How the rich get richer

[skieur]

Interesting item that I learned. If as a individual you have some money to invest like $50,000 or so, you go to the bank for example and they will give you an average of less than 5% return based on mutual or other funds with some risk involved. You could even make less than a 5% return in the short term. GICs are more secure but again the interest rate is lower.

However if you have $1,000,000 or $2,000,000 to invest you graduate to a different level of investment so-to-speak. There are companies that will guarantee to maintain your original capital and pay you an 8% to 9% return on you investment.

Then of course there are the even richer. The personal portfolio of the head of a major pension fund is giving him 24% return on his investments.

I wonder what the average rate of return on investment is for those with several million to invest.

skieur

 

[lostprophet]

That's between me and my bank

 

[Sideburns]

Banks are really not the most lucrative of markets to invest in.
Stocks, and commodities are what the REAL wealthy invest in. Or at least the savvy business person.

 

[nealjpage]

I invest in cameras.

 

[jstuedle]

If you just won the lotto and have 5 Mil to invest, but you want ZERO risk, then invest in Municipal bonds. You will have a about 200,00 anual income forever with zero loss of capitol. This is an investment for one who wants to leave a job and never worry about stock trades, banks or much of anything. There are many ways to make several times this annually, but with the risk associated with it.

 

[Skyhawk]

Banks are really not the most lucrative of markets to invest in.
Stocks, and commodities are what the REAL wealthy invest in. Or at least the savvy business person.

Yep. Only business we do with our banks (other than checking/savings/etc) is short term CD's. Everything else is through either UMB Financial or Twentieth Century.

What the original poster is referring to for those who invest seven-figures or better is often referred to as "venture capitalism." You put money into a venture such as a new business, startup, expansion, etc and then you share/reap a certain (favorable) percentage of the profits.

Also--and always--pays to keep your thumb on various opportunities. When American Airlines stock fell below $4/share and everyone was SURE they were going to file bankruptcy, we bought a lot of stock. Pooled pretty much our combined bonus checks for 2002 and a significant portion of our salaries for that year.

Not too long ago, we sold it when it hit $40/share.

Both my wife and I grew up very poor and we learned to save, save, save. Even after we started making comfortable salaries, we continued to live like we were poor starving college students. We drove old cars (still do), bought a small house compared to those our co-workers bought (we have no children--don't need a huge house), kept our vacations simple and paid off all credit cards.

After all our debts were paid off, we continued to make those same "payments" to investment accounts. When we paid off a car (we refuse to lease), we kept making the same car payments to a savings account. When it was time to buy a new used car, we already had almost enough to pay cash, and our down payment put US in the driver's seat in terms of financing rather than the car dealer.

Now we're just shy of AARP membership age and can pretty much retire anytime we want.

Our best friends in New York City gave us a lot of excellent financial advice about saving and being spendthrifts right after we got married.

My friend's favorite line is, "You don't have to be rich NOW in order to be rich in twenty-five years."

Lotta truth to that.

Jeff

 

[mrodgers]

I make so much money on my returns, I'm afraid to claim it to the IRS. I think I make around $0.10 - $0.15 a year on my savings account.......

One year, I nearly made a whole buck!

 

[astrostu]

I make so much money on my returns, I'm afraid to claim it to the IRS. I think I make around $0.10 - $0.15 a year on my savings account.......

One year, I nearly made a whole buck!

Yeah, seriously. My interest-bearing checking account makes 0.007% interest per year. I make more money on the $1.91 in my Roth IRA that's in a money market account (the rest is in mutual funds, but for some reason I get dividends and they go to a money market).

 

[Alex_B]

well, but this is just normal, of course you get people look better after your money, if their personal profit is higher. if you invest more money, their profit is much higher in case they give you a good return of investment.



BTW, if you take some higher risks, then even with 50 000 20-30% are within reach.

 

[nealjpage]

I participate in a deferred compensation deal through work. I enrolled a few months ago and contribute $50 per check. Something happened last month. I got my statement and i actually lost money!!

Damn high-risk investments!

 

[Fangman]

I invested in education for my tribe - hopefully giving them the start I had if not better. I was lucky had mine for free - Grammar School and scholarship to Med School. Now now available so I never knew what savings were - I reckon I bought a fair slice of an Independent School and Uni with five kids . . . But was all was worth it.

 

[skieur]

Just to correct a misconception, I was talking about high rates with minimum risk. The 8% to 9% return also came with a guarantee that the principal amount invested would remain the same.

My observation was that it seemed that the more you invested, the higher the rate of return seemed to be which is rather interesting. One would think that if you can get an 8 or 9% return on 1 million with no risk, why can you not get the same return on say 50,000 or 100,000?

Related to the middle man/broker/bank person or whatever, if he is making a profit on giving you an 8 or 9% return on investment, is he making much more of a profit on only giving you a 4 1/2 % return. Considering the phenominal bank profits and their ability to write off large losses on occasions, on has to wonder.

skieur

 

[Lisa B]

i make sod all on my money coz im like negative hundreds hah...good old overdraft!

I am payin it off though so perhaps soon i'll hope to gain that 15p a year that you guys are so accustomed to.

What a glorious time that will be for us all!

Oh! BTW what is a municiple bond?

 

[Alex_B]

Just to correct a misconception, I was talking about high rates with minimum risk. The 8% to 9% return also came with a guarantee that the principal amount invested would remain the same.

That are the returns you get with no risk for yourself. But it does not mean that those people you give the money to, do not (to some percentage) do risky business with it to get much more profit from the money than you will ever see. In the worst case the bank goes bankrupt, but that happens not that easily.

 

[Alex_B]

I participate in a deferred compensation deal through work. I enrolled a few months ago and contribute $50 per check. Something happened last month. I got my statement and i actually lost money!!

Damn high-risk investments!

well, recent months were the best times to lose money on the stock market still waiting for my shares to recover :mrgreen: