Two elements to becoming super-rich

I have pretty much sieved down to two elements to becoming super-rich. Honestly, mastering these two elements is easier said than done. They are probably so hard that is why so little people actually become self-made super-rich. Mastering one will merely get you rich, you need two of them together to get super-rich. Mastering one might help with the other. If you can’t master any one of them, you will die an average man.

According to Wikipedia, “the super-rich, according to Beeghley, are those able to live off their wealth without depending on occupation-derived income. This demographic constitutes roughly 0.9% of American households. Beeghley’s definition of the super-rich is congruent with the definition of upper class employed by most other sociologists. The top .01 percent of the population, with an annual income of $9.5 million or more (in 2007).”

So in order words, with an annual income of US$9.5 million in 2007 will put you in the category of super-rich. Assuming that your assets grow at 20% annually, you still need a minimum of around US$50 million to support a US$10 million income.

The two elements to achieving that goal doing what I do, or just any entrepreneurs/investors, you need to 1. achieve phenomenal growth rate at the beginning, and 2. get enough funding.

It really depends the size of your funds to determine what “phenomenal growth rate” means at the beginning. If from the beginning you only have funds from family and friends, even US$500,000 is a rather optimistic figure. At such a figure, a person with very good investment ability can probably grow the funds at 100% compounded annually until…

Year Fund (000) Growth
0  $500 100%
1  $1,000
2  $2,000
3  $4,000
4  $8,000
5  $16,000

Say that person can sustain that rapid growth for 5 years, the fund will grow to US$16 million. Say the manager actually owns 30% of the fund/company, he has around US$4.8 million. But that 30% figure is likely to grow if he reinvests all the profit-sharing profits he made. So after 5 years, $4.8 million is still a tiny figure compared to our goal of $50 million. It is likely some outside sources of funding will be needed.

Given that if you have mastered your sources of funding, a $10-$20 million figure is not a big figure, but your investments will also slow down a lot more at a larger asset size. It is conceivable that a fund manager who is very good at picking great investments, and also good at finding enough funding, within 15 – 20 years he is likely to achieve that $50 million net worth.

 

 

 

 

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