Under the spotlight: Josh

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Under the spotlight: Josh


I’m starting a new ‘occasional series’ where we put one of our 7 Millionaires … In Training! – or, any other reader – under the spotlight when there is an interesting or unusual aspect of their journey towards their Number / Date that needs to be discussed.

Josh is the lucky first participant, as a result of some discussion that we have had online (with this post) and via e-mail (that I will summarize below) …

… this is designed as a discussion – Josh and I are looking for YOUR thoughts!


I told Josh (via e-mail):

Listen, you’re keeping me up at night … and, believe me, this project isn’t usually what does that! So, here’s my concern:

Professional poker players KNOW that they need to manage their bankroll carefully; this means:

– Not risking more than 15% of their bankroll in any one session
– Breaking up their ‘windfall’ winnings in a similar manner to the 1/3 x 3 method that I outlined for you in that post.

Note: if your income comes from external sources you can ‘fiddle’ this a bit e.g. to make it 50/50 passive v trading or even 1/3 passive and allocate fully 1/3 x 2 to trading. Also, I’m not here to tell you how much of your trading account to risk on one ‘bet’ …. if you want to follow your system for 100% of the trading account in one ‘hit’, go for it.

But, if you DON’T come up with a better bankroll mgt ‘system’ than Bet It All, you will have problems later; look, this is MM101 For Traders and if you don’t make the habits now when you DON’T need them, you definitely won’t have the habits when you DO need them!

So, I’ve got some ‘special homework’ for you, Josh:

1. Buy/Read that Jesse Livermore book (you’ll love it, anyway) … esp. for how high he ‘flew’ and how far he eventually crashed. You have to KNOW this will happen to you one day if you don’t do what’s necessary NOW: http://www.amazon.com/Jesse-Livermore-Worlds-Greatest-Trader/dp/0471023264

2. Come up with a ‘bankroll management system’ that will work for you under all circumstances (i.e. now when Josh = No Commitments and later when Josh = mortgage, school fees, family commitments, etc., etc.) … and, I don’t want to hear “bet it all now so that I have a LOT of money to split up more wisely later” 😉 One system for all circumstances!

3. Think about what/how you will deal with the ‘passive investment account’; read this series of posts CAREFULLY:





I’m happy to bounce ideas around, but this is your ‘homework’ …  and, it will help me sleep better if you come up with a GREAT plan – one that you, hopefully, actually intend to keep to 😉

Josh responded with:

[I] hear what your saying, basically discipline myself now, so when I have a lot of money, it won’t be an issue (is this what your saying?).

I agree in theory, and in 95% of practice, but right now it seems foolish to have cash sitting on the sidelines in a sub-par investment when it could be really working, because blue chip or good MLP dividend stocks aren’t going to help me GET to my number, but will help me maintain it. And right now I’m still not there.

This is my plan. Lets assume I have 500,000 now. The minimum I would like to start a hedge fund with is 500,000, but  I would also like to purchase an apartment soon which costs between 750,000-1.2mill, the purchase of the apartment is important because I would like to get married soon (six months). So I’m thinking….

Once I have the apartment = 1.2 mill (worst case) I can start the hedge fund = 500,000 Lets just round up to 2 million dollars.

Once I have the apartment + the 500,000, I can understand dividing the cash into separate investment strategies to minimize risk at that point because there’s nothing to rush for, since I’m basically retired at that point anyway.

Also I plan to break the 20% rule, and own my house free and clear. This stems back to basic biblical principles of the borrower being servant to the lender. Let me know your thoughts

BTW: Josh also says that his “closing value of assets under management for today is $477,000”, which is quite a sum for a young man …… to build from and protect 😉


Josh and I would love to hear your thoughts 🙂

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Josh, I think the best way to comment on your current plans and situation with this forum would be to just state what I would do in your situation.

