3 Ways To Get Incredible Rich — Or Lose It All
A lesson on investments learned through “Streets On Lock” by [Young] Jeezy (2006).
The remarkable thing about Jeezy’s “Streets On Lock” is its reversal of the now iconic slogan “Mo’ Money, Mo’ Problems” by The Notorious B.I.G.
B.I.G. said it first more money more problems /
The way I see it: more problems more money/
The more risk you take, the more problems you amass. But the more heat you can handle, the more money you make. Or to put it into financial terms: Higher risk promises higher returns.
There are certainly many interesting ways to increase your problems in order to make more money. Here are three of my favorites:
1. Junk Bonds
Junk bonds can lead to a lot of problems when you stuff your portfolio with them. They are non-investment grade bonds that promise high returns due to carrying the high risk of defaulting on their principal and interest rate payments.
Junk bonds come in shiny categories like “Fallen Angels” (formerly great companies such as Ford) or “Rising Stars” (promising pre-IPO startups like mine without significant operational history).
If you like to create problems at home with your wife feel free to buy some Ford or hit me up for investment opportunities in my startup. Perhaps we can issue something for you.
2. Leveraged Oil ETFs
The price of oil is pretty volatile and subject to high-volume trading activity. That’s why oil ETFs have the potential of exponential returns — and losses.[1]
The ProShares UltraShort Bloomberg Crude Oil ETF created a one-year return from 2014 to 2015 of 193%. Your local bank’s shitty checking account got you around 0.04%. But the ProShares UltraShort Oil & Gas ETF gave you a five-year loss of 26%
Wow.
With leveraged Oil ETFs you basically short sell — means, to bet against— crude oil to profit from a fall in crude oil prices. Not exactly sure if Rick Ross and Jadakiss just were shortening crude oil when they wrote Oil Money Gang, but it would have been pretty lit.
Beware: While you theoretically have unlimited profits, you also have an infinite risk of losses. That is, when you short sell crude oil and its price goes down and down and down, you profit. On the contrary, when the crude oil price goes up and up and up you’re fuc*ed.
3. Startups
The numbers speak for itself: 90% of all startups just fail. Main reasons are a missing market need, illiquidity, and a weak team constellation.[2]
Still people are founding and funding startups. It’s crazy right?
Being a startup founder myself, I can tell you a thing or two about the motivations of at least founding a startup. It’s mostly obvious reasons. And of course megalomaniac thoughts like changing whole industries, disrupting the way “business is done over here” and finally proving all the nay-sayers dead wrong.
The more skin in the game we have, the more we can lose. This is real money like our capital invested or its opportunistic money like the money we could make at some top-tier consulting firm. But since the moment I got targeted on Facebook with a certain HR ad, I am more than happy to run the entrepreneurial risk of losing it all.
Startup investors on the other side are — as with any investment - well-advised to diversify their risk. Startups are a crazy speculative asset class and extremely binary: You either gain a lot or lose everything.[3] But screening fancy pitch decks and seeing companies grow (or die) is surely a more long-termed entertainment than playing roulette at the casino. Even though at roulette you have better chances of winning.
Lesson learned: The bigger the struggle, the better the results. The higher the risk, the higher the yield.
