You have no doubt heard the old maxim:
“Shirtsleeves to shirtsleeves in three generations…”
This should not come as a big surprise to anyone who studies family dynamics. The penniless immigrant scratches out a marginal existence so that the next generation can earn intellectual capital and go on to create substantial wealth.
So that the third generation can idle and dawdle, drawing down the family fortune, and erasing all the hard won gains.
But some families have managed to avoid this cliche and the seemingly never ending cycle.
The common denominator for most such families is that they have focused on creating a private wealth-generating mechanism based on either a closely-held, private family business…or ownership of a portfolio of income producing real estate.
Every other form of wealth is subject to forces far beyond individual control. Your public equity portfolio is inevitably a cork bobbing up and down on the peaks and troughs of the business and market cycles.
The ownership of stocks and funds and cash equivalents is a tool to diversify your holdings and risk, and to preserve capital, but they will never take the place of the two genuine wealth creation vehicles.
And in the truly gifted families, I’ve seen founders who have flourished both by building out the family business, and then further diversifying by adding investment real estate.
Both of these qualify as “inefficient” markets where knowledge and skills are not widely and evenly distributed.
As opposed to the “efficient” public markets for debt and equity….where you can safely assume that anyone with access to the Internet can know as much as the most celebrated expert in the arena.
In Parts II and III, we will focus specifically on the skill set and market opportunities you should pursue if either or both of these asset classes appeal to you.
And for those who’d rather not….life can still be very good.
If you find work you enjoy, a home you can own free and clear at retirement, and you steadily contribute to your workplace 401k, your individual Roth IRA, and your health and education savings accounts…you will likely end up safe, snug, and secure.
Unlike the clueless and lackadaisical majority, clutching at whatever crumbs the government tosses their way.