Wealth and the Stockbroker

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BankFC's picture
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It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 
However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 
I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.
Most made money in 1 of 2 ways.  Self employed business owner or real estate.
The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.
That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.
It astounds me to see the type of money being made.
Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time
Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.
 

BankFC's picture
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Sorry, I put up this message in spurts while doing other things.  As I was proofreading I see I made a couple errors.  Bring on the grammatical firing squad.

The Judge's picture
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Your observations are true in my experiences as well.  Though you should also include inheritances as well. The brokerage business can provide excellent cash flow, but rarely provide true wealth over time.
As an FA, I think our job with these types of individuals is simply to make sure their cash is working hard for them (i.e. muni's). Generally, I recommend against the ultra-wealthy from investing in stocks, unless they truly enjoy the markets and want to open the casino for a (very) small portion of their $.  My opinion is that they've already made the $, so preserve it. Why take the risk?

Mike Damone's picture
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BankFC wrote:Most made money in 1 of 2 ways.  Self employed business owner or real estate.
I would agree.  I don't know anyone who became filthy rich by investing in the stock market.
 
 
 

ribsnwhiskey's picture
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I think your post has some relevance to it.  However, why would anyone come see YOU if they have made a fortune in the market?  That is no diss on your or anyone, but if a guy had make all of his wealth from brilliant investing in equities, why is he seeking your (or anyone else’s) advice?  Wouldn't he stick with the guy that made him all the money, or himself if he was the one who chose his investments.  <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
I'm in no way saying we can not help these people, but someone who has had that much success would generally not be out looking for someone new unless he is mad at his broker.  Most people don't get mad at brokers who make them millionaires though. 
I guess you could find them if you offered a very specialized service that their current broker doesn't offer. 

Indyone's picture
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Interesing views here...
I would submit that the reason that this business rarely provides wealth for us is that too many of us want to spend it before we have it.  We have an image to uphold.  We want to reward ourselves for all of our hard work.  We want to buy pricey, but small and useless dogs.  The trophy wife is expensive to maintain, etc.,etc.,etc.
As far as "rich" goes, it all depends upon the yardstick used.  If getting to $1 mil is "rich", I'm there now, and I'm a long way from retiring.  With a little discipline, a million dollars is not at all difficult to achieve using today's numbers.  If rich is $20-30 million, then no, I probably won't get there but who knows...I haven't sat down to work through the compounding of earnings calculation.
I am self-employed and I have and do dabble in real estate (with mixed results).  Given that I'm new to the self emplyment gig, and my success in real estate has been limited, I'll submit myself as a posterchild that you can accumulate a mil in this business.  I'd venture to guess that many million dollar producers retain several times that.  I can tell you that some of my competitors are without a doubt, millionaires, and I'm guessing that most of them will be by the time they retire.  If you're seeing a lot o advisors that will not retire with even one million dollars, I will submit that either they are not very successful as advisors or they have a woefully inadequate spending discipline.
Judge,  I'm curious as to how you came to the capital preservation strategy.  I know the wealthy have plenty of margin for error, but isn't it our mission to attempt to grow that capital as far as we reasonably can?

Soothsayer's picture
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I do have one client who I would consider "rich" as a result of investing in the stock market.  I always say that he lived the mountain chart so many mutual fund companies like to use in their marketing pieces.  As a young man and bachelor, he was a very dedicated saver.  He invested his first money in the stock market in 1934.  He served in WWII as a relatively older soldeir, but did not cash most of his GI paychecks.  At the end of the war, he invested that money, too. 
Today, he is almost 90 years old, and still sharp as a tack.  He holds about 40 equity positions.  He can probably recite 37 of them from memory on a moment's notice.  He knows approximately how many shares of each that he owns, the current dividend yield, about what his basis is in each position, etc., etc.  He has gifted millions of dollars in the past several years to The Boys and Girls Clubs, UNICEF, Project Smile, The Fellowship of Christian Athletes, and his church just to name a few.  He is not a college graduate. 
In case you're wondering, his most recent purchase was Ford (F)--against my advice.  He is already up significantly from his purchase price.  A good knack for the market doesn't hurt, either.

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Soothsayer wrote:
I do have one client who I would consider "rich" as a result of investing in the stock market.  I always say that he lived the mountain chart so many mutual fund companies like to use in their marketing pieces.  As a young man and bachelor, he was a very dedicated saver.  He invested his first money in the stock market in 1934.  He served in WWII as a relatively older soldeir, but did not cash most of his GI paychecks.  At the end of the war, he invested that money, too. 
Today, he is almost 90 years old, and still sharp as a tack.  He holds about 40 equity positions.  He can probably recite 37 of them from memory on a moment's notice.  He knows approximately how many shares of each that he owns, the current dividend yield, about what his basis is in each position, etc., etc.  He has gifted millions of dollars in the past several years to The Boys and Girls Clubs, UNICEF, Project Smile, The Fellowship of Christian Athletes, and his church just to name a few.  He is not a college graduate. 
In case you're wondering, his most recent purchase was Ford (F)--against my advice.  He is already up significantly from his purchase price.  A good knack for the market doesn't hurt, either.