Living in NY city and being in Money Making 201 – working toward your number by your date, I believe if it were me, I would probably just rent a place due to the abnormally and unusually high real estate prices there(for 1.2 million dollars here outside of Louisville, KY where I live, I could purchase a 7,000 sq ft. sprawling estate on 25+ acres, fully fenced with a swimming pool, cabana, guest house, multiple barns, buildings, marble and granite throughout, etc.. ala MTV cribs, lol). With a 1.2 million dollar place comes incredibly priced real estate taxes and insurance(2 totally expensive liabilities that provide no return whatsoever). Not to how badly a contractor there would demolish you should you need typical upkeep and repairs(and you will need them as any homeowner does).

If I were in your shoes I would rent until your reach your number and take a pass at the above liabilites. I would simply ‘factor in’ the purchase of a place as a ‘one-off’ within my number and do it at the end(with cash), when you are moving into Money Making 301, have the passive income(albeit much safer and more reliable stream of passive income) to handle the taxes, insurance, repairs, upkeep, etc… of the place and also insuring that even those fit within your ‘monthly number’ according to your master number and desired purpose/lifestyle.

This would insure that this windfall you’ve attracted goes to work fully for you(and much safer) to reach your number by or before your date.

I would also just use around 15% of your funds at any given time right now in Money Making 201 for the speculations that you are currently using and I would really consider getting that hedge fund business going with the rest of that dough and use that as a ‘perpetual money machine’ to get you to your number.

Just MHO Josh as I want to see you get to your number for sure, but safely! 😉

But whatever you decide to do, I wish you the best!

Josh, I wish I had your problems…youth, exuberance, and money. 🙂

I tend to agree with Scott on the rental idea. I know that sounds a bit odd, coming from me, as I normally advocate home ownership. I don’t have a feel for the NY market, but I just personally couldn’t justify laying out 1.2 big ones for an apartment.

The price to value just doesn’t balance for me. That being said, I’ll disclaim it again…I don’t have an understanding of the NY market, so I could be out to lunch with my opinion.

I guess my advice would be to ask you a question. What’s more important to you? Owning a property or being located where the $1.2M apartment is?

If it’s owning a property, I would consider moving out away from the city to improve the price to value balance.

It it’s the location, then I’d look for the a rental as Scott suggests.

Otherwise, I agree with Adrian’s approach to NOT put it all on black.

Best of luck! Jeff

Scott, essentially your right. And that property you described sounds amazing, maybe I’ll move to KY…:)
Another aspect of buying this place is to diversify into real estate, a much more secure asset, and would increase rapidly if inflation becomes a major issue in the future.
After reading yours and Jeffs suggestions, it may be wise to purchase a cheaper place in White Plains, you can get a place right around the corner from there for around 250,000, it just wont have the view.

Jeff, (and Scott) don’t you think it’s an opportune time to buy right now, with RE prices so low? Not sure why it’s a good idea to rent if I have the opportunity to buy at or around the bottom of the RE market. What if we were talking about a 250,000 apartment?

ps, you guys gotta check this place out.


Josh, i’m just not sure that NY has taken the RE hit that the rest of the country has taken. Meaning that I’m not sure there is any big upside coming to the NY real estate market like there probably is in lets say, FLA for example in the upcoming years. I think it’s just going to keep cruising along with inflation(or perhaps just beating inflation, but at already over inflated prices), which means that you will have 1.2 million tied up at just better than inflation. Heck, even if your research proved that the property that you want to buy enjoys a 10% capital appreciation per year, you have to ask yourself: Can I beat 10% on my money by investing in a business and in the stock market AND not take the property tax, insurance and maintenance hit at the same time?!?

I would rather have 1.2 million dollars working for me, earning a far greater return and have it a bit more liquid at the same time, or rapped up in a 1.2 million dollar business that spins off 50k per month or more for you!

I think that’s the whole reason for the 20% rule(so that at the very minimum, 80% of that networth is working FOR you, getting you to your number and not tied up in your residence and actually COSTING you an arm and a leg in tax, insurance and upkeep liability).

