How to Invest by Net Worth

This is the blueprint I would give to 18 year old me to become a billionaire within a few decades.

It's a framework I wrote in a Notion doc about a year ago and is by no means a prescription for anyone else.

It's not necessarily based off of any mainstream financial planning principles.

This is solely based off my own risk profile, my circle of competence, the type of investments I like, and the type of responsibility I want to deal with (for example, investing in public markets takes none of my time or effort on an ongoing basis while investing in real estate does).

The giant limitation here is I don't know what it's like to be a billionaire. I don't have any idea about the kinds of tax considerations they have or how their risk profile changes once their and their family's needs are taken care of for generations.

How to invest each marginal dollar after achieving certain levels of net worth:

Net Worth Education Start Business Buy Business Stocks Real Estate Speculation
0-$50,000 90% 9% 0 0 0 1%
$50,000-$100,000 78% 20% 0 0 0 2%
$100,000-$250,000 50% 35% 0 12% 0 3%
$250,000-$500k 10% 60% 10% 16% 0 4%
$500k-$1M 5% 35% 35% 20% 0% 5%
$1M-$2.5M 1% 25% 45% 20% 4% 5%
$2.5M-$5M 1% 0% 64% 22% 8% 5%
$5M-25M 1% 0% 59% 23% 12% 5%
$25M-$250M 1% 0% 24% 16% 5%
$250M-$1B 1% 0% 25% 20% 5%

Broadly speaking, here is how I would focus capital throughout the stages of wealth accumulation:

  • $0-$250,000: Majority of investment dollars into your own education - yes, that's an investment. The highest ROI one possible, especially when starting out. This could be certifications, coaches, books, courses, maybe even university.
  • $250,000-$2,500,000: Start a business(es). This is the best way to continue your education (through real world experience) while also giving you a chance to make an outsized return in a short period of time. Don't touch real estate until net worth is over $1M.
  • $2,500,000-$5,000,000: Buying Small businesses in part or whole. You've built the skills, experience, and capital to be successful in business. Now apply it to already existing businesses. This mostly means stable, brick and mortar businesses but it could include some internet companies. Focus on cashflow through value creation.
  • $5,000,000+: Above $5M, start tapering off the small business buying in favor of increasing amounts of real estate and public stocks. Not really any giant step changes beyond $5M, just seek compounding in excellent assets.

Here is how I would focus my time and energy by level:

  • <$50k: If your net worth is less than $50k, you're probably at the beginning of your career. You are in learning mode. Your jobs should be earning you money to get education. Your free time should be spent educating and upskilling yourself. If you start a business - which I recommend - it should be something with minimal capital required like washing cars or mowing lawns. If you want to throw 1% of your money into something speculative, like maybe the next Bitcoin, go for it! Just don't get carried away, don't exceed 1%.
  • <$100k: You're still spending most of your time and money on education but presumably you're a year or two or three into your career at this point. You've built some skills but your business is still in the early stage and you have a lot to learn. There are tons of courses and coaches worth putting your money into to shortcut your learning.
  • <$250k: Still educating yourself aggressively but starting to put some money into public stocks - ideally S&P500 index funds as early as possible that you will never touch. You should spend as little time as possible on stock news and updates. You're putting an increasing amount of money into your business which should be throwing off more and more cashflow for you.
  • <$500k: By now, you've gotten the confidence and skills to start and run a business. Your business is probably paying you >$100k per year and you could sell it for $300k+ if you wanted. Thus, most of your net worth is tied up in the business. It's time to start thinking bigger. You should start looking for businesses to roll-up that will complement your existing business. Education should be financial in nature and getting smart on specific industries that have investment potential.
  • <$1M: At this point, you should be investing an equal amount of time and money into the business you founded and the businesses you buy. You're still giving yourself a generous budget for your education and a slightly higher amount is going to speculative investments. For those, invest in whatever crazy thing you think might take off, just never a penny more than 5% of your marginal investment dollars.
  • <$2.5M: Now we finally dip our toes into real estate. Not too much though. Maybe in the form of REITs or some type of fund - do not waste your time being a landlord or even dealing with a property manager. Part of the advantage here is tax benefits but also diversification. This is the final phase where you will put money into starting your own business. From here on out, it's all about becoming an investor and buying equity in existing businesses.
  • <$5M: Your focus now is on small business acquisition. You've acquired the skills to be an operator, now you're shifting to being an investor. Buy within your circle of competence and with operators you trust.
  • <$25M: You're squarely in the field of investor now. You need to get ruthless about prioritizing your time on high leverage opportunities and delegating everything else. As you get better at managing your investments and various businesses, you need to move up the value chain to bigger and bigger opportunities.
  • <$250M: You're a seasoned investor now. Now, your main opportunities will come from time (compounding of your existing businesses) and relationships. Amazing deals will come to you by nature of your track record. This also means you'll have to turn away a huge number of deals that just aren't quite right. Your biggest focus here is on getting around other people playing at the same level as you and/or one step ahead.
  • <$1B: It's just more of the same beyond this point. Your biggest risks now are reputational damage (always act with integrity is sound advice at all stages but failure to act with integrity is amplified now), overconfidence, and lack of privacy. People will know you're wealthy now and try to get a piece of it. People will be irrationally interested in your every move. And you must never stop being a student. Your own success can make you feel invincible but you're still capable of bad investments that can unravel everything you've done so far.
  • $1B+: Will update once I'm there.

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