How old do you think he was in World War II?

Soothsayer's picture
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About 30 years old.  Why do you ask?  And, BTW, where is my prize for winning your "where in the world was this picture taken" contest?

troll's picture
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Indyone wrote:Interesing views here...
I would submit that the reason that this business rarely provides wealth for us is that too many of us want to spend it before we have it.  We have an image to uphold.  We want to reward ourselves for all of our hard work.  We want to buy pricey, but small and useless dogs.  The trophy wife is expensive to maintain, etc.,etc.,etc.
As far as "rich" goes, it all depends upon the yardstick used.  If getting to $1 mil is "rich", I'm there now, and I'm a long way from retiring.  With a little discipline, a million dollars is not at all difficult to achieve using today's numbers.  If rich is $20-30 million, then no, I probably won't get there but who knows...I haven't sat down to work through the compounding of earnings calculation.
I am self-employed and I have and do dabble in real estate (with mixed results).  Given that I'm new to the self emplyment gig, and my success in real estate has been limited, I'll submit myself as a posterchild that you can accumulate a mil in this business.  I'd venture to guess that many million dollar producers retain several times that.  I can tell you that some of my competitors are without a doubt, millionaires, and I'm guessing that most of them will be by the time they retire.  If you're seeing a lot o advisors that will not retire with even one million dollars, I will submit that either they are not very successful as advisors or they have a woefully inadequate spending discipline.
Judge,  I'm curious as to how you came to the capital preservation strategy.  I know the wealthy have plenty of margin for error, but isn't it our mission to attempt to grow that capital as far as we reasonably can?I'll second that.   Some of the spending habits of the advisors I've known over the years are incredibly poor.  When the markets are good they live according to the size of their last paycheck, and when markets are bad they have to hustle like hell to keep up the payment on their BMW.Too, I've noticed many advisors sadly don't follow their own investment advice and strategies.  They get caught up in stupid speculative plays.  I have, at times, been guilty of this.  I resolved, however, that I would focus more on eating my own cookin' a few years ago, and it's served me very well.

rightway's picture
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My office has a bunch of reps that have piles and piles of MER with
basis of a couple bucks...all well beyond 7 figures.  I am not
saying this is the way to go, but it is fact right now anyway.

Indyone's picture
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That just proves that millionaire advisors are far more common than once thought...

vbrainy's picture
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Joined: 2006-07-26

I see wealthy older brokers who have worked hard.
I see young idiotic brokers making alot of money and spending it all.

knucklehead's picture
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BankFC wrote:
 
It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 
However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 
I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.
Most made money in 1 of 2 ways.  Self employed business owner or real estate.
The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.
That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.
It astounds me to see the type of money being made.
Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time
Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.
 

You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.

WealthManager's picture
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My observations largely confirm your statement.  I of course can think of many exceptions but looking at those who I know I would estimate that more than 50% made their “fortunes” through self-employment or real estate.  Another large chunk of the ultra high net worth individuals made their fortunes through stock options granted while serving long tenures at large multi-national corporations.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
 
I don’t necessarily agree that we can’t become “rich” as financial advisors.  Maybe my office is an exception, but the majority (my guess is 90%) are receiving compensation in excess of $200K/year with some even as high as the seven-figures.  While $200K/year may not make you “rich” it is certainly better than the average salary in corporate <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />America.
 
--WM

BankFC's picture
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knucklehead wrote:BankFC wrote:
 
It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 
However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 
I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.
Most made money in 1 of 2 ways.  Self employed business owner or real estate.
The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.
That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.
It astounds me to see the type of money being made.
Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time
Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.
 

You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.

You are an idiot.  This thread was about as civilized and smut free as I have seen in awhile, and then you come along and show your lack of a brain.
Not worth my keystrokes.

BankFC's picture
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I appreciate everyone else's point of view! 

vbrainy's picture
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knucklehead is a good handle for you, but I like wasteofskin better.
A Financial Advisor can work in many channels, the bank is just one example.
Did you know you can be a LPL rep and work in a bank? dork

knucklehead's picture
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BankFC wrote:knucklehead wrote:BankFC wrote:
 
It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 
However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 
I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.
Most made money in 1 of 2 ways.  Self employed business owner or real estate.
The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.
That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.
It astounds me to see the type of money being made.
Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time
Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.
 

