"Your First Million is the Toughest" How long did it take you?

[retire@40]

I want to say one word to you. Just one word. Plastics.

OK, McGuire.

 

[chinaco]

During these 7 years our combined salaries averaged around 80K to 90K a year. I never really calculated it, but this is my estimation. I think we saved more than 50% of it. The taxes in HK are very low and there is no capital gain tax nor dividend tax.

My investments were OK, but not that great until two years ago, when I read Buffett saying he can guarantee more than 50% a year if he had less than 10 million to invest.

I just followed what he did when he was young. My last year's return was 48%. Above this I used some leverage (100K), which worked for me.

This year I didn't borrow money, and my return YTD is more than 80%. (This is just an estimation. By the end of June it was 71% and it is up a lot since.)

If I were that lucky... I would not press my luck too much further. I would be be getting less risky quickly. Otherwise, the market gremlins might take it back!

 

[Spanky]

If I were that lucky... I would not press my luck too much further. I would be be getting less risky quickly. Otherwise, the market gremlins might take it back!

Don't worry- yona is a market genius.

 

[Webzter]

I want to say one word to you. Just one word. Plastics.

I've got plastic in my wallet and casually noticed a woman jogging the other day who seemed to have plastic in her chest area. Which one should I be concentrating on more?

 

[yona]

Yona, would you share with us the specific investments in your portfolio? I would love to see how you are earning such terrific returns!

My biggest holding now is 0878.hk. It is a RE company in HK, which is traded at around 1/3 of its NAV. I started buying at 2.87 when it was only 1/6 of NAV.
My DD shows me that there is nothing wrong with this company and Mr. market is wrong here.

Few others that I own most of them up a lot since I bought but are still cheap:
0212.hk - NAV is 40$ but the stock trades at around 20$ (I bought at 12.5$)
0896.hk - NAV 1.4$. Current price 1$. Also very low P/S
1047.hk - Very low P/B and P/S
0141.hk - Very low P/B and P/S

In the last two years I found 3 stocks that traded well below net cash. All of them were big winners - 1046.hk, 1149.hk & 0379.hk
It is amazing, because all 3 were cash free positive. 1046.hk & 1149.hk were really cash cows. The P/E of 1149.hk was less than 2 when I bought it and it was growing more than 30% a year. I still hold this one. Its already up more than 3 times since I bought, but its PE is just 5.

All of these stocks are in HK, you can check them here:
www.hangseng.com

And read the reports here:
Search

 

[yona]

If I were that lucky... I would not press my luck too much further. I would be be getting less risky quickly. Otherwise, the market gremlins might take it back!

I guess I was lucky to be in a place were there were so many stocks that traded at low single digit PE and well below book value.
From time to time I do tell myself that the returns these 2 years were too good to be true and I need to take the money and run. But then I take another look at my stocks, and see how cheap they still are - most of them well below NAV. I don't see any reason to sell and buy more expensive stocks.

When my stocks reach NAV (for RE companies) or P/S of 2 (for industrial companies) I start getting nervous. But there is still a long way to get there.

 

[obryanjf]

Hit and unhit 1MM last year or early this year after 18 years. no windfalls, few options, no huge winners.

Currently over and close to FIRE.

job

 

[Alan]

yona, I think you should change your handle to yoda - clever you are

 

[old woman]

Motley Fool recently did an article titled "Your First Million Is the Toughest." Your First Million Is the Toughest
It talks about how long it takes to accumulate your first million, and then the second, and third, using the criteria of monthly savings and rates of return.

Recently there was a thread asking people if they had recently surpassed that major milestone. My question is; from the time you seriously started to save for retirement, how long did it take you to accumulate your first seven figures? I am in striking distance, but I have been working at it for 25 years. No windfalls, no stock options, just one paycheck at a time.

Milkman

I started saving in April 1984 when I got divorced and bought my first IRA for $2,000. But I am far from my first million and will probably never have a million. I got to 420K so far it may seem tiny but I had started with nothing and even put myself through two years of college at a private school in that time and bought two houses. The current house has a few hundred thousand in equity maybe 300K so my net worth could be over 700K and when I sell this house I could buy a cheaper one for cash. But my money is snowballing right now my net worth has gone up 100K in a year not counting house appreciation just investment income and what I save out of my pay so if I work 3 more years I could maybe have a million.

 

[Lyle]

In 1984 I move to a new company and remember having 10K in a retirement account. I hit 1M net worth in 2006 and will hit 1M in liquid assets in 2007. It took a while but considering during this time raised a family, put two kids though college, learned about the stock market (2000-2003), it worked.

Not sure how much was me and how much was persistence and luck though.
Lyle

 

[chinaco]

I guess I was lucky to be in a place were there were so many stocks that traded at low single digit PE and well below book value.
From time to time I do tell myself that the returns these 2 years were too good to be true and I need to take the money and run. But then I take another look at my stocks, and see how cheap they still are - most of them well below NAV. I don't see any reason to sell and buy more expensive stocks.