I just have a feeling that the only ‘wealthy’ people who are purchasing apartments in NY city are: professional athletes, musicians, actors/actresses, extremely successful business owners,or those who inherited family wealth etc.. who already have SIGNIFICANT wealth achieved and paying cash for their NY home doesn’t put much of a dent in their networth. OR, it’s an investor who may not be completely wealthy yet, but purchases a couple of apartments(financed), rents out 3 and lives in one until the whole thing is paid off, then lives off the passive income received from the rents. I just think those are the true scenarios. I think that anyone just starting out, sinking just about ALL their money into purchasing a place there is strapped for the next 20-30 years and not getting richer quicker!

Josh – The one factor that stands out to me is your statement about being married in 6 months. Trust me when I tell you your thinking, including how you look at your finances will change drastically when you have others in your household to consider. There is a lot you can do now that you might not be able to do after you are married. While your financial “strategy” may not and probably should not change, it will be much more difficult to manage with a family.

I also noticed that you said “let’s assume I have 500,000 now” you then stated “once I have the apartment for 750,000 – 1.2mil then I’ll start the hedge fund.” After factoring in you wanting to be married in 6 months and own the apartment free and clear I have looked over your post several times and I still don’t understand when and where did you get the additional money?

If I’m really off base on this you’ll understand why I don’t make a lot of comments to the posts. But regardless of this I excited to watch you move forward and can hardly wait to see where your plans take you.

Scott, one thing i’ve failed to mention is that I plan on breaking the 20% rule, this stems from a biblical principles on not borrowing money, so I plan to pay cash. White plains hasn’t taken the hit like everyone else, maybe a 15% decline, I’m not really anticipating the properties appreciation making me rich, thats where the hedge fund comes into play.

Lee, please explain what changes exactly with your finances when you get married, assuming your spouse backs you 100%. It sounds to me like someone may choose to risk less because they are afraid because they have others depending on them. This is not the case for me because I do not respond to fear.

I do have to go from about .5 Mill to 4 mill, then get hit with taxes and fees, leaving me with 2 million. I plan to trade to 4 million within the next 6 months.
I’m not depending on my own abilities (although I do have some) I’m more depending on God’s abilities. It’s goes without saying that $18,000 to 4 million in less then a year is supernatural, and can only be explained with the intervention of God’s power.
And your not off base at all, these are things I needed to explain, thanks for asking.

Well Josh, I didn’t know you had plans to get to your number that quick! My number due to lower cost of living here is in the 4-5 million dollar range, so if that were me, and I was getting close to 4 million, I would be paying off my place and have no debt too! lol. If you are doing that well with your strategy, I need to look into it and just hurry up and get to my number!

Maybe we need to change this to 7 million in 7 months! 😉

I guess I’m to some degree still thinking on a small scale but the first thing that comes to mind when I think about finances changing when you get married is in the area of basic daily living expenses, food, clothing, transportation, doctor bills. medication, insurance, continuing College classes, your vacation trips double, you may have to purchase another vehicle for. Some people are “high maintaince”. But remember I said how you “look” at expenses will change and it has to unless you plan on living two totally seperate financial existances.

Assuming your spouse backs you 100% “could” be a huge assumption and “if” you are the least bit insecure, every time your spouse “questions” your actions or decisions made without her imput you will be forced to use great tact in answering her questions.

It has been my observation that couples who live in an “open relationship” where both parties have equal input in matters that involve the future of the family there is always the possibility of finances causing problems. The big three stressors in marriages are finances, sex and children.

I’m not trying to discourage you from marriage nor moving ahead with your financial plans and goals, I just saying that anytime two live together there is always the possibility of disharmony when it comes to financial matters.

There are a lot of “preacher type” things I could say but per our agreement at the beginning of this experiment we are limited in our comments about our religious and political beliefs and it doesn’t sound like you need to hear it anyway.

But the bottom line is, yes it’s possible for both spouses to be in one accord on financial matters and all will be well.