You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.

You are an idiot.  This thread was about as civilized and smut free as I have seen in awhile, and then you come along and show your lack of a brain.
Not worth my keystrokes.

Hey pooh-pooh head...first you said "all snide comments are welcome." Second...what did I say that is NOT true? Here's a hint...it rhymes with "nothing."

knucklehead's picture
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vbrainy wrote:
knucklehead is a good handle for you, but I like wasteofskin better.
A Financial Advisor can work in many channels, the bank is just one example.
Did you know you can be a LPL rep and work in a bank? dork

May I suggest you carefully read what I wrote so you don't have to prove to the world that you are a moron? By the way...your mom needs a bath. Sorry.

troll's picture
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BankFC wrote:knucklehead wrote:BankFC wrote:
 
It seems to me from my experience in this business that us brokers rarely get "rich."  We as a group may dress nice, have nice cars, but if in the end (retirement) if we have anywhere close to a million dollars to show for it we are lucky. 
However, we are in the unique position (along with lawyers, CPA's, and bankers) to get a "free look" if you will into how fortunes are made by many people. 
I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.
Most made money in 1 of 2 ways.  Self employed business owner or real estate.
The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.
That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.
It astounds me to see the type of money being made.
Argue with me if you wish, but I see it happen every day.  It amazes me, and the whole time
Anyway, I just thought I'd put this out here as self expression.  Take it for what you will, and all snide comments are welcome.
 

You don't have experience in this business. YOu are a bank employee. YOu are not in any business. The bank is in this business.

You are an idiot.  This thread was about as civilized and smut free as I have seen in awhile, and then you come along and show your lack of a brain.
Not worth my keystrokes."Not worth my keystrokes", yet you implicity legitimize his comment by taking a potshot back.  Either take the high road or don't respond.  And not that I'm hardly guilt free of that on other threads, I will admit.  Not meaning to be snide, but just offering (hopefully constructive) thoughts.Note, by the way, that all this 'wealth creation in real estate' talk is coming at the tail end-or just after the peak-of an incredible five-year bull market in real estate.  I would gladly bet those 10 million dollar net worth clients were worth a lot less 5-6 years ago.   Too, in 1999, we were all talking about the 'new economy' and the true heart of wealth creation was in Silicon Valley, venture funds, and the internet.The more things change the more they stay the same, a wise man once said.

anonymous's picture
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If anyone cares, I know plenty of people who have gone the insurance route and have become wealthy.
When it comes to 2nd generation wealth, I'd certainly rather be the kid of a successful insurance producer than one of a successful broker.

NASD Newbie's picture
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anonymous wrote:
When it comes to 2nd generation wealth, I'd certainly rather be the kid of a successful insurance producer than one of a successful broker.

What does that mean?  To the extent that accumlated wealth is a measure of success, are there different standards, different totals, among the various professions?
If you inherit $1 million earned by your insurance agent father is it more than $1 million earned by your stock broker father?

hubbabubba's picture
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Anon, do you mean that you would be taking over the book of business?  Otherwise, I think Newbie's right.  $1mm is $1mm in the bank account.

dude's picture
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I think he's trying to imply that successful insurance brokers have/make more money than stock brokers? (I don't know whether this is true or not).
I will say that the successful insurance producer probably has more insurance inforce though , therefore making him/her the clear winner in 2nd generation wealth.

vbrainy's picture
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knucklehead wrote:vbrainy wrote:
knucklehead is a good handle for you, but I like wasteofskin better.
A Financial Advisor can work in many channels, the bank is just one example.
Did you know you can be a LPL rep and work in a bank? dork

May I suggest you carefully read what I wrote so you don't have to prove to the world that you are a moron? By the way...your mom needs a bath. Sorry.

Great comeback.  I think you missed your calling.  You should be in showbiz--you would make a great clown.

anonymous's picture
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"I will say that the successful insurance producer probably has more insurance inforce though , therefore making him/her the clear winner in 2nd generation wealth."
Dude, that is exactly what I meant.