When my stocks reach NAV (for RE companies) or P/S of 2 (for industrial companies) I start getting nervous. But there is still a long way to get there.

A value approach make sense to me. Concentration on a few or 1 company can lead to great returns, it can also lead to severe cuts (alot of company risk and depending on the run up market risk). If I were lucky enough to hit the jackpot... I would be taking the money off the table an redeploying it in a diversified portfolio of stocks and bonds. I would not push my luck. And yes... it would be luck. And yes, it would catch up to me.

No offense: either you are very naive or you are pulling our collective chains. Suffice it to say, however you accomplished it (if you did), it would make sense reassess the strategy (being kind with the description of strategy).

 

[Salaryman]

20 years of hardcore saving and investing, by my 40th b-day.

Getting kicked out of school and losing my scholarship money was the best thing that happened to me. Gave me motivation and set the low bar/starting point.

[SIZE=-1]"Compounding interest is the greatest mathematical discovery of all time". Albert Einstein[/SIZE]

 

[Spanky]

20 years of hardcore saving and investing, by my 40th b-day.

That's very good. It took us more than 25 years.

 

[Salaryman]

Thanks Spanky. Hopefully the next 1mm won't take as long.

 

[yona]

Concentration on a few or 1 company can lead to great returns, it can also lead to severe cuts (alot of company risk and depending on the run up market risk).

My portfolio contains around 20 stocks, but 7-8 of them are big holdings while the rest are smaller. Investing in more stocks is harder as I read all the reports and try to attend the annual meetings when I can.

Also, there is no reason to take out money from the cheaper stocks and put it in more expensive ones just to be more diversified.

"Wide diversification is only required when investors do not understand what they are doing." - Buffett

 

[califdreamer]

Started the path to financial recovery in 1995 after the financial drains of grad school and that great job market of the early 90s .

Made first real estate investments in 1996 in Southern California and continued to 1031 and re-leverage. Hit 1M (excluding personal residence) around 2003. Hit second mark in '06.

 

[Milton]

My portfolio contains around 20 stocks, but 7-8 of them are big holdings while the rest are smaller. Investing in more stocks is harder as I read all the reports and try to attend the annual meetings when I can.

The same point is made in this article: http://www.sprott.com/pdf/06_14_2007_NP_In Portfolios, Go Big Or Go Home.pdf

 

[ScottFromUtah]

I have to say, I'm mighty impressed with you people. As a group, you're the epidome of "The Millionaire Next Door."

As for me, I started very slowly. Graduated with a B.S. in chemistry in 1969, a Ph.D. in chemistry in 1973, did four years of post-doctoral research, got my first "real" job in 1977 (age 32) and my current job in 1978. The pay was okay as academic pay goes, but nothing to write home about--literally, as my banker father was quite disappointed at the financial aspect of my career. I didn't mind it. I loved what I was doing.

From the beginning of my first real job, I saved as much as I could, but I had a big family to house, feed, cloth, and educate. Then in 1990 my wife and I wrote our first textbook. Soon thereafter she got her Ph.D. and a job, so we had a second income. Then our textbooks started selling well, and we have now sold over 2,000,000 copies.

I don't know when we passed the $1M mark. I wasn't paying attention. I now know what my net worth is, but more importantly I know that I've been blessed with a full, wonderful life and hope to make it fuller and more wonderful as we go into retirement next summer.

Everyone's life is different.

 

[LOL!]

Started serious investing at age 28 when I got my first "real" job. 14 years to first million in 1999, 7 years to the 2nd one despite the setback in 2000-2002. No need for a 3rd. None of it real estate. All of it investing in mutual funds, stocks, ETFs.

 

[chinaco]

My portfolio contains around 20 stocks, but 7-8 of them are big holdings while the rest are smaller. Investing in more stocks is harder as I read all the reports and try to attend the annual meetings when I can.

Also, there is no reason to take out money from the cheaper stocks and put it in more expensive ones just to be more diversified.

"Wide diversification is only required when investors do not understand what they are doing." - Buffett

Yup! I have read the same. One can diversify amongst a smaller amount of stocks in that asset class. As I stated before, concentration can lead to greater returns (albeit at higher risk). Of course, I doubt very seriously that most people have the same understanding of the company and its management, portfolio management, etc. that Buffet does. Buy and Hold is valid as long as one knows what they are holding!

You stated that you made $1MM in 7 years. l am assuming that you did not start with a portfolio of $500k... But something modest like $10-$20k/year. Which would mean that you had to make massive gains. For example, if you started with $20k and made it to 1MM in 7 years, you made 5000% gain.

