How To Invest $250,000 The Smart Way

Jewelry and Versace: Assets that rarely appreciate — but does it matter after all?

A lesson on investments learned through “Culture” by Migos feat. DJ Khaled (2017)


Sometimes — albeit not often — rappers’ advice should not necessarily be followed. Migos’ Culture features two investments tipps. One can play out well. The other — well, it depends.

Don’t buy the car, we want the lot (skrt skrt) — Takeoff of Migos

A worthwhile series of YouTube videos on value investing explains this issue quite colorful: Wealthy people invest money on assets that appreciate. Poor people spend money on assets that depreciate.

Now, when Takeoff buys a car he clearly “invests” in a depreciable asset. The moment he buys a car, it loses 20%-25% of its value. On top, he pays insurance, gas (supposedly a lot as a rapper), and maintenance repairs. Therefore, owning a car is an expensive thing. You are blowing money fast (B.M.F.). In his book “The Only Investment Guide You’ll Ever Need”, Andrew Tobias put it best by stating:

“That “new car smell” is the most expensive fragrance in the world.”

Having said that, owning the lot with a whole bunch of cars can either make things worse (you drive more cars, therefore steeply depreciating your assets). But more probably you are going to sell or lease these cars since you can’t drive all of them. By doing this in a sustainable way, you’re going to make more money than you’ve spent. Hence, owning the lot potentially favors your net worth a lot more than buying a single car.

Speaking of depreciable assets, we receive another investment tip from “Culture”. This time by Offset:

“Quarter million in the vault (quarter K)” — Offset of Migos

Keeping cash in your vault, esp. in the amount Offset is talking about, may seem like a save way to set your net worth on fire. Cash is always a bad investment. It’s not producing anything and its value decreases over time.

Let’s look at the facts: Interest rates are at a historic low but inflation is slowly rising, at least staying stable. With inflation rates around 2% over the next years, keeping your cash in the vault decreases the value of your quarter million to around $230k within five years (s. Table 1).

Table 1: Keeping a quarter million in the vault has destructive consequences.

$230k purchasing power is still not bad, but you can definitely lose $20k doing things that are more fun (like finessing somebody on a trip to Cancún in June, no raccoon).

Nevertheless - to speak with Warren Buffet - “Cash is like oxygen, you wanna make sure it’s around”. And Offset may be a smart mo********er in the tradition of AAA-investors like Charlie Munger or Warren Buffett.

Say, he keeps his cash in the vault in order to react quickly to changes in the market. He is patient, waiting for this low-risk, high yield opportunity that only passes by from time to time. And when he spots it: Boom! He opens the vault and takes time by the forelock! Quick closing, no need to leverage on debt from banks. Therefore, Offset is not only able to react in no time to investment opportunities, he also doesn’t need to touch his lot and sell some cars when he needs free investment dollars. Good investors rarely touch the money they’ve invested so to keep it growing.[1]

What’s more, Offset may be lucky to have $250k in the vault when shit hits the fan and Migos’ “Culture”-album doesn’t sell.* The usual investment gurus advise us to keep an emergency fund that secures our lifestyle for at least six months. That would let Offset spend roughly $42k a month. Surely enough to finance most people’s lifestyles… most people’s.

Lessons Learned: 1. Own the lot, not just the car 2. Put your cash to work. But keep some on the side for sudden opportunities and bad times.


*This of course is meant rhetorical. “Culture” was certified Platinum just under three months after release.

[1] https://www.thebalance.com/how-much-cash-should-i-keep-in-my-portfolio-357127