BankFC's picture
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Quote:Note, by the way, that all this 'wealth creation in real estate'
talk is coming at the tail end-or just after the peak-of an incredible five-
year bull market in real estate.  I would gladly bet those 10 million dollar
net worth clients were worth a lot less 5-6 years ago.   Too, in 1999, we
were all talking about the 'new economy' and the true heart of wealth
creation was in Silicon Valley, venture funds, and the internet.The more
things change the more they stay the same, a wise man once said.[/
QUOTE]
That my friend is where you, and me until the past year, are missing
the boat.  The bull market you speak of is the environment where any
idiot can buy an already overpriced house, hold it for six months, and
then it for a just about guaranteed profit.  I agree, that is a residential bull
market.
HOWEVER...a couple things.
First of all, I live in the Southeast, and we never experienced the bull
market you speak of to the extent the Northeast, California, etc (with the
exception of FL, which is altogether it's own animal)...prices have steadily
inclined on existing construction (older, established neighborhoods), with
a lot of new construction coming up daily.
Secondly, EVEN IF PRICES STAYED CONSTANT, i.e didn't rise 6-8%
annually as they have in my area, what do you think it costs a BUILDER to
build a house versus it's true value (relative to comps in a given area)?  [/
P]
I tell you. At most price points, whether were are talking about a
$250,000 house, or a $2,500,000, the avg builder will net 25-30% of
the selling price as profit.

30%, even if the market doesn't move an inch.
Of course their are some risks, and that is why the smart builders (IMO)
are staying where the highest demand is....1500 to 2500 sq ft, middle
income style houses that look good, are nice, and sell quick.
I see it every day...as I said, my bank caters to these folks ALOT.
 

Beagle's picture
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I would agree with the statement that financial advisors are horrible investors or savers of their own money.  My experience is that way to many have a gambling nature and are making wild bets on micro-cap stocks.  Not all but I've seen a good number doing just that.As for becoming wealthy via the stock market - it can happen but simply put, you need money to make money.  I could invest $300k now and be very well off in 50 years but how many 20 year olds have that kind of money without taking massive leverage?  That's why real estate works.I do have clients who became rather wealthy via the stock market.  We looked through our book of clients back in the late '90s and found every one of them did it via small bank stocks and consumer goods.  We've had multi million dollar accounts who were mostly invested in Ralston Purina, Anheuser Busch and Emerson Electric (yes I'm in St. Louis area).  I've also had them with BAC and C because they had significant investment dollars in small regional banks and very small insurance companies that were gobbled up a few times.

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I disagree with this totally. More people "get rich" in the stock market than real estate and here is the way it is done.
1.Lets say you work at a private company that is now coming public. The private shareholders who  have a low cost basis suddenly are multi-millionaires. This is assuming that they are able to sell their stock when the lockup period ends. I remember I counted at least 20 people in the homstore.com secondary offering that sold more than a million dollars in stock  @110 a share. (now 4). This happens all the time
2. Venture capital people who are in these companies before they become public
3. You get lucky(as many did in Real estate) and you company does well and you work there for 20 years. ex MO
4. You get lucky and work at a company that goes up and you get stock options and sell. ex AOL or any tech stock during the bubble. Then of course talk to an investment professional, like ourselves, to explain to you that you need to diversify out of tech,real estate  or whatever you made your money in to preserve your wealth.
5. You get a client, and hopefully yourself, to follow a disciplined plan of savings and debt reduction to achieve a million + dollars.
What we do is preserve wealth. We are not going to find the stock that makes someone a million. Im sure it happens sometimes but if we did it is usually luck and not our pick that did it.
One last thought on real estate. If you bought a house for 500k, borrowed 500 and it went to one million in ten years. How much did you really gain. 500k X 6%=30k a year X 10=300k total cost 800k. Yes I know you get a deduction on the interest, but you also pay taxes and insurance. 2500 a month(30k a year) for the same 10 year period into New Perspective fund would be 503000 dollars. Granted you can live in the house but this is for illustration purposes. By the way what if the house did not double or WENT DOWN.
Lastly, simply save 10% of what you make and do it for 20 years and keep your debt levels normal and you will have a million + dollars.

no idea's picture
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It seems the common ingredient for both real estate and equity success is time. You know the old quote... it's not timing the market, it's time in the market.

