Want some cash money?

The following is a guest post from my friend Jeremy Johnson who was kind enough to help me out with a random WordPress question issue when I first started back in 2009. I’m pleased to say he jumped head first into P2P lending when we spoke a couple years ago about diversifying his savings, and is doing well. 

Peer to peer lending is one of the most simple and effective ways I’ve ever found to make passive income. It has outperformed my stock picks, selling old baseball cards, my own business ideas – everything. I’ve earned more money through it than I’ve earned at anything else except my day job. This is pretty powerful for me. I’ll share a walkthrough of how this works for me and you can use/adjust for yourself.

Oil is a popular topic due to its surprising ~50% price drop from June 2014 to early 2015. Nobody could have imagined such a quick collapse in oil. I certainly didn’t when I decided to buy a Honda Fit instead of a Jeep Grand Cherokee Limited last summer! If I had known I could pump my rolling 4th bedroom for less than $2.90 a gallon, I might very well have opted for the bigger car.

Given knowing what the hell is going on in the world is part of being a functioning citizen in today’s society, I decided to do some research into what happened. After all, I did purchase the oil ETF USO, a couple major integrated oil companies, an airline stock, and some auto stocks in my newest diversified investment portfolio for 2015 to try and make some money.

So what caused this significant drop, and how does this affect businesses, the economy, and our everyday lives? Is oil poised to rise once again? Let’s explore these questions and more.

Top: Akhil Lodha. Bottom: Mike Furlong

One goal after leaving my corporate job of 11 years in 2012 was to learn more about the startup industry in Silicon Valley. I was coming from the old school finance industry where there was relatively little innovation compared to many financial technology companies today. Life was getting a little boring and I kept watching company after company we took public grow into great successes.

One of those companies was Google. I remember being excited seeing Sergei Brin, one of Google’s founders give a lunch presentation in downtown San Francisco during their IPO roadshow back in August, 2004. It was standing room only, so I wasn’t able to eat one of the manufactured plates of rubber chicken. We were one of the lead book runners, and I was inspired at how quickly Sergei, Larry and team were able to build something so huge, so quickly.

We are living in the golden age of tech/internet innovation. Five years ago, at age 32, I told myself that if I didn’t create something internet-related on my own or join a startup while having so much access living in San Francisco, I would kick myself in the face when I’m old.

Today, Google is one of my largest sources of traffic and revenue for Financial Samurai. Maybe it’s good karma for helping them go public, even though the IPO seemed shaky at the time with the last minute price decision of $85/share. Yes, we all should have piled in back then! It’s crazy how life comes full circle.

After some research, I’ve decided to consult for a couple months part-time for Sliced Investing here in San Francisco! I discovered Sliced Investing on AngelList while vacationing up in Tahoe over Christmas break. With my tag-line “Slicing Through Money’s Mysteries,” I wondered if destiny was calling once again as I shot the founders a note to say I’m interested in helping them out. They kindly responded, and here I am.

I wrote off hedge fund investing until 2015 because I didn’t have the $500,000+ minimums to invest. It was just as well since the markets have been on fire since 2009 and hedge funds have underperformed. But in a way, I have been creating my own equity hedged portfolio with my accumulation of structured products since 2012. Give me 5-10% returns every year with low volatility, and I’ll happily invest all I can.

Sliced Investing smartly crowd-sources investor capital in order to make investing in hedge funds and alternatives more accessible to more people due to their minimum investment of $20,000. With the bull market entering its sixth year, I’m beginning to wonder how much more this baby can run. I’ll take under a 10% return for the S&P 500 for 2015 if anybody wants to take the other side of the bet!

In this interview, I want to understand the mindset of an entrepreneur. We’ll talk about risk-taking, the why, and how things came to be with Mike Furlong and Akhil Lodha, founders of Sliced Investing. I’ve got to imagine many people would love to be their own bosses and create a company one day as well. 

Stocks and James Bond

Wealthier people in America do not follow the conventional asset allocation model of buying bonds, i.e. age equals your bond percentage allocation or a 60/40 equities/fixed income split. How do I know this? Personal Capital has over 800,000 users of their free financial dashboard to help manage your money and I’m a consultant who is privy to some of their data to share with all of you. Data geeks, rejoice!

Out of 800,000+ Personal Capital financial dashboard users, roughly 165,000 of them have linked investable assets of between $100,000 to $2 million. We call this the mass affluent class, or upper middle class if you’re so inclined. The mass affluent are generally regular folks with mainly W2 income. They save and invest in order to provide for their family, pay for expensive tuition bills, take a couple nice vacations a year, and hopefully achieve a comfortable retirement when all is said and done.

Let’s do a quick review of my proposed stocks and bonds asset allocation model before moving on to the big data. 

Diversity by Kongaline.com

The rich get rich by buying appreciating assets like stocks, bonds, real estate, and fine art. The people who don’t get rich spend their money on depreciating assets like cars they can’t comfortably afford, and clothes that are never worn more than a few times a year. It takes discipline doing research on investable assets, which is probably one of the reasons why many people don’t even bother.

One of the biggest push backs I hear from readers who want to get rich, but don’t have enough disposable income to invest, is that investing costs too much and is too complicated. This post eliminates one more excuse people have for not building additional wealth.

It’s been a while since I’ve had to carefully watch my cash position, but since I spent a lot of money buying a fixer last year, cash flow is tight. I have a goal of rebuilding my liquid cash hoard to $100,000 in 2015, while also paying off roughly $85,000 in rental mortgage debt. It won’t be easy because I don’t want to cheat by selling assets to pay off debt.

Despite my debt elimination and savings goals, I want to continue investing in stocks and bonds when I see opportunity. With the recent volatility in the market, I see A TON of opportunity right now. Oil and energy stocks have gotten crushed, but aren’t going to zero. Market darlings such as Tesla, Pandora, GoPro, Yelp, and Lending Club have all taken a beating, and I love all their products and services. Interest rates have collapsed, providing a tailwind for a couple industries. I want to invest!

The only problem is, I’ve only got about $10,000 I can spare in this market volatility vs. a normal investment of $50,000 if I want to reach my savings and debt pay down goals.