You’ve fought through a field of thousands, and now you’re sitting across the table from Phil Ivey – heads up for the most coveted bracelet in sport.
Of course, you’re just thinking that you already have the $5 million runner-up prize ‘in the bag’ (allowing you to have a very nice – and, ‘guilt free’ – $250k spending spree, and then live this quite pleasant $250k/year lifestyle) …
… but, you’re hoping-against-hope that you beat Phil senseless and pocket the $8.5 million first prize!
Firstly, let me burst your balloon: you’re still a ways off the $11 million (plus a bit extra for up-front ‘splurging money’) that you’ll need if you want to live this rather lavish $550k per year lifestyle … but, you’ve still made your own $7 million in 7 years, and then some! 🙂
I’m now assuming that you’ve made your Number …
… so, the key is to protect your wealth (to ensure that you have that $250k – give or take – to live off, inflation-adjusted, for the rest of your life); you do this in any number of ways:
– Invest in Index Funds and live off 5% (dividends + selling off some shares each year), enduring the ups and downs of the market,
– Invest in Inflation-Protected Federal Government Treasury bonds, suffering the low returns currently available, with the option to ‘spice things up a little’ by using up to 5% of your capital each year to buy 12 month call options over the market,
– Invest in real-estate; since you’re not trying to create new money, you can afford to pay cash and simply live off 75% of the rents (setting aside, perhaps, another 5% of your starting capital and 25% of all net rents against vacancies, repairs/maintenance, and other contingencies).
Of these, the last holds the most attraction for me, because:
– I don’t require much liquidity (I’m looking for steady income), but can always keep aside another couple of year’s of living expenses (say, $500k) in cash … just in case,
– My income (i.e. the rents) is generally inflation-adjusted (and, rents usually go up – over the long’ish run – in line with inflation),
– I never need to worry about eating into my capital: it’s sitting there in bricks and mortar – also growing at least in line with inflation!
Of course, you could always just blow it all on a mansion and a garage full of Ferraris 🙂