BankFC's picture
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aldo63 wrote:
I disagree with this totally. More people "get rich" in the stock market than real estate and here is the way it is done.
1.Lets say you work at a private company that is now coming public. The private shareholders who  have a low cost basis suddenly are multi-millionaires. This is assuming that they are able to sell their stock when the lockup period ends. I remember I counted at least 20 people in the homstore.com secondary offering that sold more than a million dollars in stock  @110 a share. (now 4). This happens all the time
What % of the population actually gets the opportunity the participate in something like this, and at that level?
2. Venture capital people who are in these companies before they become public
Again, an ULTRA SMALL portion of the overall population does not make for an accurate example.
3. You get lucky(as many did in Real estate) and you company does well and you work there for 20 years. ex MO
Sure you can sock away money for 20 years and (hopefully)build up a decent nest egg.  That's not the point.  The point is I have seen guys go from VERY AVG to net worths well over a million buck IN JUST A FEW YEARS through real estate building and development.
4. You get lucky and work at a company that goes up and you get stock options and sell. ex AOL or any tech stock during the bubble. Then of course talk to an investment professional, like ourselves, to explain to you that you need to diversify out of tech,real estate  or whatever you made your money in to preserve your wealth.
AGAIN, vast minority.
5. You get a client, and hopefully yourself, to follow a disciplined plan of savings and debt reduction to achieve a million + dollars.
What we do is preserve wealth. We are not going to find the stock that makes someone a million. Im sure it happens sometimes but if we did it is usually luck and not our pick that did it.
One last thought on real estate. If you bought a house for 500k, borrowed 500 and it went to one million in ten years. How much did you really gain. 500k X 6%=30k a year X 10=300k total cost 800k. Yes I know you get a deduction on the interest, but you also pay taxes and insurance. 2500 a month(30k a year) for the same 10 year period into New Perspective fund would be 503000 dollars. Granted you can live in the house but this is for illustration purposes. By the way what if the house did not double or WENT DOWN.
See my point?  Why is it that so many folks in THIS field cannot grasp the notion that something (a house) can be worth much more than the sum of its parts? 
Builders don't build houses for $500,000 and sell them for $500,000...why is that SO difficult for stock minded folks to understand?
Lastly, simply save 10% of what you make and do it for 20 years and keep your debt levels normal and you will have a million + dollars.
What if you only make 6.25/hr?  If I save 10% of that, will I have a million dollars at the end of twenty years? Try to refrain from silly blanket statements.

troll's picture
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BankFC wrote:aldo63 wrote:
I disagree with this totally. More people "get rich" in the stock market than real estate and here is the way it is done.
1.Lets say you work at a private company that is now coming public. The private shareholders who  have a low cost basis suddenly are multi-millionaires. This is assuming that they are able to sell their stock when the lockup period ends. I remember I counted at least 20 people in the homstore.com secondary offering that sold more than a million dollars in stock  @110 a share. (now 4). This happens all the time
What % of the population actually gets the opportunity the participate in something like this, and at that level?
2. Venture capital people who are in these companies before they become public
Again, an ULTRA SMALL portion of the overall population does not make for an accurate example.
3. You get lucky(as many did in Real estate) and you company does well and you work there for 20 years. ex MO
Sure you can sock away money for 20 years and (hopefully)build up a decent nest egg.  That's not the point.  The point is I have seen guys go from VERY AVG to net worths well over a million buck IN JUST A FEW YEARS through real estate building and development.
4. You get lucky and work at a company that goes up and you get stock options and sell. ex AOL or any tech stock during the bubble. Then of course talk to an investment professional, like ourselves, to explain to you that you need to diversify out of tech,real estate  or whatever you made your money in to preserve your wealth.
AGAIN, vast minority.
5. You get a client, and hopefully yourself, to follow a disciplined plan of savings and debt reduction to achieve a million + dollars.
What we do is preserve wealth. We are not going to find the stock that makes someone a million. Im sure it happens sometimes but if we did it is usually luck and not our pick that did it.
One last thought on real estate. If you bought a house for 500k, borrowed 500 and it went to one million in ten years. How much did you really gain. 500k X 6%=30k a year X 10=300k total cost 800k. Yes I know you get a deduction on the interest, but you also pay taxes and insurance. 2500 a month(30k a year) for the same 10 year period into New Perspective fund would be 503000 dollars. Granted you can live in the house but this is for illustration purposes. By the way what if the house did not double or WENT DOWN.
See my point?  Why is it that so many folks in THIS field cannot grasp the notion that something (a house) can be worth much more than the sum of its parts? 
Builders don't build houses for $500,000 and sell them for $500,000...why is that SO difficult for stock minded folks to understand?
Lastly, simply save 10% of what you make and do it for 20 years and keep your debt levels normal and you will have a million + dollars.
What if you only make 6.25/hr?  If I save 10% of that, will I have a million dollars at the end of twenty years? Try to refrain from silly blanket statements. Yes and the 'guys' you have met are not necessarily a representative sample of all of those who have attempted to develop real estate, and they have done it in a VERY favorable environment over the last few years.

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Q How many people are builders.
A a vast minority. Do you really think they are all rich. Some are so highly leveraged they could lose it all very quickly
Q how many buiders are there when the real estate market goes down.
A smaller minority
Fact- if you only make 6.25 an hour, you will not make money in real estate or the stock market. Invest in yourself for education, By the way when I made 18000 a year when I started as a broker in 1989. i invested 300 a month in mutual funds(american funds). I still do that. It is now 130k from that alone. I have much more than that
Q Do you know how many builders lost everything in the late 1980 early 1990's. Do you realize the house they sell for 700 that they built for 500 is great. What about the spec house(s) they cannot sell. I was talking about personal residence in my example
A. many. leverage will kill these people when the market goes down
Lastly, propsect these builders, open accounts, show them the history of the market and real estate and explain divesification to them. Explain to them how the tech bubble blew up and how me, you and others in this business with net worths currently less than them can help them.
 

