If you could meet all your needs and wants with treasuries, why would you risk capital?

23 Replies

People lose it all. Huge lottery winnings or the sale of a high tech company. If you had 10,000,000 (or a 100,000,000 for that matter) and could earn 350k a year with 30 yr treasuries, or own all of a neighborhood, a large apartment or what have you, would you risk it all? Some of it?

I think I could budget and be happy with 10m and 350. 

I guess if I had $10mm to put in treasuries AND was more confident of the long-term future and stability of the dollar, treasuries might not be a bad option.  Since I have to build wealth...I didn't come blessed with it...and have little confidence that the dollar will remain solid for the next 30-years, I think I'll stick with real estate.

Not too many people these days would do it @Hattie Dizmond  . With crazy talk of a default and all. You never know though, look at what happened to Bill Gross. 

In the olden days it was not uncommon to throw everything into long-term bonds. Knew and old guy that sold his finance company and put it all in 30 year treasuries. He had more income than he needed so sent back what he didn't use.

Something in me wants a solid base. I could ladder some bonds at my age and it would be better than an annuity IMO. 

For lottery people, why not ladder yourself a million a year? With that invest in risky stuff.

@Andrew Syrios  and you need to be aggressive before you can afford to be conservative.

And there are those that would lose it all.

Build it like a pyramid with solid low risk at the bottom and higher as you go up?

@Jeff S.  

 Great question.  It speaks to some of the central questions about being an investor: How much is enough, What risks am I willing to take and What are my motivations $ or the thrill of the chase.

I think I would have to take the safe money.  It wouldn't have to be treasuries of course.  To keep trying to grow the money would say that I am really just in it for the thrill - not that there is anything wrong with that.  So long as your dealing honestly in a fair market your enrichment doesn't come at someone else's expense - in fact it enriches others.  But to risk a sure thing when it is already more than you need... seems like chasing your tail. 

Hey Don, welcome. Read your bio and it sounds like you have the whole thing going that people on here want to achieve. I think  the response (or lack of) to this post says it all about the BP community and that is that they want more than "safe money." Having been very broke myself I like a guarantee and want the sure thing.

There are those that hit it big, lose it all, and then hit it big again. Don't have the stomach for that. And then there are those that will end up broke no matter how much they have. Thanks for the response.

@Jeff S.  We (or some of us here) know how to make money in real estate. I have friends that work in textiles that could take $10m and turn it to $15m in the apparel business. However, the lottery winners, former pro athletes, or whoever the person is that can blow through tens of millions would do the same if if were ten of thousands, or hundreds of millions.

I know that if I had $10m, then I'd want $50m... not $10.35m.  So why risk it??? Because with risk comes reward. Isn't that why we are all here?

Jon Huber, Real Estate Agent in New Jersey (#NRS0565737)
Originally posted by @Jeff S.:

Hey Don, welcome. Read your bio and it sounds like you have the whole thing going that people on here want to achieve. I think  the response (or lack of) to this post says it all about the BP community and that is that they want more than "safe money." Having been very broke myself I like a guarantee and want the sure thing.

There are those that hit it big, lose it all, and then hit it big again. Don't have the stomach for that. And then there are those that will end up broke no matter how much they have. Thanks for the response.

I think safe money at that rate is for people who have enough capital to create an actual income.  $1M at the current rate is $35K/year.  Most here don't have $1M and most wouldn't tie up that much capital to live on $35K.

When you get to $10M, low returns with safety becomes more of an option.  But how does average investor get to $10M, let alone $1M in capital?  Certainly not with that kind of low rate and safety.

@Jon Huber  interesting. Guess if you run in certain circles of friends that focus on growth in business then taking that capital and risking it all would be expected. 

Not really agreeing that risk brings reward. Risk can be a big rush and exciting but in and of itself it brings nothing except a higher possibility of loss. The reward comes from knowing what you are doing and to those that look like they are risking, to them they don't see it that way because they have done their homework. The reward is higher because others perceive it as risk so stay away IMO.

I'd put the money to work.  Humans are designed to grow, produce, create, and not just exist.  I only have what I have for a short time (life). In order to be a good manager during my stint, I should create some value, no?


Mark Cuban went to treasuries after he sold Broadcast.com to Yahoo.  For a while.  Then he bought the Dallas Mavericks for $285 million.  That's a big toy.  Cuban now says the team is worth well over a billion.  I suspect he's happy he didn't stay in treasuries,

Kristine Marie Poe of course we all know about the older women that have 800k in CD's and only live on their SS. They grew up in the depression and don't like the market much and remember lots of abandoned houses. They aren't looking for return, just return of capital.

