If you don’t, then what are you hustling for, like, you only have so long to live. If you spend it all running on a treadmill, you’re going to die. So I think hustling and talk about crushing it does work but only if you’re passionately, passionately interested… So passionately that you dream about what you’re interested in at night, that you love talking about it, that you love studying it and reading books about it, and interviewing people about it and you know, networking about it, and putting yourself in environments where hustling becomes easier and crushing it becomes easier. 

So you don’t necessarily have to be an entrepreneur. Essentially, think about the average multi-millionaire. The average multi-millionaire has five different sources of income, according to the IRS. That’s not like statistics, that’s like IRS facts. They say people who are worth a billion by all income sources are from five different sources on average. 

You have a full-time job that’s only one source so you can’t get financially free, most likely from only one job, but being an entrepreneur is only one source of income also. So that’s not always the best strategy. 

Now, it’s a great strategy if you have an idea that you could sell for $100 million, but that’s pretty rare. And there’s a lot of skills involved in being an entrepreneur, it’s not just coming up with a good idea. You have to also have relationships to raise money, you have to have relationships to get customers, you have to have sales ability. You have to have technical ability, even if you don’t build the product. You have to be able to micromanage the product because you’ll hire developers or whatever. You have to have leadership skills, motivation skills, you have to be detail-oriented, so you can keep track of profits and losses and stay on top of clients, particularly as if you don’t have enough staff yet. 

So being an entrepreneur is very hard and requires, there’s no one skill called entrepreneurship. It’s like an umbrella of skills. So I encourage young people to try lots of things because you can’t figure out what you’re interested in. You have to do things to determine if you’re interested. My guess is you didn’t say to yourself, “Hmm, I would really like to invest in real estate.” My guess is you did things you saw people invest in real estate, you went on location. You saw people you admired, who were having a fun time or enjoying the process of real estate investing. 

Maybe you helped someone place an investment, maybe you did your first investment and they felt good. And you said how that feels good. It’s like a compass pointing me more towards this. And so I’m going to read real estate listings. I’m going to see which ones I think are undervalued compared to other buildings or projects that have been sold nearby. 

Or in similar situations, you started to become more and more of an expert because you were hustling at something you were interested in. So your hustle mattered. And I think, you know, again, you have to try lots of things because maybe it was not real estate investing. 

Maybe you would have rather been a Bitcoin investor or a stock market investor. Or maybe you would rather invest in private companies, or maybe you do have an idea to start a company or whatever, you don’t know. So you have to try lots of things. You’re trying podcasting, you’re looking at stocks, you’re looking at real estate, trying lots of things. 

That’s the first thing I would recommend is a.) every day, work on your inner self. So physical, emotional, creative, spiritual health. And b.) try lots of things, experiment and take small risks. Not big risks, but small risks to see which risks you’re comfortable with and which risks excite you. You know, those are really the first two basic things.

I think most people skip those two things: working on their inner self and experimenting with lots of things. So it sounds like a cliche answer. I hate to say it sounds like almost too self help-ish. But it’s not because it’s not the basic advice. And it’s actually critical for any successful entrepreneur or even investor.

Robert Leonard  15:23

No, I don’t think it’s cliche. I think it is really good advice. What made you want to go from being a programmer to becoming a hedge fund manager after having trouble or losing it all from trading stocks?

James Altucher  15:37

That’s a good question because, again, it goes against the normal narrative. Everybody thinks, oh, I need to get a business degree, then an MBA, then I’ll work at a Wall Street bank and I’ll work for a hedge fund, then I’ll go off and start my own hedge fund. That’s kind of the normal classic path of that. Not only that I have no experience. 

I mean, I worked at HBO then I had started a company making websites for record labels, that was our primary client. And then I lost all my money investing. And then I decided to be a hedge fund manager. It’s not the normal path for such a job. 

But after I lost all this money, I did get obsessively interested in investing. I was like, how can I make so many mistakes? And so it forced me to learn. Once I started learning, I realized, oh my gosh, there’s so many things I did wrong when I was investing. There’s so much to learn. I was so foolish to start investing before I even learned about even 1% of this. I must have read hundreds of books, or the biographies of every investor I could find, like every great investor. 