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aldo63 wrote:
Q How many people are builders.
A a vast minority. Do you really think they are all rich. Some are so highly leveraged they could lose it all very quickly
No, I don't think the minority of people are builders.  That would make no sense logically.  Also why it's such a great business to be in.
Q how many buiders are there when the real estate market goes down.
A smaller minority
You need to turn off the TV (and the talking heads of doom and gloom) and look around you.  No real estate bubble here in Southeast overall (every thing has an exception SOMEWHERE).  Plus demand for the $150,000-$300,000 house is STRONG.
Fact- if you only make 6.25 an hour, you will not make money in real estate or the stock market. Invest in yourself for education, By the way when I made 18000 a year when I started as a broker in 1989. i invested 300 a month in mutual funds(american funds). I still do that. It is now 130k from that alone. I have much more than that
Congratulations.  I will make more on the three spec houses me and my partner (a GC w/20 years experience) are building over the next six months than you have investing since 1989.  And yes, this has been disclosed as an outside business activity thank you.
Q Do you know how many builders lost everything in the late 1980 early 1990's. Do you realize the house they sell for 700 that they built for 500 is great. What about the spec house(s) they cannot sell. I was talking about personal residence in my example
A house not selling quickly is OBVIOUSLY a risk.  You (actually, I) am mitigating the risk by
1)  Building houses at high demand price points
2)  Building in desirable locations
3)  Being EXTREMELY diligent regarding budget/bids, timetables, change orders, expenses in general, etc
A. many. leverage will kill these people when the market goes down
Lastly, propsect these builders, open accounts, show them the history of the market and real estate and explain divesification to them. Explain to them how the tech bubble blew up and how me, you and others in this business with net worths currently less than them can help them.
Honestly, I admire you seemingly genuine zest for the fundamentals of this business, and it sounds like you would work well with the folks who need assistance with fundamental investing.
 
 
 

aldo63's picture
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My last response.
quit the investment business and go into real estate or maybe the mortgage business. 
you are smart, i am dumb
real estate is the only place to make money .
Debt is great
the inventory in houses is just a tv thing
the over leveraged nation will increase their net worth 20% next year from appreciation in real estate
lu was a steal when it dropped to 50, so was csco, emc, intc, homs, arba, bway,crfh,artd,clic,ect
live long and prosper
 
 
 

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aldo63 wrote:
My last response.
quit the investment business and go into real estate or maybe the mortgage business. 
Why not do both financial advising and real estate?  Can't be both?
you are smart, i am dumb
I don't question your intelligence.  Just sometimes folks can't see the forest for the trees.
real estate is the only place to make money .
I never said that...I contend that for someone who has the inclination, opportunity, and funds, real estate building and development is a QUICKER way to build wealth versus plunking  $1000 a month into a mutual fund. 
Debt is great
As a tool, it can be.    Did you pay for your house in cash?  Ever meet a small business owner that used SBA/home equity/whatever to start a small business.
the inventory in houses is just a tv thing
Probably not everywhere, but not like they make it out to be.
the over leveraged nation will increase their net worth 20% next year from appreciation in real estate
No, not from your own house.  Obviously you are STILL missing the point, which shows you are either being close minded, or you simply cannot grasp what I am saying.
lu was a steal when it dropped to 50, so was csco, emc, intc, homs, arba, bway,crfh,artd,clic,ect
Don't get the relevance of this comment.  Care to elaborate?
live long and prosper
Are you a trekkie?    You do as well.
 
 
 

futureadvisor's picture
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Do the wirehouses frown on brokers if they try and do some real estate development work on the side?  It almost seems like a natural progression for some, and if you have clients that are willing to invest in your projects...

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futureadvisor wrote:Do the wirehouses frown on brokers if they try and do some real estate development work on the side?  It almost seems like a natural progression for some, and if you have clients that are willing to invest in your projects...Yes they do.  They generally frown on brokers who make money on ANYTHING other than working for them.

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As long as it doesn't take away from meeting production goals, and is not a conflict of interest in some way with the bank or the client, then it should be okay.
I am producing above my goal, and what time I spend on outside activities is in excess of the 8-5 I put in at the bank.
Yes, I work 8-5.  That's one of the reasons why I came to a bank, for better working conditions.  It has given me the opportunity to have a life again for one, and to do other things for two.

