Investing outside the comfort zone
How thinking as an investor leads to optimisations
Hi friend,
So I learned that technical investing in penny stocks is a fool’s game.
Do you know what benefit came with that experiment though?
I completely changed my mindset and operations about how to invest in general.
Want to beat the markets in any condition? Learn Mixed Active Investing here.
Around the same time I was exploring how to squeeze more out of my active investing, I also somehow got the idea of trying to figure out how the very wealthy operate.
Before podcasts were a mainstream thing I was listening to some trying to make my skateboarding route to work more useful. It must have been Tim Ferris or Freakonomics that planted the idea, can’t really remember. I got curious to learn what the wealthy do differently in all areas of their life so I started paying attention instead of dismissing them as rarities.
To invest in penny stocks I had to open an account with a broker in the Cayman Islands.
Isn’t that where criminals and corrupt people keep their money? Friends would ask.
Instead of being scared of doing something illegal I was intrigued and did my research.
Nothing illegal about it, just slightly more annoying paperwork for me. The broker didn’t even take my money and run. Imagine.
Having to do this made me realize that I do not have to limit myself to investing via my bank or the big online brokers if I don’t find that suitable.
When building my startups I learned to establish a holding company in Denmark to own the startup equity instead of me owning it personally. This was recommended by mentors I had at the time and is a general good practice. Again nothing fancy, just more annoying paperwork.
This made things click when I read the Rich Dad Poor Dad book as there is a section explaining that the wealthy aim to not own anything, contrary to popular belief.
Why would I not want to own anything if I am trying to become wealthy?
It has more to do with freedom of choice than the common scarcity mindset-driven belief that it is about evading tax responsibilities.
If I am tied personally to an asset, it creates problems if I want to move myself between jurisdictions.
Maybe I live somewhere where it is difficult to invest in certain assets. Should I just give up?
What if I want to flip assets? Or transfer them? What if I die?
Creating entities that own your assets gives you a lot of freedom of operation. The cost is paperwork and having to learn legalese and international tax law. The added benefit is that now you can decide where and when to pay your taxes.
It’s a common myth that you can just create an offshore company and hide from your tax responsibilities. To actually do that requires a crazy amount of work that likely costs you more than just paying the taxes. Governments have an interest in making believe that offshoring is dodgy because it kinda sucks for them when citizens or entities leave for where they are treated better.
Where am I going with this?
Don’t assume that you have to do things the way the majority of people and especially your government expect you to do things.
There are always a multitude of options if you are willing to learn the rules and the laws.
With my changed approach I am now able to invest in US funds directly without having to buy the UCITS versions of the EU because I can invest via a US entity instead of me personally.
Back when crypto was less accepted I could invest in more risky assets and have crypto-backed payment cards without affecting my personal standing with banks and governments also by having an offshore entity.
Don’t be scared to improve your legal and financial knowledge just because it appears complex, there is a world of flexibility out there.
Have a good one,
Chris
Thank you for reading! :)
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