I started my journey to early retirement with only $10,000 to my name. I was freshly married and off to the big city for my first professional job. My wife had six months to finish up graduate school then she would pack her bags up and move to the city with me.

Our collective net worth was negative $50,000. Debt consisted entirely of student loans. As the work weeks and months slogged on our mindset about the “American Dream” changed drastically.

Detailed in a prior newsletter, my wife and I sat down together six weeks into our careers and made a plan to get financially independent. We called it Freedom 30. A goal to become financially free by the time we were 30, which was five short years away.

The plan was to work our asses off for five years and drop as much money as we could into the stock market and other cash flowing assets. We were both educated with high paying jobs so if we lived like the average American, we could save 50-75% of our income every year. By the end of year five we should have enough assets saved up where we could quit our jobs and do whatever we wanted with our time. During this time period I was so burnt out from the corporate travel lifestyle that I was ready to relocate to somewhere tropical and teach people how to surf. That was my end goal. To become a beach bum with a bankroll.

I remember when I first started tracking our net worth. I had an excel sheet with a detailed budget and another sheet that forecasted our net worth, assuming a certain percent of our income saved and the rate of return we would get on our investments.

I would look out into future years on my net worth forecast and see how quickly money compounds. It kind of seemed impossible to tell you the truth. By year five, assuming my forecasts were directionally correct, I would be making more money from the assets I had in the stock market than my current high paying job.

The journey was slow. It took two years to hit a net worth of $100,000. Two long years of hard work with an intense saving rate. But at the end of that year I thought to myself, “this is beginning to work.” I could see the money compound in real time.

Every time I sat down to do our budget and calculate our net worth it grew faster each month. The compounding interest money machine was beginning to work. And as we got raises there was more money we could throw into the money machine. If we kept this up we would have more than enough to live comfortably without a corporate job eating up all of our time.

In a year or so, we had enough money saved up to live without any income for more than a year. It felt good. Our assets were compounding and we were one step closer to ditching the suit and tie. Every bonus received at the end of the year went directly into the market. And at the start of the year we would do it all over again. Rinse, wash and repeat.

By year three our net worth had doubled. It took two years to hit $100,000 net worth but only one year to hit $200,000 net worth. Compound interest combined with career growth was starting to work. Despite our increase in net worth and significant raises, our cost of living stayed the same. We lived like the everyday normal American family.

At the end of year four we were at a cool $500,000. Our savings rate was off the charts given that the world was shut down and there was nothing to do, and our investments killed it. I bought a bunch of stocks at the market low in March of 2020 that more than doubled. It was one of the greatest investing years I have had in my career. Six months into the new year, and our net worth had doubled again.

It took us four years to hit a net worth of $500,000, but only six months to hit a net worth of one million. As Albert Einstein famously said, “Compound interest is the 8th wonder of the world.  He who understands it, earns it; he who doesn’t, pays it.”

Sure, the market returns during 2020 and the first half of 2021 have been absolutely insane for anyone actively invested in the market. In any normal market scenario, it probably would have taken a bit longer to go from $500,000 net worth to one million. But that isn’t the point. The more money you save and throw at the market, the more opportunities you will have.

If I wasn’t actively saving and investing money every month, I would have not been prepared when the COVID-19 crash happened. But since I created a plan four years before the COVID-19 crash happened, I had a large pile of money set aside waiting for place to invest. And this pile of money compounded extremely fast and will continue to compound for many years to come.

If there is anything to take out of this newsletter, just remember these four things.

1. Money compounds extremely fast and the more you accumulate the faster it will compound. It took me almost five years to become a millionaire. But it will probably only take me 1-2 years to become a multimillionaire.

2. If you can figure out a way to save 50-75% of your income for five years your life will dramatically change. By the end of year five it is highly likely your assets will start producing more income than the time you put into your 9-5. It can be a long journey but it works and it is very rewarding.

3. I made a significant amount of money buying stocks when no one else wanted to own them. Get the guts to invest during all cycles of the market, especially during those once in a decade type downturns. Real money can be made if you can stomach the volatility.

4. When you are building your initial capital base learn to spin on a dime. Keep your fixed costs fixed and your variable costs variable. Live without debt and dump as much cash as you can into assets as quickly as you can.

How to Invest Like a Billionaire (Without Actually Being One)

Most investors don’t realize billionaires invest a large portion of their wealth in assets outside the stock market. In fact, billionaires allocate 50% of their portfolios to alternative assets, like private equity, commodities, and real assets, according to KKR. That’s because data shows that investors diversified into alternatives historically outperform those who don’t.

Take hedge fund legend, Steve Cohen— he’s invested over $1 billion in art. Recently, I followed his lead and diversified my portfolio with art as well.

Here’s my thesis:

• Art has the lowest correlation to equities of any major asset class according to Citi

• Contemporary art prices have increased by 2,518% since 1995

• WSJ called the art market “one of the hottest on Earth,” with works selling for 15x their asking price

But unlike Steve, I didn’t need to spend $300 million to invest in my own Picasso. 

I just used Masterworks.io—the only platform that lets you invest in the same paintings collected by billionaires.

Personally, I think Masterworks is the best platform for investing in art. They leverage over 60,000 data points to find the best works by artists like Warhol, Picasso, and Banksy. 

And while the markets were down last week, they sold a painting that got their investors a 31% IRR net of fees.

If you want to join me and 280,000 other members on the platform, click this Alpha Link to skip the waitlist.

*See important disclosures

Updates

I recently acquired a new position for my portfolio. I think the stock is an easy double from the current valuation just based on where their peers are trading. Over the next couple years I think the company can easily go up 2-3x if management executes on their 2024 plan. I have followed this company for years and after the recent plunge in retail stocks from the new Omicron variant combined with supply chain issues, the stock came back on my radar. At the current price I am a buyer. If it goes lower from here I will accumulate as much as I can. Currently it is a 10% position for me.

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