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BankFC wrote:As long as it doesn't take away from meeting production goals, and is not a conflict of interest in some way with the bank or the client, then it should be okay.
I am producing above my goal, and what time I spend on outside activities is in excess of the 8-5 I put in at the bank.
Yes, I work 8-5.  That's one of the reasons why I came to a bank, for better working conditions.  It has given me the opportunity to have a life again for one, and to do other things for two.I hope you can do it, really.  Just telling you how compliance people think.

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BankFC wrote:
I have found that very few of them made ANY SIGNIFICANT MONEY by buying and selling stocks.  Some saved over the past 40 years, and the cumulative effect might be significant, but if you look at it over an annualized basis, it isn't that overwhelming.
Most made money in 1 of 2 ways.  Self employed business owner or real estate.
The clients that I have clients who are truly rich, and by rich I mean worth in excess of 10 million or 20 million dollars didn't make their money in mutual funds.  One of them grew up dirt poor, and had NEVER EVEN BOUGHT A STOCK until he met me.  Made all his money in real estate.
That my friends, real estate, is where I believe many fortunes are made.  Not by buying already overpriced houses during a bubble hoping it doesn't pop, but by developing and building residential and commercial real estate.
You are correct.  That is why, when I meet young clients (I'm under 30 still - barely) and they ask about the best way to accumulate wealth, I tell them that if they have the start up capital ($10k to get started) and willing to learn and risk tolerance, then by far, real estate is the way to go.  All because of two things 1) cheap money and 2) leverage.
I personally own 5 properties including my own.  RE is a hard deal to beat.  I'd much rather get just an average THREE percent return on my money in RE, than an average 11% return in the markets.  Why?  Leverage.  I only had to put down 10%.  So that 3% return, was actually 30%.  And my renters pay my debt service completely.  And don't forget the tax benefits of having rental props.
And you are right...the development business is an even better return (I own a few books on this and am meetin people in that industry whenever possible). 

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The past is littered with the corpses of "can't lose" propositions and real estate isn't looking too healthy, right now.
Also, stocks won't call you at 3AM to say that the toilet is overflowing. Bonds won't cram 6 people into a living space ideally suited for just 2. And neither one will trash the place, either.
Furthermore, let's make sure you don't buy a place with structural defects and mold.
I'll take owning securities over real estate.

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doberman wrote:The past is littered with the corpses of "can't lose" propositions and real estate isn't looking too healthy, right now.
Also, stocks won't call you at 3AM to say that the toilet is overflowing. Bonds won't cram 6 people into a living space ideally suited for just 2. And neither one will trash the place, either.
Furthermore, let's make sure you don't buy a place with structural defects and mold.
I'll take owning securities over real estate.
Yes, it sometimes isn't easy.  But again, it takes intelligence and (surprise) a long-term outlook.  Your concerns are common among those who have not invested in real estate.  But from real experience I can tell you not once in two years has a toilet ever over-flowed.  Noe one has ever called me in the middle of the night. The worst call has been a malfunctioning  a/c internal unit...but that is why you buy home warranties for $20/month on each property.  I buy in nice upper-middle class neighborhoods too.  I carefully screen my tenants and require large deposits.  I schedule quarterly inspections of each property to insure everything is going smoothl.  I buy for the long-term (10+ years) and could care less what the real estate market does this particular year.  You see...it's like building an advisory business.  You have a plan and you work your plan.
And, like I said...bring on the *measly* 3 (30) percent appreciation years.  Yeah, it's worth it.  As I said, the original poster made a good observation.  Over 50% of the wealth in this country is built through real estate.  I was lucky to have learned this and acted on it at an early age.

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doberman wrote:
Also, stocks won't call you at 3AM to say that the toilet is overflowing. Bonds won't cram 6 people into a living space ideally suited for just 2.
Btw...you would use bonds to "accumulate wealth"?  That is what I said real estate is used for.  To me, RE is not liquid enough to be used in retirement to any great deal, for income.  Also, 12% on a good year for stocks vs. 30% on a bad year (yeah, where I own RE that would be a bad year - and I'm talking long-term historically, not just the irrational last 5 years of RE bull market)?  And you get very nice tax benefits with the rental props.  Again, the picture starts to paint itself.
Lastly, I was shocked at your post.  I looked at a lot of your historical posts on other threads and you seemed so intelligent in those threads.

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I can tell you being a landlord is a waste. I own two rental properties (Both for sale)and my family owns many, if I had invested the money in a REIT or RE MF I would be far better off today without the headaches of city inspections/fees, tenants, vacancies, etc. I agree maintenance is not a huge issue, but when it comes time to raise the rent it seems like taxes or insurance rise faster than the increase in rents.

