Luck, or Foresight? Getting to FIRE Gets A Whole Lot Easier When You Can 10x Your Capital.

MichaelEducation, FIRE, Making Money, Misc, Saving Money36 Comments

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10x Your Capital

It’s funny.  When you are in the midst of something, you don’t always realize the grandeur of certain events going on in your life.

I would go so far as to suggest we’re in the midst of something magnificent today that has the potential to 10x some of your investment capital.

My First 10x

The Boom

When I was in college, I was witness to an incredible stock market boom – the dot-com boom.  Wow, what a fascinating time!  There was money being thrown out to all sorts of ideas from VC firms flush with cash.  I can clearly remember, Amazon just being an online bookstore.   It was an Internet darling (AMZN) that sported a $100+ price tag for a while in the year 2000.

The Drop

After 9/11, Amazon’s stock was decimated and dropped to single digits!  I was in awe.

I was still learning about stock market fundamentals, so I didn’t really know how to analyze Amazon as a company.  But, what I did know was that it held on after the crash and kept chugging along.

I knew that I was still using them personally and even venturing out to purchase other non-book related items, like tech, etc.  So, I thought it had the potential to be a good purchase and I wanted in.

Gimme Some!

Once I started working, I began to have a little discretionary income and began investing by setting up a ROTH IRA.  I didn’t have a lot of money back then, so I purchased 50 shares of AMZN at ~$10 per share.  I sat on this for about a year and saw my share price more than double.  I decided to sell it off to capture my profits and felt pretty smug about doubling my money in little over a year.  However, I just took out the “purchase price” and kept the remaining 15 shares as “gravy”.  Not bad, right?

Well, as I continued to watch the company grow, I decided to throw some more money into it.  Again, I was able to purchase it low and sell it high, once again locking in some handsome profits.  Finally, I convinced my wife to purchase some into her Roth IRA portfolio, but by this time it was all the way to $48.58 per share (4-5x’s where I had been purchasing it).  We didn’t know if could go much higher, so we decided to pick up just 15 shares.

It’s How Much Now?

So, if you didn’t know, Amazon has had a pretty good run in the past decade.  Not only do they sell everything under the sun online, they also have a massive data and cloud infrastructure business that many corporations have come to rely on.  Additionally, they’ve entered into numerous other verticals, including TV and movie production.

Today their stock price is $980.35!

Boy, I wish I had kept all of my original stock… it would have been worth over $100k today… ah well.  🙂

I shouldn’t complain.  After all, I trounced 10x returns with this purchase.

In the Know

I wasn’t looking at their fundamentals at the time, rather their momentum and infrastructure growth.  Their EPS could have been much lower that their competition, but I hadn’t a clue on how to compare them back then.

Nevertheless, what I did notice, was their data business before a lot of other people did.  This was probably because I was in I.T. at the time and virtual servers were rather hard to comprehend from other investors.  So, it truly does pay to know what the other guy doesn’t and also okay to ride a wave of momentum up!

So, great theory, or dumb luck?  Truth is, I don’t really know.  However, I do know that if I sat on the sideline, I wouldn’t have made a dime.

Fast track to FIRE

Reaching FIRE sooner than later takes a certain amount of risk.  Although I’m risk averse by nature, I’m also keenly aware that there’s no glory without some skin in the game.

If you’re making a good income and looking to FIRE, equities is certainly an investment vehicle that can get you there.  Or, if you’re like me, you can use a combination of different vehicles – savings, stocks/equities, real estate, and businesses.

My Outlook Today

With regards to equities, I should note quickly, that my individual stock purchases were more like “side bets” because the bulk of my investments were being funneled into the markets slowly and steadily via the likes of ShareBuilder and Etrade.

I did and still do have a small “play” account where I’m able to take some additional risks/gamble to seek out higher gains and keep my interest going.  I’ve definitely been burned before but also hit a few winners like AMZN along the way.

The Million Dollar Question?

So, where’s the next 10x opportunity?  Any ideas?  Why?

Sectors and Tech I Like

Here are some areas that have caught my interest recently and I’m trying to figure out the best way to make a play in one or more of these areas.

VR & Augmented Reality

I mentioned this in one of my previous newsletters.  VR and AR are going to change the way we see the world… literally!  That means there’s going to be a huge opportunity for the companies who are able to innovate in this new dimension.

For example, I’d love to invest into a company that focuses on a VR exercising experience.  Not only is it cool, but you could take a killing with a VR gym.  Imagine not having to drive to the gym, but having the same interaction with people and looking around in a real life gym environment from the comfort of your own home.

Some of the bigger VR players currently are Facebook (who bought and owns Oculus Rift) and Samsung.  They make the most sophisticated headsets currently.