My point: I doubt that type of success would continue or that I would repeat it. If I were lucky enough to hit the jackpot, I would understand (now after doing this for years) that it was primarily luck [on my part]. I would be moving much of the money out of the equities that made the big run. I might redeploy it in stage out of it over a period of time (months). Since I am investing for retirement, I would want to lock the gains in and reduce the chances of losing it. [I would not be looking to take big risks]. If I wanted to keep some money in the security just in case it continues to run. I might do so. By the way, the risk being taken with say a $20,000 initial investment is not the same as having $500,000 in one stock with a portfolio of $1MM.

 

[Spanky]

My portfolio contains around 20 stocks, but 7-8 of them are big holdings while the rest are smaller.

In other words, diversification is for the rest of us while a concentrated portfolio is for the experts such as Warren Buffet, Peter lynch, Harry Dent -- not to mention Yona.

 

[dmpi]

What's that old saying? Don't confuse brains with a bull market.

 

[yona]

Yup! I have read the same. One can diversify amongst a smaller amount of stocks in that asset class. As I stated before, concentration can lead to greater returns (albeit at higher risk).

I am new here, but from what I read until now, I noticed that there are few here that made a lot of money by having a successful business. That means that more than 50% of their net worth is concentrated in one business, yet not many people will think they are taking a huge risk. So why so many people think that owning part of 20 or so successful businesses is so risky?

Some people here made a lot of money owning RE. Some have 2-3 houses, yet no one think they are taking a big risk. My biggest holding is a RE company, I am very familiar with their buildings. And the stock is traded at about 1/3 of NAV. Why do you think it is more risky to own a RE via stock than directly?

Of course, I doubt very seriously that most people have the same understanding of the company and its management, portfolio management, etc. that Buffet does. Buy and Hold is valid as long as one knows what they are holding!

You can't have a very good return with buy and hold strategy. There is almost no business that can grow more than 20% a year. Ben Graham said you should hold a company for 2 years. Joel Greenblatt developed a formula that will yield 32% if you replace your stocks every year.

You stated that you made $1MM in 7 years. l am assuming that you did not start with a portfolio of $500k... But something modest like $10-$20k/year. Which would mean that you had to make massive gains. For example, if you started with $20k and made it to 1MM in 7 years, you made 5000% gain.

I also saved during this time. So my return was not so high. Actually, my return wasn't high until I read these lines from Buffett:

"If I was running $1 million today, or $10 million for that matter, I'd be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."

http://www.businessweek.com/bwdaily/dnflash/june1999/sw90625.htm

It surprised me that someone can achieve such a high return. So I read more about it, and found out that he is not the only one that can have very high returns with small amount of capital. Take a look at this:

http://www.gurufocus.com/news.php?id=877

My point: I doubt that type of success would continue or that I would repeat it. If I were lucky enough to hit the jackpot, I would understand (now after doing this for years) that it was primarily luck [on my part]. I would be moving much of the money out of the equities that made the big run. I might redeploy it in stage out of it over a period of time (months). Since I am investing for retirement, I would want to lock the gains in and reduce the chances of losing it. [I would not be looking to take big risks]. If I wanted to keep some money in the security just in case it continues to run. I might do so. By the way, the risk being taken with say a $20,000 initial investment is not the same as having $500,000 in one stock with a portfolio of $1MM.

I was lucky to be in the right place (HK) at the right time (after a few very bad years of the local economy - Asia crises, SARS etc..). The stocks were beaten very hard. I found stocks that were traded well below net cash. If you buy a stock that is very cheap, it will go up sooner or later and it is nothing to do with luck. Usually I hold a stock for 1-3 years - until I think it reaches its fair value, or if I found cheaper one.
Some of the stocks that I had, already had a great run and I replaced them with cheaper ones.

I am not old, but in my 35 years of existence, I already noticed that people will believe to what they want to believe regardless of the facts.
You can believe me or not, it is fine with me. You don't know me and I have no way to prove my returns. But I hope that at least you believe people like Buffett, Graham & Greenblatt. If you read Graham's books, you will see that he developed a formula that any one can use, and it will beat the market. Greenblatt even put his formula free of charge on the internet.

I noticed that the common wisdom on this forum is to invest with index funds, which is great for people that want to have a good return with no effort at all. I also advice my friends and family to buy index funds, as I know that they don't have the time or the mentality to buy stocks. But to say that there is no way someone can beat the market by high margin, is just not true.

 

[chinaco]

I am new here, but from what I read until now, I noticed that there are few here that made a lot of money by having a successful business. That means that more than 50% of their net worth is concentrated in one business, yet not many people will think they are taking a huge risk. So why so many people think that owning part of 20 or so successful businesses is so risky?

...

Good luck making your second million.

 

[Spanky]

But to say that there is no way someone can beat the market by high margin, is just not true.

Someone or some group will always beat the market by a big margin (>xx%) but not likely on a consistent basis (i.e., years after years).