This is a really GREAT discussion, and the direction that I was hoping this forum would move: 7 minds (PLUS readers … where are you all?? … we need your input, too!!!!) are MUCH greater than one 😉

@ Josh – so far, I see the issues break down as:

1. Your attitude to borrowing: Lee, can you comment? Is Josh on the right track with his belief that there are “biblical principles on not borrowing money”? If so, we would need to help him respect his beliefs …

2. The 20% Rule – this has nothing to do with borrowing; it’s to do with your equity; as Scott explains: “that’s the whole reason for the 20% rule(so that at the very minimum, 80% of that networth is working FOR you, getting you to your number and not tied up in your residence and actually COSTING you an arm and a leg in tax, insurance and upkeep liability).”

How do you reconcile 1. with 2.? Simple: rent until $1.2 million (or $250,000 in WP) represents no more than 20% of your Net Worth! That’s what I do … pay cash for my houses, but spend no more than 1/5 of my total Net Worth when I do …

3. ‘Gambling’ 100% of your Net Worth to get to your Number; again God may be on your side … but, He also likes to test people: remember Job and Jonah?

4. Marriage: You may be 100% NON-risk averse … but, I guarantee that your wife WON’T be … either take your 100% risks now and swear to a life of risk-moderation before you get married, or – better yet – start practicing now … do you think that your future wife will want to see her husband-to-be lose his entire net worth on one mistake? Would you even accept a 1% chance on ruining the start to your marriage on such a ever-so-slightly-possible disaster?

5. If I said to you: Josh, you will make $1 million to $2 million in the next 12 months GUARANTEED … would you take it? And, if I said that you would SAFELY reach your Number in just 3 years more, would you say “not for me, Man”?

IF you TRULY BELIEVE that you can take $477k to $4 mill. in the next year … and, keep repeating “as long as [the Biotech] industry and rules which govern it remain unchanged” then what do you lose if you do ‘hedge’ your bets and pull 50% to 67% of your ‘winnings’ out into a MM301-style ‘passive investment’ strategy (a la the Perpetual Money Machine)?

6. Wouldn’t this help protect you in the unlikely – but, possible – event that one of the biotechs that you invest in has a terrorist attack, a crooked CEO, an FDA disaster, a class action, a …..?

7. After all, isn’t the objective to GUARANTEE that you reach your Number by your Date … rather than ‘make a sh*tload of money as quickly as possible? Just a question … 😉

This is a great discussion!

@ Josh – I think your idea of buying your house with cash is an interesting one. On the one hand, it would eliminate a significant amount of stress (if not from you, at least from your future wife!). But, as you said yourself, it seems silly to leave all of that cash on the sidelines in a sub par investment.

Someone else is willing to let you put 20% down on an investment and still reap the appreciation rewards of the full 100% value, while at the same time taking the other 80% and investing it (NOT in the stock market with everything else!!!) in say another property or two. You are not their slave!

It is like the master has given you talents and you can either bury them (i.e.-buy your house outright) or double them (leverage and invest).

Josh – I don’t mean to meddle, but I will offer one piece of unsolicited advice. I believe you have to be on the same page with your spouse financially to become successful in this endeavor.

It’s taken my wife and I the better part of 15 years together to truly reach that point. It hasn’t always been easy and a lot of my assumptions (and hers) proved to be incorrect.

The best solution I can offer is that you have to open the dialogue early and often in order to reach a common mindset. I pretty much don’t make any financial moves w/o first discussing it with my wife. I want her on board for the big win and the best way to do that is to discuss the plan with her and to have repeated discussions along the way.

To do otherwise is to invite potential misunderstanding, discord and disaster.

To quote Mother Love….”Romance without finance is a nuisance.”

Hmmm, you have some excellent points Adrian, and I foolishly overlooked the option of simply decreasing the cash I would spend on a home in order to align myself with the 20% rule, now I understand!

1. check out Proverbs 22:7

2. The way I think sometimes is unusual, I’m an all or nothing kind of guy I guess, I’ll work on toning this down.

3. Job invited troubles into his life because his sacrifices were based on fear, it’s right in the beginning of the book of Job (Job 1:4-5). Jonah was just disobedient.

4. This is a good point,

5,6. I will consider moving 50% into a less-risky strategy.

