Ep 522 | The $50 Million Mistake: Why Chasing New Investments Can Slow You Down

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. It's been a little while since we talked about wealth, so I want to focus our conversation there today. About 6 weeks ago Someone that I know pretty well, she was, she was in my Metrics Mastermind group for some time, actually a few years. I bumped into her and she had said to me that she had this plan to get to a $50 million net worth, which is obviously a massive net worth and would be an amazing accomplishment. And she's already off to a fantastic start as she's been building over the years. But she had said to me, I'm going to get to that $50 million net worth, and I think that in order to do that, I need to get outside of the things that I know really well and have been doing for a long time, which of course is real estate investment as well as index fund investing, S&P 500-based index fund investing. I need to get outside of these things and get to some alternative investments that'll get me there faster. And I thought about what she had said, and I told her, you know, respectfully, you're wrong. And I want to explain why I believe this individual was wrong in that statement, that she had to get out of what it is she knew so well, what she was concentrating on, and get into these shiny object or alternative opportunities to get to where she'd like to go. Again, that $50 million number. I'll tell you what, what I'm thinking about. I think most people think bigger wealth requires all sorts of new vehicles, and I've just not found that to be true in my personal journey, as well as all that I study, right? Like, there are so many books and so many podcasts, so many experts, uh, and a lot of people that don't know what they're talking about out there that we can turn to. And I think that when you, when you, when you seek out the truth, what you find is real wealth is actually built by concentration. It's not built by constant diversification. So to go to back— go back to my friend, her plan isn't broken, it's just not fully scaled out yet. I think when you look at real estate, real estate is, in my opinion, what I would call a scalable workhorse. So let's go to my friend. Let's think about, you know, her buying single-family homes just for, for ease of conversation today. She's just buying these single-family detached homes and we're not going to get into multiplex and all these different or commercial. Let's just talk about single-family homes. When she's buying homes, I'm going to use some really basic math and say that as she holds these homes, let's just say they increase in equity. By $200,000 over the time that, that she happens to hold them. So she buys a $400,000 house, she rents it out, that $400,000 house grows to $600,000. So it picked up $200,000 in equity. She's also gonna have, you know, uh, cash flow. Let's call it $300, $500, $700 a month in cash flow, which is going to be leveraged to create more wealth. But we won't focus so much on the cash flow right now. Let's let's just talk about net worth, okay? Because that was the goal, the goal, $50 million. So every home she buys is going to appreciate by $200,000, and she's gonna have that $200,000 in equity. At 100 to 150 homes, which is a lot of homes, but just stick with me, that means she's got $20 to $30 million in equity alone. She already knows how to do this. She's been buying home. She's been underwriting property. She's a real estate professional. There's no new skill set required. If she uses 1031s and leveraging her real estate operation to source deals, and she uses the BRRRR method, which we'll talk about on another episode, she can continue to do this stuff and simply repeat what works. And in doing so, she picks up 100 to 150 homes. Now, I'm going to say this is a 20-year plan. When you look at it in a sense of 20 years and we're talking about 100 homes, we're saying she's buying 5 homes a year. If it's, if it's 150 homes, she's buying 7 homes a year. That is not out of the question if you're generating good job income and you can source opportunities. So she picks up 100 to 150 homes and she accumulates $20 to $30 million in equity. Now, in the index fund, uh, space, which I think is, you know, if real estate's the scalable workhorse, I think index funds are the silent monster. If she's got a couple bucks, let's say she has more than a couple bucks, let's say she has a million bucks or a million and a half today in S&P index funds, S&P 500 index funds, and she puts in— because she makes a lot of money— she puts in $100,000 a year. If you look at the S&P 500 and its growth over the past couple of decades, you'll find it's sitting around 11%. So an 11% rate, she already has $1.5 million and she's able to take a portion of her income, which, which $100,000 a year is not a small amount. I understand some listening may be thinking that is way out of the question, but I'm just trying to demonstrate the path to $50 million here is to remain concentrated and not diversified. If she took $100,000 a year, which she's already doing right now, and then some, and she continues to put it in there, in 20 years, that $1.5 million she started with plus the $100,000 a year at 11% ends up $20 mil, almost $20 million in 20 years. That's totally passive, zero effort, and this is the wealth preservation and growth machine that most people ignore. So, when you combine these two paths, real estate plus index fund, which is where she's been spending her time and what she's become a master of, where does she land? She lands somewhere in the $50 million range. If you take what she does in real estate, what she does in index, what she already has, she's gonna be at 50+ in 15 to 20 years. And that's, to be super clear, that is all without chasing crypto, without chasing mineral rights or hard money lending, or whatever the newest, coolest thing happens to be. Now, to be clear, I'm intrigued by all these alternative investments as well, and I'd be lying if I didn't say, you know, I have some, some, uh, investment allocation to some different things that I'm learning about or I'm venturing into to diversify a bit. But I don't allow that to, to impact positively or negatively. It'd be nice if it's positive, but I don't really need it to positively or negatively impact my ultimate goal, which is constructed around the things that I know, which again are real estate, especially long-term hold single-family homes, those things that I know, plus index fund investment, which is simply set it and forget it. So the $50 million goal doesn't require new investments. It just requires better execution of what's already working. I don't really think you need more ideas. I think you need more scale, you need more time, and you probably need more consistency. So my challenge for everyone listening here today, just using this example, and it may have not been applicable to you, but there's some messages here that very much are. I want you to audit your focus. Audit your wealth-building focus. Are you, you know, craving this diversification and, and going after all these shiny objects, or do you truly have focus on 1 or 2 or maybe 3 things that you actually know at a high level, and you're going, and you have the ability, the knowledge to be patient around, to allow to accumulate over the next, call it, 15, 20 years to get to whatever your version of the $50 million goal is? Audited that focus. Do you have it, or is your strategy broken, or is it just underleveraged? I think there's lots of different ways to look at your wealth building, and I want to challenge you to go and do that. That's all I have for you today, the No Days Off Podcast. Thank you so much for listening, and remember, every single day brings a new opportunity to get better. So let's get after it. [MUSIC] [MUSIC]