-rich-slow-scheme

Fact: If you put money into mutual funds that follow the market trend, you will make a minimum of 7%/year on average. That means you will double your money every 10 years(minimum).

BTW, the market has actually gained 10-11% over the last 50 years, I just used 7% to be on the safe side.

Another way to look at it. For every dollar that you save, in 28 years that dollar will be worth 16 dollars.

If you have 10,000 dollars, you will have 160,000 after 28 years.
100k = 1.6M

Why am I pointing this out? Because people don't really see the benefit until you show them with simple numbers.

Anyway, I'm just babbling, let me know if you want more info. This is where I'd start(actually, I have done this for a while now).

Dave

[Ribbit]

Not trying to be a spoilsport, but what will that $1.6M actually be worth in 28 years compared to now? Doesn't inflation essentially follow the value of things like mutual funds and the stock market?

(Yes, I'm a clueless n00b. Teach me, master)

[Helevitia]

yes, you will need more than 1.6M so don't take it literal as the amount needed to retire. The question is, when will you retire? How long will you live? And finally, how much a year can you live on during those years. Then that is how much you will need.

[Wombat]

And the market beats inflation.

[Umfriend]

Any investment advisor should point out that past performance is no guarantee for future performance. There is loads to elaborate on, but I must sleep now

[GNEP]

^^ ditto to Umf's posts, but then maybe we are a bit biased being in the financial world .

Seriously, with legal investments, there is always a trade-off between risk and reward - so if you have already followed Dave's good advice and paid off all debt that is more expensive than student loans (and as an old man I presume you have...) or the mortgage, then with any spare money:

you should invest in a variety of different instruments, both spreading your risks, and also giving you the overall level of risk/reward that you are comfortable with. Stocks/shares (invest in tracker funds, not managed funds or, even riskier, single-company shares); pictures; property; antiques; foreign exchange; anything really - all stuff that other people would buy back from you at an indeterminate price is an asset class with its own risk/reward profile.

For you in particular, you might look to increasing your AVCs or pension payments depending on what sort of scheme you are in currently.

Be wary of financial advisors - either they are wise but on heavy commissions, or a bit slow and an IFA. They like recommending products they themselves don't actually understand themselves, just because they happen to be in fashion at the time. It might be worth seeing a couple (without buying anything or paying any fees) just to get some ideas on what is out there.

The other thing of course is to act as either a sleeping partner or something more active in a local business - whilst keeping your present job. Might cause issues with the wife though. Business Angels with some capital are well sought after - talk to the Leicester association of angels (if there is one - maybe notts would be better) - or the local chambers of commerce. But you need proper experienced advice and a very decent solicitor before parting with ANY money there. High risk, but potentially high reward, particularly if you have some knowledge of the particular industry segment and can exert some degree of control.

Only ever put money into a high-risk category that you can afford to lose completely.

PM/email me (freeuk.com or shell.com) if you want to talk any specific ideas over - even if just to bounce ideas off of. Just don't expect anyone else to provide "that magic idea" - basically, if there was a magic and legal way of making lots of money with no risk, it would exist for about a picosecond due to arbitrage coupled with human nature. That or you would never, ever find out about it.

George

[Helevitia]

Originally posted by Umfriend
Any investment advisor should point out that past performance is no guarantee for future performance. There is loads to elaborate on, but I must sleep now

Sorry if I sounded like it was a guarantee, but I know most of you MURCers are smart enough to know that in any investment there is no guarantee. I should have said:

Fact: The market has grown 10-11% over the last 50 years. If you want to start in a safe investment, you could put your money into mutual funds that follow the market trend and you will probably average at least 7%/year. Maybe more, but there is NO GUARANTEE

[Fat Tone]

Thanks for all the advice.

I don't have any debt beyond my mortgage. Never have had (apart from a 2 year car loan ~10years ago) and AFAIK have a perfect credit rating. I abhore debt.

I don't have any spare cash at this minute either, but realisitically expect that to impove a lot in the next 2-3 years.

What I do have is equity as my house is worth much more than the mortgage and my borrowing potential is much higher than my current mortgage.

From what is said (or rather not said) above, I'm guessing you would generally recommend against borrowing more to invest elsewhere? Paying the mortgage off more rapidly and increase pension contributions are obvious sensible things to increase future wealth once they can be afforded.

I have considered borrowing for a holiday property to let. Generally there seems to be little scope for profit at my end of the market, but even if it just pays for itself this can only be a good thing? And if it becomes a burden, selling on is always an option.

On the jobs front, it sometimes seems that salaries aren't proportional to education, length of service, training etc. Plumbers are a well known example of that at the moment in the uk. Last summer I employed a carpenter friend for 4 days at his usual daily rate of £160/day or about £40k/year - nearly double the average salary for the area. A lot of that would be cash too!
I once employed someone temporarily who did 'factoring' (essentially buying debt for a small premium) and was going self-employed. It didn't seem too complicated yet the salary was HUGE.

[GNEP]

Factoring is fairly high-risk.

[Umfriend]

FT, it is also a question of personal preference / risk-advresity.
You could use the equity in your house and invest the additional borrowings in stocks. Do not delude yourself though, it is a highly leveraged position you'd be taking, investing in stocks with borrowed funds, albeit at a "low" rate.

I would look at this as having an investment already, i.e. the equity in your house which I personally perceive to be high-risk. Consider this. You are probably paying a floating rate of interest on the mortgage. If interest rates rise, what could happen is:
1. You need to paymore on the loan
2. The house will fall in value, diminishing or depleting your equity in it
3. Your stocks might fall as well......

And then, one can lose his/her job as well....

Personally, I have equity in my house, I leave it as that. I have a savings account which could now last me more than a year (not a lot though) should I lose my income. Any savings over and above that total, I partly invest in stock (the other still on low yielding savings acct).

If you start saving now, you might direct a small part of your regular savings to an investment fund. Tracker funds seem most sensible to me. And yes, as GNEP said, only go to high-risk/high returns investments with money you can lose (and I consider tracker funds high risk already).

I guess in the UK it is also possible to get some tax advantages with investment schemes or pension related, which may make sense. Nonetheless, I have rarely found these to be sound enough to borrow for, only as a means to allocate regular savings.

GNEP is right, be wary of financial advisors. They ussually have a conflict of interest in the sense that although they should and would try to advise you as best they can, they also need to sell product. If you can talk to them for free though, you can only learn or get ideas.

I think it is important to just sit down for a while and consider your age, current and future income, pension income already ensured and expected at the time you retire (and when that will be), maturity of your mortgage (I assume you are paying down on it) and what it will do to disposable income when you have paid it down. Will that happen before you retire or later etc.

Sum it all up and PM me for my account number

In short, they way I see it:
1. Your net value is approx GBP100k (which seems fine with me) but it is "in the bricks".
2. You have no buffer to cover for financial difficulties yet aside form (1) above
3. Build up a savings account mainly first
4. Consider investing a small part of your regular future savings in a tracker fund, alongside with (3), but the key word here is "small" to begin with

I am a conservative cowardly person and would do this first.

I should not be doing this....good luck!

[GNEP]

I'll report you to your compliance officer Umf

[Umfriend]

OMFG, NOOOOOOOOO! I'll pass on 40% of what I'm making on FT, ok?

I *think* I'm alright though (hoping and sweating)