With what you can get from fixed income with a million the term "middle class millionaire" really applies." If you have "just a million" you probably need another source of income unless you are really old. That is very sad for those thrifty savers.

The question is if you had so much money that you could have everything you want would you put it at risk for more? Whatever that number is, would you try to be a Donald Trump or would you just stash it and spend your time thinking about other things than money?

Originally posted by @Jon Klaus:

Humans are designed to grow, produce, create, and not just exist.

 Actually, humans are only designed to reproduce.  ;)

I think Kristine Marie Poe nailed it for me.  If I had enough wealth to generate significant passive income, I wouldn't risk the capital I have.  I'm here to build wealth, which will then generate the passive income.  This becomes a chicken & egg discussion for me.

Not to mention the fact that I'm not ready to declare, in perpetuity, that treasuries are "safe".

The simple fact is, people will always need a place to live and there is no new land being created, unless you are in Japan or UAE, where they are pouring sand into the ocean!

I agree totally @Jon Klaus . Creating value by creating jobs and managing the funds in a way that helps produce goods and services is what we are all about. No argument there. Guess you wouldn't play golf and bridge all day. Good man.

Mark Cuban is one crazy son of a gun. I just listened to a podcast about him. He hired an attorney who came to work the first day in an expensive suit trying to impress. Cuban told him to go home and change into grubbies- he was going to start in the stockroom to learn the business from the ground up. Smart.


That is hilarious @Adrian Tilley  . Actually we have a large percentage that believe exactly that. More kids, more welfare.

Originally posted by @Adrian Tilley:
Originally posted by @Jon Klaus:

Humans are designed to grow, produce, create, and not just exist.

 Actually, humans are only designed to reproduce.  ;)

So no creation allowed, just procreation.  ; )

Where's the owner's manual, anyway?

Oh c'mon... I can't believe anyone has yet to mention the best course of action... go to vegas and put it all on black.... ;)

Well of course there is always a reason to take a balanced approach to risk so that you can maintain the purchasing power of your money. With taxes taking 40-60% of your 350k treasuries income and the official inflation numbers of 2.9% (real is prob 5-7%), earning 350k in this scenario is not exactly what it is cut out to be.

You would not only need to earning enough to break even with inflation so that your 10 million today can maintain or growth indefinitely with out attrition. Additionally you'd need an excess amount of returns so that you can provide for your personal lifestyle.

Albert Bui, Lender in CA (#345453), WA (#345453), TX (#345453), and TN (#345453)
949-514-5106

Hi @Albert Bui  good logical answer. If it were me I'd be investing some of that 350k in inflation hedging assets like RE. But the question is if ((maybe for you it would take 100 million) (not many houses in Irvine; we are currently vacationing in Laguna Beach)) you had enough money that inflation is not a concern would you put the money at risk. Trying to see if all the investments you were using to grow your money went up in flames would you still be well off. 

For you 10 million is not enough so 100 million should give you enough income from treasuries. Would you still put it at risk.

See you are a mortgage planner which to my definition is to take equity out of your home and invest it as in the stock market? A risk taker.

Hi Jeff,

I think that in answer to your question, it's all about math and growth for me.  If we accept that as human beings, we never want our personal influence and power to diminish, then we will never want to stop growing.  Investing in riskless treasury securities is a stoppage in personal growth.  That's an unacceptable position to voluntarily place ones self in, in my opinion.

On the math side of things, we can expect the stock market to appreciate at a rate of around 6.5% per year in aggregate over the long haul.  If you can claim 2-3 % per year in dividends from your investment, over the long term you are likely to have the same or greater spending power that you get from riskless treasury securities.  In this case, a very basic change of mindset that is willing to accept some short term loss results in exponentially greater wealth over the long term.

I guess it all comes down to a very basic question - why settle for less?

-Scott

Thanks @Scott Trench  , of course the market can correct at any time and take a 40% bite out of things. But you are a young guy and if you have nerves of steel you will weather the storm and hope it comes back. For me when the market tanks I am out and for that reason I am better off with income products which includes RE. 

Good luck learning about RE. Thinking long-term is the best advice. Of course life offers many bumps that can derail the best savings plans but one just has to keep jumping back on that horse.

BTW there is a reason banks don't loan on stocks but they do on RE.

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