In this episode I break down the symmetry of investing, wealth building, and taking calculable risks. Listen on Spotify or Apple!
About Indestructible Wealth: I’m Jack Gibson. I’m your wealth strategist and I’m here to help you make some money. The Indestructible Wealth Podcast is for young entrepreneurs who want to make, keep and grow wealth to enjoy now, and for years to come.
Episode #6 – Let’s Start Taking A Few Swings for the Fences
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Welcome to the Indestructible Wealth Podcast. This is the place where we help young entrepreneurs to make keep and grow wealth that you can enjoy now and for years to come. I’m your host Jack Gibson, a senior or serial entrepreneur, founder of multiple seven and eight figure of businesses, and wealth building strategies. Each week I’m gonna share you my tips, resources and secrets, to help you create a plan and build the life you’ve dreamed of.
Back in the year 2000, I bought my first cellular phone. It was a flip open phone and texting was arduous when you had to use the numbers on the telephone to find the letters. In less than 2 decades, we now have not phones, but computers in our pockets that are 100,000 times more powerful than the computer NASA used to send the first astronauts to the moon.
What will happen over the next decade with technological advances will simply be mind boggling. Autonomous cars, gene editing therapy, biotechnology breakthroughs, 5G and 6G superspeed wireless networks, robotics including personal assistants, are just a handful of the exponential advances we are on the cusp of seeing in our everyday lives.
To create wealth, we want to be picking the Netflix and not the Blockbuster. We want the Amazon and not the shopping malls. We want the Google and not the AOL.
So we need to start positioning ourselves to be in front of these trends and in the early stages before these technologies get mass adopted. In order to do that, we will have to take on some risk.
The key is keeping that risk a smaller part of our portfolios until we have built up some safe stable passive income streams. In today’s episode, we will cover step 4 and take some small swings for the fences that don’t knock us out of the game, but position us for some potentially huge upside. This is where it starts to get fun, and you get to flex your Entrepreneurial risk-taking spirit.
Alright welcome back to the Indestructible Wealth show I’m super excited that you decided to join me yet again. And, wow I’m feeling good today nice and limber and loose. I just got a 90 minute massage sports medicine massage, I kinda almost felt like funny about it when she asked why I came in, I’m like well I’m trying to get better at golf and then I’m just hoping she didn’t laugh right? So I do though really need to get better at golf because every time I play good which is not that often, but when it happens it’s like poetry in motion it is so fun. So, I’m going to get more flexible though I’m super tight, lower back is starting to get strained because I need to stretch more. Should I do yoga? Does anybody out there actually like yoga? How do you like yoga? Just sitting there for an hour and not be able to do something like productive and just stretching that’s really sounds awful. But anyways she’s stretched me out good. I’ll spend money on massage, I mean I think that’s a great investment so, I want to create more money so I can get even better massages and this girl was good so I’m loose, I’m limber you guys ready? Because today we’re going to talk about taking some small swings for the fences and some small reasonable swings for the fences.
So, this one… the step is number 4 on the 7 step series. It’s titled allocate a portion of your investments into well researched high reward plays using small amounts that you can risk. So, let me set this up, over the past several years after going through some very shady stock market manipulations I had a couple of stocks where these big wall street hedge fund guys, they came and shorted one of the stocks I was in and my stock dropped like a rock. I decided to learn and study and implement a cash flow investing strategy. I became so focused on it that I pretty much ignored anything that could even be considered the least bit speculative so I pretty much got out of stocks. I was so, I’m just so pissed right that wasn’t the right move at all but I was just so angry that people could come in into a market like that and they could just manipulate a market and cause a stock to go down. So, I only wanted to buy investments that I knew when I bought them what to return on investment with be, so I started buying cash flow producing real estate. And like everything I do when I make up my mind I get super hyper focused and to my own detriment I often can’t see anything else. They call that tunnel vision.
For a couple hours per week, I work at and I help my wife out of her our little nutrition club blending up high energy teas and healthy smoothies for customers and this guy Lance the landscaper comes in. I’ve known Lance for several years, he’s been a regular and we’re in the same entrepreneurial group he’s a super nice guy. I know based on conversations at entrepreneurial club that he has some significant struggles in his landscaping business. Mainly with employees, attracting and keeping solid hardworking loyal people in that business is very very tough and Lance was consistently feeling the same pain. So, we are going into a conversation about Bitcoin and cryptocurrency as I was just start to get into it and hear more about it and Lance told me that he bought 10 Bitcoin back when it was a $1000 per coin. Now, it was at $20,000 when we had that conversation and quickly there after its jumps to as high as $64,000 and currently sits as of this recording at $54,000 per coin. Now, Lance the struggling landscaper took $10,000 we call that a stack of high society right? Doesn’t that sound cool? That stack of high society I learned that from Rounders with Matt Damon. In that Poker movie they talk about winning the 3 stacks of high society and winning the illegal underground poker game and then he lost it all. So, Lance took $10,000 and its now worth over $540,000 you guys. I knew right then and they’re that I had to change my mindset, it was time to start going after some exponential returns. I mean I could’ve peeled off 10 grand and bought some Bitcoin when it was a thousand per coin, I could have easily done that. I peeled off 10 grand and played in the World Series of Poker and I lost all that in 10 hours playing the main event which was a dream come true and I don’t regret it. I still feel bitter about that so I can’t talk about it right but I’ll get over it eventually.