I wrote software to analyze the market since World War Two, like anything you could imagine about the markets, like what happens if the stock market goes down four days in a row… What statistically happens on the fifth day, what happens for Microsoft the day after reports earnings, what happens when insiders buy a stock. I would write software to analyze all these questions and I read more and more about markets and accounting and every options strategies, commodities, arbitrage value investing, growth investing, because I didn’t have any single training. I wasn’t forced at any one particular style of investing. I learned all styles of investing. And then I started investing. 

In the past 20 years, I’ve probably invested across almost every style of investing you could think of, ranging from algorithmic, quantitative trading, to day trading to real estate investing to arbitrage options, value investing, and so on. I just got very excited about it. I loved it. 

And when you love something, I started to get a track record.I started to write about my software. So I started to get to be known. That was my way of getting known by investors was by writing for the Financial Times, The Wall Street Journal, wallstreet.com, and I gradually raised money for a hedge fund. And then I also raised money for a fund of hedge funds. I invested in other hedge funds, like I invested in multiple investing strategies. And that was it in a nutshell.

Robert Leonard  18:00

Do you think being a serial entrepreneur before you started your hedge fund helped you? Or do you think it hurt you as a hedge fund manager?

James Altucher  18:07

Oh, it definitely helped me because I learned how to sell. Like when you’re an entrepreneur, you have to know how to sell and I don’t mean sell just a product, but to sell your vision of the world. With my first company, I built websites for companies that didn’t even have websites back then. My vision of the world was that they were going to need a website, or they were going to die. And so that was the vision I was selling. 

I had to convince companies, I had to convince employees, I had to convince investors. I had to convince acquirers. I had to convince my partners because you know, when you’re starting a company, it’s not like oh, yeah, we make websites. We wanted to do anything possible that would make money. 

So while we were building websites, we considered should we bottle iced tea and sell it in grocery stores? Should we make our own record label? We came up with so many different ideas, we’re writing TV shows and building websites. And of course, the only thing that works for us was building websites, but we’re trying to think of anything we could to make money because we didn’t raise a dime of money. So we were profitable from day one, and we’re just living off of profits. So we’re just trying to make as much money as possible.

Robert Leonard  19:11

How is being a hedge fund manager different than you expected?

James Altucher  19:14

You can’t control the stock market, and you can’t predict the stock market. And you can guess, and you can make pretty good guesses. But in general, there’s a lot that happens in the market that’s out of your control, and it can be very frustrating and very depressing. Whereas, you know, in other companies, I feel like I’m pretty good at making deals and structuring deals and understanding what kind of products people want. I’ve been able to successfully start or costart many companies, whether I’m an initial investor or a seed founder or whatever, or creator, the founder of the company. With a hedge fund, you have no control over whether you’re going to lose money. Many days in a row make money, many days in a row. There was many frustrating points. It was too stressful, which is why ultimately I got out of it. 

I will tell you a little story, why I fully decided to get out of it, the moment I decided I’m getting out of this business, I’m sick of it. I was trying to raise money for the hedge fund. And a friend of mine introduced me to his boss. The boss gave me the tour of his facility, spent some time together, is a really nice guy. And he sits me down and he says, “Okay, James, why are you here? What do you want?” And I said, “Well, I want to raise money for my hedge fund.” And he said,” Listen, you’re a great guy. I’ve heard a lot of good things about you. I read your stuff. If you ever want a job here, I’ll give you a job.” 

He had this huge, multi $10 billion hedge fund and he said, “If you ever want a job here, I’ll give you a job. If I give you money, I have no idea where you’re going to invest the money. I can’t take the reputational risk.” And he said he pointed to himself, he said “The last thing I need to see on the front page of The Wall Street Journal is the name Bernard Madoff Securities on the front page. So you wouldn’t invest in me.” Bernie Madoff made the biggest Ponzi scheme of all time, and I remember leaving his office and I was really depressed because he’s not gonna invest in me and he liked me. And he, had better returns than me. 

So I thought nobody knew he was a scam. Everyone called me up afterwards, “Hey, did you find out what he does? Like, how can we invest in him?” And I don’t know. So I figured like, I can’t compete against guys like this. 

That’s really the problem with scandals like that is yes, people lose a lot of money. But what really happens is it drives out legitimate legal players in the industry. When people who are in scandals, scams are soaking up all the money, only so much money for hedge funds, and he was soaking up $60 billion of it. So that’s why I got out of it.

 I figured, you know what, I can’t do it. I can’t compete with the best. And I started other companies instead. I started a website which combined my interest in investing with interest in websites. And you know, I started investing in private companies. I was really excited by Facebook. So I didn’t invest in Facebook, but I wrote an article early on Facebook had just turned down an offer from Microsoft for a billion dollars, you know, yeah, they turned it down because they’re worth $100 billion dollars. 

I remember CNBC had me on, everyone was laughing at me and I’m like, “No, Facebook’s like a mini internet. This is gonna be great.” So instead of investing in Facebook, I did what I did with the internet. I couldn’t start a Facebook ad agency, like I started an internet agency 10 years earlier, but I invested in two or three Facebook ad agencies, and they all did very well. And I made money on them. And that’s how I started kind of doing more intelligent, private company investing.

Robert Leonard  22:33

Wow, that story about Bernie Madoff. That’s really interesting to hear that that’s really what pushed the end of your hedge fund career. That’s very fascinating.

James Altucher  22:43

Let me tell you something. Last year, I called up his prison. And I said to the warden, can Bernie Madoff come on my podcast? I know the guy, *inaudible* my podcast. And a few days later, I hear back from the prison, “Bernie Madoff said no.” And I’m like that guy turned me down again, 10 years later, says he’s got my number, like, what else is he doing all day? He’s just making license plates. Can’t talk to me for 10 minutes? But yeah, frustrating my dreams again, Bernie Madoff.

Robert Leonard  23:13

With all of this talk about your success and failures as an investor in a hedge fund manager, what have you decided to do with your investing today?

James Altucher  23:22

It’s almost entirely… I mean, it changes every now and then. But right now, it’s almost entirely private companies. Actually, the safest companies are the ones that most people think are the highest risk, which are private companies. 

You know, I do my homework, and I have people that I have invested with for over a dozen years now. And that I network with and, and then in some cases, I help the founders start the company and then I invest. I don’t get involved in running the company, but I invest by early on. Now, I haven’t some stocks, but that’s because some of the private companies I invested in went public and that’s the main way I’ve made a living in the past 12 years. 

Now, when you do private investing like that, though, you go three, four or five years in a row without making a dime. So I diversify, I write books, I do a podcast, none of these make a lot of money. It’s the private companies that make investing that make the most money for me, but I like to do lots of things. 

Robert Leonard  24:18

I know many of your books embody this idea of choosing yourself, what does this mean? And how has this idea made you successful?

James Altucher  24:28

I really don’t like it when people who tell me I can’t do something, and they don’t kind of give me good reasons why. Now, it might be right or they may be wrong, or they might just not know. But it’s always worth thinking about it. Like, can I do this without permission, without validation without someone choosing me? So for instance, a classic example is, let’s say you wanted to write a book about real estate investing. You’ve ever written a book before, it’s my guess.

Robert Leonard  24:57

I’m actually currently working on writing one right now. 

James Altucher  25:00

Do you have a publisher? 

Robert Leonard  25:01

Right now, I’m planning on self publishing,

James Altucher  25:03

Right? Because when you work with a publisher, you have to get an agent, the agent is probably gonna say no to you because you haven’t written a book before. The publisher is going to probably say no to you because the publisher is going to ask, “Well, how many Twitter followers do you have? How many Instagram followers do you have? Oh, not enough, we’re not going to publish you and you’re a first time writer anyway.” 

So all these people have to choose you in order for you classically to write and publish your book. But what if you just want to publish a book, you know enough about real estate investing, you can write a book on that on your experiences, your experiences are interesting to people. So you could write the book now, you could design a cover, do it on Kindle, paperback, hardcover, audio book, and you could upload it to Amazon. Now your book is published. 

So I had written, you know, eight or nine or 10, mainstream published books by publishers. And then I started to self publish my most successful book, Choose Yourself, self published. So I chose myself to publish my own book and it worked. 

Or if you want to do a TV show now, you can go around and pitch to every network. That’s really hard. They’re all going to say no, we don’t know who Robert is. Did he write on Seinfeld, no? Okay, I don’t want to meet him. But what if you have a great idea for a TV show? Well, it doesn’t cost too much now to shoot a little show on your on your iPhone. Then you upload it to YouTube. And now you have a TV show. Or by the way, you could upload it to Amazon, and it’ll appear on Amazon Prime. You have a TV show. 

So businesses too, hedge funds, I chose myself to do a hedge fund. I didn’t wait for Goldman Sachs to hire me. I wrote some software, I came in and people trust me. And then I built a track record and started raising more and more money and I built a hedge fund I chose myself. 

Now again, can’t do that, unless you’re also healing yourself. So again, that’s the physical health, emotional health, creative health, spirituality. It’s important to be healthy. So you have energy to do your ideas. Important to not have toxic relationships in your life. So you don’t end up in screaming arguments while you’re trying to start your business or write your book. It’s important to exercise the creativity muscle every day because it atrophies fast. 

And it’s important to kind of give up on the things you can’t control. That’s always the base. But then that helps you figure out how to weave your way through. So you can choose yourself no matter what the category, there is no category that doesn’t allow you to choose yourself. You can even be an astronaut now without government’s permission.

Robert Leonard  27:23

So James, as we wrap up the conversation, I’m going to put you on the spot here as a serial entrepreneur and investor that’s weathered the dot-com bubble and the 2008 financial crisis, and Bernie Madoff, what’s your number one investment pick right now? It could be stock bond, ETF real estate or even cryptocurrency and why?

James Altucher  27:46

The best investment is really in yourself. Nobody became a billionaire picking a bunch of hot stocks and then waiting until they became worth a billion. Not even Warren Buffett. But people invest in themselves. 

So Richard Branson, he had a flight canceled, he was going from someplace in the Caribbean, to Puerto Rico, the flight was canceled. So he arranged to charter a jet, but he didn’t have any money. So he puts up a sign. And he says “$29 a ticket” because he knew how many people were canceled on that flight to Puerto Rico, so everybody bought $29 a ticket, they got to Puerto Rico. And he said to himself, this 27-year-old hippie music magazine publisher, who the heck was he? 

And he’s like, “I’m going to start an airline.” And everyone said, “You can’t do that no one can compete with British Airways. No one ever has competed with British Airways, you can’t possibly compete against them. And you’re a 27-year-old music publisher.” What did he do? He just simply called Boeing and said, “Can I borrow a plane for a year?” And they gave him one. He didn’t invest in anything. He didn’t say, “Oh, I’m going to buy Boeing stock or I can’t compete with British Airways. I better buy British Airways stock.” No, he said. “I believe in myself. I’m going to borrow a plane from Boeing.” What you can’t do that? “I’m going to borrow a plane from Boeing and then I’m going to convince the British government. I’m going to convince Heathrow Airport to give me a landing strip.” What they’re not going to do that. And they did it. And he built up. 

He sold Virgin Atlantic for what is it $3 or $4 billion. That’s the bulk of his wealth came from, starting an airline at the age of 27. Now he’s at Virgin Galactic. He’s making spaceships and sending tourists. He’s gonna send tourists to space. So he invested in himself. 

You look at other people, Daymond John, okay. He sold $6 billion worth of clothes through FUBU. He was sewing one hat a time and Macy’s… He went to a clothing conference and Macy’s made $100,000 order and you know what he did? He said, deal. He didn’t have $100,000 worth of clothes to give them. So he went back to his mother, and he said, “Mom, I’m mortgaging your house. I just need the money for a weekend.” He mortgaged his mother’s house, she would have lost her home. 

He hired a bunch of seamstresses to deliver the hundred thousand dollars worth of clothes to Macy’s. He paid back the mortgage, saved his mom’s house. He invested in himself. He didn’t take that hundred thousand dollars and buy Apple stock. He made hats with it, and gave it to Macy’s. They gave $100,000 now he sold $6 billion with clothes. 

Everybody successful invest in themselves first and all these guys who are billionaires by random out and think like a billionaire. You can see every story, they’re all different. They all invested in themselves, the best returns. Even if you’re not an investor or an entrepreneur, take $2,000 to take a photography class. If you do just one wedding next year, you make 200% on your investment, where else are you going to invest in and for almost a guaranteed 200%

Robert Leonard  30:45

Yeah, that that last piece you added there that’s exactly what I was going to say is that most people even if they invest in themselves, they’re probably not going to build a billion-dollar company which is fine. That doesn’t mean that they weren’t successful. Like you said you can invest a couple hundred or even a couple thousand dollars in a skill that you want to learn and then implement that in the side hustle or a small business.

James Altucher  31:05

If you get a skill, that skill is yours forever, you own it forever. So let’s say you spend $1,000 to get a skill and you live for the next 50 years. So you have that skill for 50 years. It’s as if you paid $20 a year for that skill, it’s almost nothing. You could make a ton of money on that skill, whether it’s a side hustle or something you’re passionate about. There’s no investment in the world better than that. Really.

Robert Leonard  31:28

Yeah, I agree. Recently, for me, I actually, I got my real estate license. I have no intention of practicing as a real estate agent anytime soon. But what’s great is when you have your real estate license, you’re able to earn a commission on referrals. And so if I know somebody that’s purchasing a house, I’m able to refer them to a practicing agent and you can make a pretty substantial commission. I spent three or $400 to get my license, studied for a few hours and passed the test. The next week, I referred somebody to buy a house or sell a house. They did and I think I made $2000 or $3,000 in, you know, a couple of weeks just from that. You know, I’m gonna have that license forever. And I can do that almost unlimited times.

James Altucher  32:07

Right, and you’re somewhat in control because you have a real estate background, you have a network, you have connections, you know, the agents, you know, the buyers, you know, the landscape, literally. And so what you made 400% in three weeks, investing in yourself. And now you can’t buy a new real estate license every week but you can do something every week that says, “Okay, I’m going to just improve a little bit on some scale, and invest in myself a little bit each week.” 

In one year, two years, three years, your returns on those investments that you make each week on yourself, it’s incalculable. That’s how you make millions. That’s the main way to make millions or billions if you want to, not everybody wants to make billions. But by the way, that’s not the reason to study billionaires. You don’t have to make billions but studying what they did. Okay, if I did one-thousandth of this, I’m happy with that too.

Robert Leonard  32:56

And I mean, it even applies to somebody who has no entrepreneurial spirit or anything like that. It even applies to a corporate career, right? If you go and learn a skill that can help you climb the corporate ladder or just even get a higher salary, if you spend a couple hundred dollars or even $1,000 on a course, if that adds $5000 or $10,000 dollars to your annual salary over the lifetime of your career, if you want to work a corporate job for the rest of your career, that adds a ton of value.

James Altucher  33:24

I call that being an entreployee, where you invest in skills, just the same way you invest in yourself, but you bring that into the workplace. Trust me, no one can compete with you because they all work four hours a day tops, and you’re busy learning new skills that get noticed by your boss’s boss’s boss.

Robert Leonard  33:44

It’s all about being prepared for the moment and, you know, taking advantage of it. I really like that idea of the entreployee. Yeah, I haven’t heard that before. But I like that idea. 

James Altucher  33:53

Yeah, it’s been a very valuable idea for me.

Robert Leonard  33:56

James, thanks so much for your time. I really appreciate it. Where can the audience go to connect with you and learn more about all the different things that you have going on? 

James Altucher  34:05

Well, I highly encourage people to check out my latest book, “Think Like a Biliionaire.”  It’s on Scribd, scribd.com, which is a great site. And you can also listen to my podcast, The James Altucher Show.