7. That may be the problem, I see it as possible, even very likely, and see no reason to delay.

Ryan, This is extremely interesting, I’m going to have to chew on this for a while. I see your point about the man who buried his money.

Jeff, I cherish advice like that, please keep it coming.

Great discussions here, everyone. The discussion about Debt prompt me to look up some notes from a Crown Ministries class I took a while ago. The chapter on Debt did bring out several scriptures including the one pointed out by Josh. The authors of the workbook did describe 3 conditions when borrowing is allowed:

1) Item purchased with debt produces income or has the potential to appreciate.
2) Value of item equals or exceeds the amount owed against.
3) Debt is not so high that the repayment puts undue strain on the budget.

Josh, from my notes I found a few scriptures on saving and investing that is relevant to the discussion above:
Proverbs 21:5
Ecclesiastes 5:13,14
Ecclesiastes 11:2

Adrian, Josh is correct in his understanding of the biblical concept of “borrowing” and he is to be commended for his willingness to obey.

Also there is far more scriptures directed at those who “have” wealth commanding them to not charge exorbitant amounts of interest. Wealth is to be used to help those less fortunate recover from the stress of failure rather than making the wealthy more wealthy.

The problem comes because we live in a capitalistic society that is run by debt. Even churches borrow money to either build or buy buildings and property.

Believers often send mixed messages, for instance they might ‘not’ borrow money because of the biblical mandate not to, yet they ‘will’ make unwise “high risk investments” based only upon speculation and hope which is gambling.

The bottom line for a believer is to do your home work, investigate so you can make informed decisions, pray for wisdom and do nothing that is in conflict with scripture.

For the non-believer the bottom line begins with a right relationship with God. (first things first)
(Read Romans 3:23, Romans 6:23, Romans 10:9-16 and Romans 12)

JOSH – thank you for your bold witness don’t stop and remember we are all on this journey together.

@ Josh – well , Mark, Ryan and Lee have put to bed your biblical fears about borrowing … you will meet the three conditions, right? And, if the Church can borrow to build churches ….

… and, as long as you meet your Date there IS no delay 😉

But, for now:

– I’ll take “I will consider moving 50% into a less-risky strategy”

– Turn off the spotlight (with thanks to all the fantastic contributions … I think everyone would have to agree that this has been the best, single post on this blog, to date)

– And, now I can go to sleep soundly 😉

What if you took the 500k and purchased an apartment building instead of an apartment? It would have to be further away in an area hit harder where property has depreciated more than NYC. With the housing market so bad right now there are many many more renters. If you wanted to you could even live in one of the units, but it would be a longer commute for you. Paying cash could mean an immediate return on your investment if there are current tenants in the building.

Adrian, Mark, Scott, Lee, Jeff and Ryan, thanks for all the spectacular advice. 7 heads are exponentially better then one.
This post has challenged some of my investing principles I think for the better. Thank you gentlemen.

@ Juliana – Now THERE’S a great piece of advice … esp. if you can get the building to cashflow positive from the get-go …

Juliana, a good suggestion, but real estate turns me off. Stocks are more my speed, what do you think about 500K in a high yield REIT or several REIT’s?
And thanks for commenting, 8 heads now and counting…

[…] in fact, some horses have jumped right out of the gate so fast, we’ve had to gently coax them into slowing down, […]

Honestly Josh, I don’t know a thing about REITS or the stock market. But it is best to go with what you know and love. Now I see that everyone else has their Share Your Number pic. Do I need to add my pic to my profile and it will pop up or do I need to sign up somewhere else?

I think you need a wordpress account…then upload your photo,
Hope you visit often!

AHa!…I am definitely looking into that right away! Since I am on a mission to reach to my number and constantly paying attention to it. Remember..whatever you pay attention to grows! Whether it is troubles or good stuff.

This is the second time today I heard about wordpress.
Thanks and I will be here often.

[…] Josh found out I like to put our 7 Millionaires … In Training! under the virtual ’spotlight’ […]