But I knew it’s time to stop grinding out only small and predictable returns and I need to start going, I need to start doing, making some what they call higher risk higher rewards plays. Now, I didn’t rush go out and buy bitcoin and succumb to FOMO which, which is an acronym for fear of missing out, is a really terrible emotion for investors that got me back in 2000. I saved up $50,000 while I was going to college and I invested it all in tech stocks, because other investors were getting like 30-40% annualized returns in tech stocks so I thought “I don’t want to miss out on this”. So, I buy in at the market peak then lose half of my money and so I don’t want to repeat that error in judgment again. Let’s learn from the mistakes of our past, let’s not repeat them.
So FOMO causes us to buy things hitting peaks instead of buying things when they’re on sale. I started doing research, I subscribed to some experts I paid a few grand to experts who study crypto that have insider information, that have research teams, and who have been doing it for years and I finally just humbled myself and said “you know what dude just follow their advice they know a lot more about this than you”. So I follow their suggestions and I spread my allocation across multiple coins. So there’s bitcoin and there’s Alt coins. Alt coins are alternative coins, that’s everything but Bitcoin. And I pretty much was prepared to just hold for 5 to 10 years waiting for this to really get in to massive adoption where we’re using block chain technology in our everyday life. And I do believe that is coming, that is absolutely, that day is coming where you and I, our entire day will be multiple occurrences of block chain and cryptocurrency usage. That will happen within the next decade probably much faster than that I can absolutely guaranteed that’s coming.
Well I didn’t have to wait very long within a month my portfolio was up over a 100%, now it’s very volatile so it can swing quite a bit for even 1 day and the next. Last week I lost over $100,000 in crypto overnight, now that was just a portion of my gains and I got it all back, like when we recorded it’s all back right. So that’s why I didn’t care when it happened because I knew that it was just a temporary bounce. But it’s a really small percentage of my overall portfolio but it has a chance of growing exponentially, I call it parabolic I love that word, isn’t that a cool word? It’s going parabolic right? So if all of my crypto goes to 0 which is unlikely, the greater chance is that it’s hacked and stolen then my cash flow producing investments will replace everything I put into crypto within about a year. I have 1 coin Uniswap I love this coin now I don’t know right now if I rush out and buy it, I’m not telling you to do that because when I bought it was at $3 and now as of today it’s at $41 so according to my chart I’m up 990% on uniswap, uniswap is a kind of like Coinbase where you can buy and sell crypto but it’s a decentralized exchange. So, I really like the concept that made sense to me. So that’s one of the ones that I bought and it was also recommended to me right? So 990% increase on just that 1 coin in about 4 months. Crazy right? There’s lot of place in the stock market that we can also use the same strategy to go for big gains. I can’t say that I’m taking huge risk but I’m a going for what’s called asymmetric gains.
So, let’s think about this the difference between a symmetric bet and an asymmetric bet. So symmetry is where you have an equally divisible amount on one side or the other. So when somebody is said to have symmetry in their looks they’re generally going to be better looking right, because you have you have equal symmetry and balance in your features. So in this case a symmetric bet is where you put in let’s say a $100 and you’re going for these like 5 to 10 dollars type gains so a symmetric bet the upside is about equal to the downside okay? So symmetric bets can definitely go down big, we’ve seen the stock market drop like 50% back in 2008. Last year, last March when covid hit the market dropped like 30% so you can definitely see some big downward drop you can also see some, you can see some 30, 50% gains in the stock market as well. So, symmetric bets are typical for high cash value whole life, real estate, mortgage bank notes, mutual funds, which has historically hit around maybe 6%. Symmetric bets overall are less volatile, they tend to be safer typically there’s not a huge risk to your capital. I would however argue the point that mutual funds for their average annual returns at just 6% and probably absolutely the riskiest of all those available options, because they can drop in value pretty quickly.
Asymmetric bets now these are fun this is where we’re going to start doing it in this step. This is where you put in a dollar and you’re going for a $100 even a $1,000 this is the uniswap bet, this is Lance’s bet in Bitcoin. These are small bets that has a chance up going parabolic. These types of plays typically sound too good to be true for most people so, that’s the way I was too, I was like this only happens for other people this is never going to happen for me. I’m going to place to bet and I’m going to lose it all. So you don’t even open up your mind to the possibilities that this going to happen for you. I was definitely that guy so I can understand and I can relate, you know my 2 biggest thoughts were that it only happens for others that get lucky and 2 I don’t have the time the patience or the research abilities to sift through and analyze the thousands of potential asymmetric opportunities out there and somehow throw a dart at the dart board right and pick the right investment.