Robert Leonard  34:19

I will be sure to put links to everything that James and I’ve talked about throughout the show, as well as links to James’s resources in the show notes. You guys can go check it out. Be sure to connect with him. Let him know what you thought of the episode. Let him know any questions you might have. James, thanks so much. I really appreciate it. 

James Altucher  34:37

Robert, thank you for having me on the podcast. I really appreciate it. Good luck with all the real estate investing and I look forward to talking to you again. 

Robert Leonard  34:46

And now we’re going into the segment of the show where I answer questions we receive from you all listening to the show. Today’s question was asked by *inaudible* on Instagram, he asked: as a millennial investor, how should I best allocate my portfolio for the best risk adjusted returns over the long term?

Robert Leonard  35:05

This is definitely a great question. And just by starting to think of this at a young age, you’re ahead of a lot of people. But similar to last week’s question, it’s really hard to answer because it’s specific to the person. It really depends what your long term goals are, how willing you are to take risk, and how involved you want to be with your investing. 

I personally have a 30 to 40 year time horizon and I tend to be okay with taking on quite a bit of risk. So that said, I’ll try to answer the best I can and I’ll tell you about how I invest then you can decide what works best for you. If you don’t have a high risk tolerance, or you don’t want to be involved much in your investing, you’re probably best off splitting your portfolio 90-10, 80-20 or even 70-30 between a low cost broad market stock ETF, like ticker symbol VTI which is Vanguard’s total stock market fund with an expense ratio of only .03 percent as of this recording, and a low cost broad market ETF like ticker symbol VND, which is Vanguard’s total bond market fund, with an expense ratio of just point .035%, s of this recording.

If you want a bit more risk, you could increase the stock exposure to maybe 80 or 90%. If you wanted a little less risk, you could decrease the stock exposure to maybe 50 or even 40%. You could also buy a target date fund based on the year of your expected retirement. So if you’re going to retire between 2041 and 2045, which means you’re about 25 right now, you could look at a fund like ticker symbol VTIVX from Vanguard. 

Or if you’re about 30 and you’re going to retire between 2046 and 2050, you could look at a fund like ticker symbol the VFIFX, also from Vanguard. Both of these funds have a pretty low expense ratio of about .15%, as of this recording. For context on the allocation of these funds, they have about 90% in stocks and only 10% in bonds. 

So if you’re just going to buy ETF yourself, instead of buying a target date fund, you could follow a similar allocation percentage. But remember, it’s really up to you and what fits your personality best. Like I said, for me, I generally like a lot of risk. I invest about 50% of my portfolio in ETFs, which I buy automatically every month. That 50% of my portfolio is allocated with about 45% of it to a low cost s&p 500 ETF through Vanguard, ticker symbol VOO, and the remaining 55% is allocated to a low cost technology ETF also through Vanguard ticker symbol VGT. Then the other 50% of my stock portfolio is invested in individual stock picks. 

I run a pretty concentrated portfolio with this part of my portfolio and I generally buy big positions In the companies I really like. And I also sell options pretty frequently with this part of my account. You’ll notice I don’t own any gold or bonds or even total stock market index funds. But that’s because I’m super passionate about investing. I love doing it and I generally have a high tolerance for risk with 30 to 40 years before my retirement. I’m okay with a lot of volatility in my portfolio is that means higher potential returns. 

So *inaudible* and everyone listening to the show today, I really can’t say which portfolio allocation is perfect for you. There’s no broad allocation that will work for everyone listening to the show today, but I hope this discussion will help provide clarity for you and help you decide which is best for you. 

If you want to hear your question answered on a future episode, the two best chances you have for this are to send them to me on Instagram or to post your questions in our Facebook group. You can find me on Instagram with my username @RobertAtTip, which is spelled out as ROBERT AT TIP. I’ll put a link to my profile, in the Facebook group in the show notes, which you can find below in your favorite podcast player or at theinvestorspodcast.com. But that’s all I had for this week’s episode. I’ll see you all again next week.

Outro  39:15

Thank you for listening to TIP. To access our show notes, courses or forums, go totheinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network, written permission must be granted before syndication or rebroadcasting.