Also our parents spend considerable amounts of time on maintaining properties it pretty much consumes their lives, they cannot go on vacation without worrying, they are in court battles at least once or twice per year and constantly showing a house or apartment. I know someone is going to chime in with that is what property managers are for. Obviously you have never had the experience of owning rentals. They will do much of this and take 10% off the top, they do not care about you or your property they only care about their 10% so they stick in crappy tenants, find laborers who do shottty jobs and overpay (Probably getting kickbacks) Property managers- No Way and we've dealt with many!

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I use all of my real estate holdings for immediate cash flow.  I'm not into flipping properties mainly because I am not into construction, etc.  My stocks are used for retirement and wealth building.  The bulk of my net worth though is in real estate.  I believe a truly balanced financial portfolio is underscored with balanced real estate holdings (not too heavy in any one type of property) and a balanced securities portfolio and then maintaining balance between the both of them...
I understand the misfortunes of real estate as well...I lost EVERY property I owned to Hurricane Katrina and Hurricane Rita, just a year or two after Ivan took my condo in Florida...  But by and far Real Estate is still the best investment long term (in my humble opinion) and I would suggest to anyone trying to get into that business to put away the paralysis of analysis and after talking to some professionals to just get out there and do it!  Just like you did with stocks...

ManDate's picture
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bankrep1 wrote:I can tell you being a landlord is a waste. I own two rental properties (Both for sale)and my family owns many, if I had invested the money in a REIT or RE MF I would be far better off today without the headaches of city inspections/fees, tenants, vacancies, etc. I agree maintenance is not a huge issue, but when it comes time to raise the rent it seems like taxes or insurance rise faster than the increase in rents. Also our parents spend considerable amounts of time on maintaining properties it pretty much consumes their lives, they cannot go on vacation without worrying, they are in court battles at least once or twice per year and constantly showing a house or apartment. I know someone is going to chime in with that is what property managers are for. Obviously you have never had the experience of owning rentals. They will do much of this and take 10% off the top, they do not care about you or your property they only care about their 10% so they stick in crappy tenants, find laborers who do shottty jobs and overpay (Probably getting kickbacks) Property managers- No Way and we've dealt with many!
You are right about prop managers...I find them expensive and ineffective, so i have never used them.  I have heard of your parents' plight many times.  I was afraid of that and that is why I only invested in very good areas and with quality tenants.  Not ONCE in 2 years have I been through court battle or even had to evict anyone...never.  But then again, my rentals are worth an average of $225,000 each and the rent is around $1250, automatically requring higher quality tenants.
Disclaimer:  Using the ManDate Real Estate Investment Course does not guarantee you positive retursn.  Individual results may vary.

bankrep1's picture
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They have several in a college town, high rents/profits = more headaches than the others, but all still have there fair share.

doberman's picture
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ManDate wrote:doberman wrote:
Also, stocks won't call you at 3AM to say that the toilet is overflowing. Bonds won't cram 6 people into a living space ideally suited for just 2.
Btw...you would use bonds to "accumulate wealth"?  That is what I said real estate is used for.  To me, RE is not liquid enough to be used in retirement to any great deal, for income.  Also, 12% on a good year for stocks vs. 30% on a bad year (yeah, where I own RE that would be a bad year - and I'm talking long-term historically, not just the irrational last 5 years of RE bull market)?  And you get very nice tax benefits with the rental props.  Again, the picture starts to paint itself.
Lastly, I was shocked at your post.  I looked at a lot of your historical posts on other threads and you seemed so intelligent in those threads.

My wife owned rental property when we married. My complaints with rental real estate is from actual experience. My wife offered below- market rent to people she thought had good character: teachers, etc. What we ultimately found out was that they were human garbage who took advantage of her good nature. I convinced her to dump their *sses on the street and sell the properties, which she did.
I know several affluent people who made their fortune owning real estate. Their properties were mostly "shotgun shacks". However, I won't rent out shacks and I won't rent to human garbage, so we invest in stocks instead.
Suffice it to say that real estate ain't my thang!

AllREIT's picture
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bankrep1 wrote:I can tell you being a landlord is a waste. I own two
rental properties (Both for sale)and my family owns many, if I had
invested the money in a REIT or RE MF I would be far better off today
without the headaches of city inspections/fees, tenants, vacancies,
etc. I agree maintenance is not a huge issue, but when it comes time
to raise the rent it seems like taxes or insurance rise faster than the
increase in rents.

I love REITs, all the benefits of real estate, w/o any of the
headaches. Trouble is everyone else has figured this out for the past
few years, so that a cheap investable REIT is hard find these days.

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