The Hypocrisy Of Financial Gurus And How To Change Your Destiny
Follow those who lead by example
This 2022 can be a turning point in your life. Generally, people set goals for the beginning of each year, and after a few months, in the best of cases, they stop their activity from setting goals again at the end of the following year.
One of the most popular commitments in the world of finance is: save 10% of your salary, invest it in a passive fund every month, wait for 40 years, and at the end of 40 years, you will have +$1M in the bank. Perfect plan, isn’t it?
Who can wait for 40 years? If you are 20, it would be at 60. If you are 30 at 70 and 50, indeed your grandchildren will inherit it.
These gurus that sell this plan usually show their luxury cars or their houses on the beach. Let me tell you that houses and cars came before being wealthy, and if they are rich, it is by selling courses and not by investing in a passive pension plan.
Now I will tell you how those who have been able to retire wealthy and young (and it has not been with passive funds) have done it.
The answer is straightforward. It has been through leverage. Unless you are the son of a billionaire making 10% a year, you are never going to make it.
If you want to get rich, you have to control and leverage the variables in your financial plan. Any financial plan without control immediately disintegrates into a program of hope.
“Hope I don’t get laid off!”
“Hope my stocks rebound!”
“Hope I get that promotion!”
“Leverage is the reason some people become rich and other do not become rich” — Kiyosaki
But we must remember what Buffett said: that leverage is like driving a car at high speed. While you do not crash, it is all perfect, but a single accident can be fatal.
Today we have the means to do that leverage with little risk, and it is through financial derivatives. Having an asymmetric portfolio with few assets at high risk and many assets at low risk is what can make you achieve your goal.
Imagine that you follow the instructions of the gurus and invest all your capital in passive funds and when you are 70 years old, about to retire, 2008 happens, and you see how half of your savings vanish in just a few months.
How would you feel?
On the other hand, imagine that you only have 20–30% of your portfolio exposed to black swans, as we do, and you see how your portfolio makes 1,000% in that same year.
Not only that, but you will be able to invest at half the price in the passive funds you like.
The market is tremendously overvalued. We see multiples never seen before average P/E of companies, P/S ratio, etc.
In addition, interest rates are expected to rise three times this year and another three times in 2023. Below is a chart of what has happened when interest rates have been raised in the past.
This, coupled with current valuations, can be a terrible mix.
Follow those gurus who have become wealthy by example, not those who do not. We expose our portfolio in full detail every week.
We don’t know when this black swan will arrive, but we know that it will happen in 1 year or 10, and, rest assured, we will benefit from it. A much better plan than waiting 40 years, isn’t it?