But here’s the thing, you don’t have to do the research and spend the time and have the patience to analyze thousands of opportunities. There are really smart guys who do this every day, that spend all day every day looking at potential options and then pass the information on to you. They have proven track records to be able to make picks that provides monsters type gains. They have 150 person research teams that do the heavy lifting. What are these, who are these people, how do I find them? There’s plenty of options. These are what’s called paid subscription models or newsletters. Now, does every pick they make go parabolic, of course not. But here’s the thing, you don’t need them too, often times you only need them to be right 1 out of 10 times, but often times they’re right a lot more than 1 out of 10 times, so let’s look an example. You’ve been presented with 10 well researched early stage companies that Wall Street hasn’t recognized yet and haven’t gone main stream. This is how I love investing in the stock market I want small companies that I understand what they’re doing, I get their business model I want a piece of that ownership of that company. Because when you buy a stock it’s an equity share of ownership in that company, so I want to, I want to get these companies a lot of people aren’t even looking at yet. So you bet a $1,000 and all 10 picks for a total of 10 grand. After 5 years, 9 of them drop in half. Now, these are viable companies so it’s not likely that they go bankrupt and simply drop to 0 certainly in the equity market, this is not very likely to happen where would they go to 0, these are businesses that do have some track record of sales and revenue and infrastructure but more likely they will drop in value by a percentage. Now in the crypto game there are going to be a lot of projects that simply just vanish and completely go to 0 as this whole technology starts to really play out we will probably see it more in the crypto space than we will in the equities market.
So, 1 of the 10 picks goes up a 100x to a 100,000. So when your original $10,000 invested you have a total value of a $104,500 right so you have the $4,500 because the other 9 dropped in half so there’s your other 4,500 and then you got $100,000 from the 1 that went a 100x. So that’s a total return of 945% and it annualized by year by year basis it’s an annualized return on investment of 59%. So, being that the average mutual fund returns 5% to 6% historically, I’d say 59% is pretty darn good. What’s critical to the successful implementation of the strategy is the asset allocation model that I adamantly teach, you see, you‘ve got your safe steady predictable boring returns from your whole life cash value insurance policy. You’ve got your mortgage backed notes with the safe and predictable 6 to 9%. You’ve got your real estate rental holdings at 10% maybe as much as 20% with utilizing leverage debt, and then you got your syndication investments like the one I’m in self-storage, that hit 18 – 20 – 25 even 30%. And then you’ve got some equity you got some private businesses that you own, you got some private money loans out there, you got some solid blue cap, sorry blue chip, dividend paying stocks maybe some collectibles like some sports trading cars or some vintage cars with various rates of return with those solid income producing assets at play and the diversification across all these different asset classes, you can comfortably and aggressively take some swings from the fences with these asymmetric bets.
What’s important is if you’re following the 7 step strategic process, then you’re clear on strategy over tactics. Strategy in any field trump’s tactics. Imagine the US military going to war and randomly sending in troops and tanks and jet fighters without an overall strategic coordinating plan to guide them. Simply because they have better tactics, you know their tactics are their advanced weaponry, they’re highly skilled trained fighters, their overall superior technology those are the tactics. No matter how superior the tactics without a guided strategic plan then we all know how this is going to go. Going to battle just on tactics probably will be a total disaster. So the same thing needs to be put in place to your financial plan you’ve got to understand your strategy. You guys come on I’m not telling you ever to risk your current lifestyle for a better one I’m not telling you to take gambles that you’re not comfortable making that don’t make sense for you. When you follow my 7 step plan you’re never going to get knocked out of the game if you do it the right way. So I’m saying if you’re up until age 30 or under you can probably do 20 – 30% of your total portfolio investible dollars you can do it in these types of plays. Because look you got a long time and a lot of earning power to recover. As you start hitting 40 – 50 – 60 you want to start taking smaller percentages of your total portfolio to go after these type of riskier plays. Because you don’t have as long to recover.
Now I believe that with amount of the new technology and the biotechnology and precision medicine and gene therapy that’s coming out I believe that we’re going to see the lifespans of the average American going to sky rocket over the next couple of decades over 100. I believe that’s probably very likely to happen. So you’ve got even longer when you’re 40 or you’re 50 today and you have an expected life span of a 100 when you got a lot more time to take riskier higher return type bets right. So I really appreciate Lance although I’m a bit jealous I wouldn’t say I’m jealous because you know like we have an incredible life and plenty of resources right. I’m just kicking myself because I didn’t do what Lance did, I didn’t do this a decade ago 2 decades ago even. So I’m just encouraging you guys to keep a balanced plan and everything is going to work out for you. So I hope you got a ton of value out of today’s episode I can’t wait to share the next episode with you guys. Here we go!
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