Alex Hormozi: The best way to invest your money...nobody will tell you this.

The video discusses the best way for entrepreneurs to invest their money, including taking dividends out of their business and investing in passive indexes, while also considering opportunity cost and downside risk.

This video by Alex Hormozi was published on Jun 21, 2021.
Video length: 10:13.

In this video, Alex Hormozi discusses the best way to invest money as an entrepreneur.

He suggests taking dividends out of the business as it grows to decrease downside risk, and investing in passive indexes to avoid spending too much time actively investing and losing focus on growing the business. He also recommends keeping six months to two years worth of living expenses in cash and using loans against invested assets for reinvestment in other ventures.

Overall, Hormozi emphasizes the importance of growing income and extracting money from the business while minimizing risk.

• Taking dividends out of a business decreases downside risk and decreases the risk of losing everything if the business fails.
• Passively investing in indexes like the S&P 500 can get about 10% a year, while actively investing might give a marginal difference of an extra 5-10%.
• Keep about six months to two years worth of normal living saved up in cash and invest the rest of the money in indexes to decrease downside risk.
• Invest most of your time and energy in growing your income and the main vehicle you have.
• Investing in your skills is the highest return you can get, and investing in passive assets can help grow your net worth.
• When 10% of your net worth growth exceeds your income capacity, shift your perspective to growing your wealth.
• Investing in your skills is the best way to increase your income, and investing in revenue streams can make you more valuable to the company.

The best way to invest your money...nobody will tell you this. - YouTube

Why take dividends out of a business?

• Decrease downside risk of the business not succeeding in the long term.
• Many entrepreneurs have the idea that they will sell their business for some magical number in the future, but only 1% of businesses ever sell.
• Consistently taking money out of the business as it grows is a better option.
• Decreases the likelihood of stacking the chips on a 91 to 1 bet.
• Decreases the risk of losing everything if the business fails.

What to do with the money?

• Think about it through the lens of opportunity cost.
• Passively investing in indexes like the S&P 500 can get about 10% a year.
• Actively investing might give a marginal difference of an extra 5-10%.
• Spending half of the time thinking about actively investing will take up half of the mind space.
• Active income will fall at a disproportionate rate compared to the money made.

How much money to keep in cash?

• Keep about six months to two years worth of normal living saved up in cash.
• Invest the rest of the money in indexes because it is passive and you never have to think about it again.
• You can always take a loan against those assets if you want to start something big.
• Most banks will give you 60-70% of the assets or at least 50% depending on the stocks and your history with them.
• Extract the money and put it into indexes to decrease downside risk.

The best way to invest your money...nobody will tell you this. - YouTube

Where to invest time and energy?

• Invest most of your time and energy in growing your income and the main vehicle you have.
• Extract the money and put it into indexes to decrease downside risk.
• Actively investing might be an option when wealth becomes so large that the opportunity cost of the money should be made by paying more attention to it.
• Investing in passive indexes is a better option for entrepreneurs.
• Extracting the money and putting it into indexes is a better option for entrepreneurs.

Investing in Yourself

• Investing in your skills is the highest return you can get.
• Investing in yourself makes you a more valuable asset.
• Improving your skills can lead to a significant increase in income.
• Investing in self-improvement is disproportionately low compared to the potential return.
• Improving yourself as the source of income makes everything else easier.

Investing in Passive Assets

• Invest in truly passive assets, not side hustles.
• Dividends from your business can be invested in passive assets.
• Passive assets allow you to focus on your main income generation.
• Investing in passive assets can provide a steady stream of income.
• Investing in passive assets can help grow your net worth.

Shifting Perspective to Wealth Management

• When 10% of your net worth growth exceeds your income capacity, shift your perspective to growing your wealth.
• Managing wealth becomes more important than growing income at this point.
• Investing in passive assets can help grow your wealth.
• Opportunity cost shifts from income generation to wealth management.
• Focus on growing your wealth when it becomes more profitable than growing your income.

Investing in Your Income

• Investing in your skills is the best way to increase your income.
• Investing in revenue streams can make you more valuable to the company.
• Generating more revenue for the company can lead to higher compensation.
• Keep your basis for living low and invest as much as possible in highly liquid assets.
• Investing in yourself and your income should be the primary focus until your net worth growth exceeds your income capacity.

Watch the video on YouTube:
The best way to invest your money...nobody will tell you this. - YouTube