Cryptocurrency (eg. BitCoin)

It’s pretty cool to see a new currency emerge out of nothing.  Cryptocurrencies are likely here to stay.  In fact, some countries are beginning to embrace it – like Japan!

I don’t pretend to know that much about BitCoin, but I believe you can purchase it on an open exchange.

Again, as the Internet becomes more and more prevalent in our lives, people are going to want a quick way to receive/spend money

Final Thoughts

I’m pretty excited to see and imagine what’s next.

I don’t have a crystal ball, but I do have enough tenacity to take an alternate perspective from the average investor.

Readers, what do you think?  What are your million-dollar ideas?  Are you going to do take action to seek your own 10x return?

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Michael

Hi, I have been blessed to take an early retirement in my mid-30's so I can focus on becoming a better father, blogger, and investor.

My goal is to help you find your personal path to financial freedom, and to enjoy the entire journey.

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36 Comments on “Luck, or Foresight? Getting to FIRE Gets A Whole Lot Easier When You Can 10x Your Capital.”

  1. It’s so refreshing to see an analysis of Amazon from an investor’s perspective. We LOVE Amazon at the FAF family. Sometimes we think about making a 20 minute drive to Wal-Mart and decided to buy stuff on Amazon instead. What a great innovation!

    1. I think the thing I admire the most about AMZN is their tenacity and unwillingness to keep pushing forward and innovating along the way.

  2. Wowza, great job with that stock! It’s all about risk–sometimes it pays of big, and sometimes it doesn’t. Mr. Picky Pincher has a coworker who 10X his money through Bitcoin investments, too. It’s insane! But if you know what you’re doing (or just get plain lucky), then you can fast track your way to FIRE for sure.

    1. Yeah, Bitcoin has been going crazy recently with a couple of countries acknowledging it as a viable medium or exchange… I believe Japan was one of them. Fascinating times we live in!

  3. We tend to favor index funds. However my psychological crutch small active investment portfolio is currently in more staid investments like electricity distribution and semiconductor chips. I am positioning myself for the downstream impacts of self driving cars and internet of things. More things require more power and more chips to run them.

    1. FTF, those are wonderful ideas… self-automated driving is just around the corner I believe and the internet of things is slowly spreading its reach. Someday we’ll wonder how we operated things without a direct connection to the internet.

  4. Wow, that is a cool story. I often think about the dot com boom when people say the stock market is fairly priced, based on all knowledge, even rational. I wasn’t investing then.

    VR feels like it isn’t ready yet for even sophisticated VCs to make money on it. It feels like one of those things where you can just be quick to notice what product is winning, and jump on board then. Trying to pick or shotgun approach now has a lot of downside.

    I think buried in here was a great insight about AWS. You knew the space. I think that is where people can find success in picking individual stocks. For example my friends company uses Shopify and love it, so they bought shares and have been killing it. Anytime you can be the first to notice, not predict or gamble.

    1. Nice observation, Brian. AWS really has been a game changer for AMZN, yet the majority of consumers don’t even realize it exists!

      VR is definitely a longer play, but one that should pay off handsomely for the persistent players.

  5. You did well with Amazon, but could have done even better if you’d held on. Do you have any individual stock purchase failures to share?

    I don’t like to make that buy, sell, or hold decision on an ongoing basis, or live with the “what-ifs” if hindsight shows I did the wrong thing. So I’ve avoided individual stocks, but that’s just me.

    Cheers!
    -PoF

    1. PoF, I definitely have some individual stock purchase failures! One of my clients before when I owned my IT company was a billionaire. He seemed to do well in a multitude of businesses and I attempted to invest alongside him with a speculative tech stock. Well, let’s just say they got delisted a couple of years later… poof… $5000 gone!

      Although not as sexy, I’m definitely an index fund champion at this point in my life.

      1. Ouch. When you’re a billionaire, you can afford to swing and miss. Of course, any down day in the market we “lose” at least that much on paper.

        Cheers!
        -PoF

  6. Index funds here for me too. This is mainly because I don’t want to spend hours analyzing companies to determine what I should buy. I do wish I had invested in Amazon or even Apple back 15 to 20 years ago. Hindsight is always 20/20.

    1. Agreed. Hindsight is always 20/20. I’ve definitely missed out on others that I kick myself about now…

      APPL, MSFT, FB, BABA, etc.

      That’s motivation to find the next high flyer if I’m able to!

  7. I’m reading The Everything Store about Amazon and Jeff Bezos’ rise to success. It’s a fascinating read and I highly recommend it.

    I started a business and am looking to build that into a company I could sell at some point. We are at 1000 in revenue for month 1, so things are looking good! 🙂

    1. Oooh, that’s on my book list, Erik. But, I’m gonna have to bump that even higher now after your recommendation. 😉

      Awesome to hear about your revenue! Best of luck and stay the course (even if you have to pivot a few times).

