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I really don’t get that. If you had say $10 million, no more than $1 million should be invested into anything actually risky. The stock market (index funds) isn’t risky, it’s just a matter of not being an idiot and selling at a bottom of the market. If someone like that had $1 million in cash equivalents, maybe a million or two in real estate (or more), and most of the rest in diversified stock portfolios they’ll be set for life. What’s the purpose behind throwing it all into crazy wacky investments?
Are you commenting on what I wrote? If so, the guys I wrote about got rich off of stock options in the high tech arena. Their wealth was tied up in the value of those shares. I cannot say for sure but I suspect they did not diversify because they did not want to take the cap gains hit. So they held on to the bulk of their options and then the tech crash happened in 2001. But meantime they had overextended themselves in other areas. The two that I knew funded some high tech startups. So come 2001 their value was half and they had piles of debt, and the startups they had funded crashed with the rest of high-tech. Why did they get involved in start-ups? Because they were high-tech guys who liked creating things and they got rich off of their own start-ups so they thought they could do it again. For the record, I was the CTO of one of the start-ups that they funded. Those were heady times - in hind sight it was over-exuberance but at the time it was seductive.
Brilliant CPA. Passed the exam while he was still in school. Recruited to a "Big 8" firm and started his own practice a few years later, and then a car dealership.
My mom was beautiful and us 3 kids (8,6,3) were pretty cute.
Never one to bother with being home for dinner, he started staying out later and later. Then he started not coming home at all.
His personality changed. He told us kids stories about such things as the CIA chasing him, and his civil rights were being violated a messed-up hamburger. Things like this happened all the time. Looking back, his brain must have been completely fried.
He burned through the savings. Sold the Porsche and the nice things. And when that was gone, he mortgaged the house, took the money and vanished. Life for us changed pretty significantly after that. Found out later he was living in a car, before he moved into his brother's garage.
Are you commenting on what I wrote? If so, the guys I wrote about got rich off of stock options in the high tech arena. Their wealth was tied up in the value of those shares. I cannot say for sure but I suspect they did not diversify because they did not want to take the cap gains hit. So they held onto the bulk of their options and then the tech crash happened in 2001.
SO many stories like this and not all the result of poor decisions. I remember those times and many options couldn't be exercised for a certain period so even if you saw the handwriting on the wall you could do nothing. Other companies had their 401(k) match ONLY in company stock and you could invest your own contribution in company stock at a discount to the current market value. So, there were a lot of riches on paper that evaporated in the late 2001 crash. (Or in Warren Buffet's colorful words, "When the tide goes out you can see who's been swimming naked".)
There were changes to the laws after that and employers are no longer permitted to force employees to keep the employer match in company stock. Financial advice writers also stressed the need to make sure your net worth wasn't tied up in company stock because your livelihood AND your net worth were tied to the fortunes of the same company. It didn't work well for Enron employees.
My great-grandfather was a very successful farmer and continued to acquire other farms, becoming the largest farmer in the county. First to have both running water and electricity indoors, he did very well. Eventually he acquired the local town bank. While I'm still trying to get the hand written ledgers from my idiot cousin who hasn't a clue about them, the story is that there was a gentleman's agreement when he acquired the bank that the selling banker would only move cash out in pieces over a number of years. Instead the seller took all and went to California. While he survived that, it left him in a weakened state financially. While the 20's were roaring for manufacturing, they weren't the best of times for agriculture. Loans kept being extended. By the 30's things took a dive and he closed the bank, apparently writing off many loans and selling almost all of his farms at depressed prices in order to honor his depositors. In those days, there was no FDIC. What was left to the kids was split between the 13 of them.
When people look at income inequality charts....sometimes it's easy to forget that the top tier is rarely the same people throughout a lifetime. It ebbs and flows. I'm sure my Dad made more money than Bill Gates when Bill was a teen.
Yep. People don't realize that individuals fluctuate broadly in their lifetime earnings. I've always been an advocate for self-employment, chiefly because you largely have more control over your own destiny.
In the case of your great-grandfather, it sounds as if he was the victim of the various farm tariffs that were passed in the early 20s, laws that did nothing but to reduce the market for American farmers. Before it was passed, a bushel of wheat typically sold for around a buck. After the tariffs, that price dropped to about two bits.
I don't know if this qualifies as a rags to riches story, but at one of my first jobs as an Electrician's Helper, the owner spent his entire life building up an Electrical contractor business in North Jersey. He had about 20 employees, dozen trucks, equipment, a building, and a solid repetition as a reliable contractor. After working hard all his life he decided it was time to retire and move to the South Jersey Shore. He turned the business over to his son to run things and planned to live off some of the income from the business.
It took his Son one year to bankrupt the business. He would take down payments for jobs, spend all the money and not have enough money to pay for materials or workers. After his son totally wrecked things and it was too late to save the business, he was forced to come out of retirement and start a new electrical business so he could support himself in retirement. When I started working for him, his step son ran the business, just one truck contractor run out of his houses one car garage. He was getting too old to do much work himself. He ended dying of Cancer about a year after I started. His step son was pretty on the ball kind of guy, but I heard years after I stopped working for him, he got involved with a girl that was a druggie. He ended up being a druggie himself. lost everything.
My father in law and his mother are a perfect example of "riches to rags." My FIL's father was a wealthy man. He owned some stores in downtown Miami in the 70's. He was successful enough to own a mansion on the water with its own dock in Miami Beach. My FIL grew up being able to take regular trips on the family boat and generally living a very privileged life. His fathers downfall was a common one. An irresponsible spouse who cared nothing about responsible finances.
One day my FIL's father had a sudden heart attack and died. Although he left sizeable assets; his wife burned through it within a couple of years. My FIL was primarily raised by his mother because his father worked a lot. So he was raised to be highly irresponsible, frivolous spender and expecting instant gratification. His mother went from living the high life to living in a terrible neighborhood in an efficiency in Miami. She died a few years ago.
My FIL always held ok jobs but he was addicted to alcohol, minor drugs and generally liked to try to be a "show off." It was not uncommon for him to go to a 5 star restaurant regularly even though he knew he wouldn't have money to pay the rent, spend money on cars he can't afford or to neglect his children's healthcare costs because of his financial irresponsibility. Since I have been with my wife, my FIL and his wife have been evicted numerous times from many places for not paying rent, went out of their way to create many major financial difficulties and generally just lived one step away from being homeless.
He caught a bit of luck back in 2016 when his wife's mother died and left a decent 2/1 house on a canal in a nice lower middle class neighborhood to them. It was fully paid and the property tax and insurance costs only $200/month. They have had it made for the last 3 years. But they are about to commit financial suicide again by selling the house. I suspect they will blow the $130K cash they get within 1.5 years and then be back to being temporarily homeless between being evicted from places.
I suppose when I think of riches to rags, I think of Don Ameche and Ralph Bellamy in Trading Places. But I don't know anyone that fabulously wealthy, or dead-broke. I can think of some people who have been forced to step back a notch or two. I know of one person who tried to retire early, then ended up having to return to the workforce, and moving from Florida to Minnesota to do it.
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