  8. I’m in index funds although I love the idea of a ‘play’ account. However, if my luck in Vegas is any indication of my picking the winners prowess I better just stick with my easy peasy Vanguard funds. Unless of course you figure out that crystal ball and share your secret. 🙂

    1. If I had that crystal ball, I might share it with you, Amy! 😉

      Index funds are definitely the responsible and smartest way to play the markets for most.

  9. I bought less than 10 shares of BRKB when it first sold at $80 a share. It’s more than doubled in value and I sure do wish I bought more each year since!!

    But I’m not a stock picker in the sense of trying to get in on the ground floor of all the hot new companies, that’s not my skill. I’m focused on building a solid dividend portfolio foundation instead. I’ll take any great companies I find along the way but I’m looking for steady and sure income first.

    1. Revanche, a healthy dividend portfolio is super smart. It’s fun to catch some high flyers every now and then, but those eventually average out with the losers too.

      Awesome job snagging some BRBK!

  10. Very cool story. Glad you were able to realize these returns on Amazon. Definitely an element of luck involved, but every investor and investment has an element of luck involved. You saw an opportunity and went for it, and it looks like it paid off. But Amazon is amazon, and the results may not be the same with other companies in the tech industry. So I would be careful and not assume that the results would translate from Amazon to other companies. But for now, congrats on the return and yes, that does make retiring early that much easier!

    Bert

    1. Bert, I definitely wonder sometimes how much of luck is involved with individual stock picks. After all, the majority of investors must overlook several variables that are critical to the growth and strength of a stock. However, it’s also possible that a single variable could catapult it on its own accord. It certainly keeps me humbled and interested tho!

  11. It’s always fun having 20/20 hindsight. I did the same thing you did with Apple, had a bunch of share at $38 that I too sold for a double, but then there was that pesky 7:1 split, dividends that came out, and so on and so forth. Don’t even want to know what I lost on that one. My worst one was when American Airlines went bankrupt and I contemplated buying 10,000 shares for $.20. If I had and I had kept them through the US Air merger….$500,000. Sometimes you win sometimes you don’t, but it’s always definitely an adventure.

    1. Oh man, AA for $0.20!? I thought about buying a bunch of BOFA for $2/share after the financial collapse of 2008. I didn’t get in at $2 but did pick up a couple of hundred at $5.

      You’re right, it’s fun to look back with 20/20. Hopefully, there are at least a few that can put a smile on our faces!

      Nowadays, I don’t usually pick anything up individually (except for fun). I eventually realized that my average performance was okay, but not much better than if I had just go slow and steady with S&P500 index funds.

  12. Its very happy to hear your drastic increase in the capital by 10x. these stocks are so crazy, sometimes they lift up so high and in the next movement it may drop down. So, if you take this 10x as base for next it may or may not be the positive result. So, be with safe hands.

  13. No idea where the next 10 bagger is. But actually, if we live long enough, many things will be 10 baggers.

    You’ll have to take risks investing in small caps and private equity names. I could invest in a real estate crowdfunding company but I decided to pass, even though I’m investing a lot on their platform.

    I just want a 4-5% return nowadays!

    Sam

    1. I think that would be pretty cool to hit something big on a private equity play someday!

      And, yes Sam, 4-5% ROI on your capital base would be super exciting all day long. 😉

  14. I’ve tried to hit home runs with my investments but rarely do. I still kick myself for those missed opportunities! I started investing during the tech bubble which didn’t help. I’m focused on index funds but definitely interested in trying to find some investments with higher returns with my play money.

    1. Yeah, it can be tough when you hit an extended bear market. The good thing is it always comes back and new opportunities arise. Have fun with your play money! 🙂

  15. I was fortunate enough to buy Facebook at $19. Like you, I ended up selling a decent portion after doubling my money. I kept 25 shares around as I was “playing with the house’s money.” Those 25 shares have done a lot better for those that follow the stock.

    On the other hand, I recognized that smartphones would be the wave of the future as far back as around 2001 when I was able to put a modem module into my Handspring Visor. Carrying the internet in your pocket was amazing. Palm ended up re-merging with Handspring and created the Treo line of smart phones. These took SD cards and could play mp3s on SD cards and even take pictures.

    Anyway, long story short, Palm wasn’t the 10x it should have been. Two other companies that didn’t really have mobile operating systems at the time are the leaders today. If you had invested in either back in 2001 (or as soon as you could), you would have done pretty well.

    1. Thanks for sharing, Lazy Man! I remember the Treo. I used to lug that brick around with me everywhere. 😉

      I too held some Palm stock (3com before that) and yeah too bad it wasn’t a 10x winner. Ah well.

  16. So strange to look back at the investments and wonder if you could have convinced yourself to keep the eventual 10Xer

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