What We Can Learn From The Mistakes Of Millionaires

People drink during good times. They drink when times are bad.

Bernhard Stroh knew this. He also learned how to build a fortune. In 1850, he left Germany with $150 and his family’s beer recipe.

As recently as the 1980s, the Strohs controlled the country’s third largest brewing company. They were worth about $700 million.

But today, their once-great fortune is a fiscal train wreck. They’re no longer rich. Rampant spending, high debt loads and poor investment decisions sank their wealth.

Unfortunately, stories about a wealthy family’s fall are as common as pimples on a teen.

Time journalist, Chris Taylor, references data from the Williams Group wealth consultancy. He says 70 percent of wealthy families lose their fortune after one generation.

A whopping 90 percent lose their fortune by the third generation.

Image by Pixabay

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Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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8 Responses

  1. David says:

    Hi Andrew…

    Hope you have been really well…

    I have been investing monthly into my portfolio with an asset allocation of
    33.33$ Bonds (currently: 33.81% down 1.92% of buy price)
    33.33% Australian shares (currently: 33.15%) up 12.82% of buy price)
    33.33% International shares (currently: 33.04%) up 24.74% of buy price)

    This monday will be the 1st of the month, which is investing day. I have 2 minor concerns…

    1) The lowest % index is International shares. This means based on my plan I should be investing in them. However, the index has gone up nearly 25% from the buy price. So I feel like im buying high. In addition, the market has been on steroids and I feel we are headed for a correction. Should I simply follow my plan and buy the index regardless of whats going on or should I take notice of what the share market is doing and keep the money in cash…

    What would you do? In fact what are you doing in this scenario? Thanks Andrew

    Dave

    • Hi Dave,

      Base all of your purchases on your goal allocation. Don’t think about how much a fund has risen or fallen. Simply look at the fund in relation to your goal allocation and make purchases accordingly, to maintain your goal allocation.

      Cheers,
      Andrew

      • David says:

        Thanks Andrew… I really appreciate your expertise as it helps me to stick to my plan and keep me grounded. Emotions can be a detrimental factor in investing…

  2. Raj says:

    Andrew,

    I feel I have made a huge mistake. For years I have been busy paying down my mortgage like a madman. I have ignored the huge potential for growth in the stock market in favour of the safe and secure return on paying down debit, earning an effective return of just 2.75%. I now find myself with a very small mortgage, but have not benefited from the huge returns I could have gained if I had invested instead.

    I am reassured that my housing is safe and secure, but I don’t FEEL wealthy. If I lost my job tomorrow, I would not be able to eat or keep up with my bills very long before running out of money.

    Raj

    • Evie says:

      Raj,

      Based on current stock market turmoil, I would say you have played a blinder!

      • Evie, what’s a blinder?

        On a different note, what recent stock market turmoil are you referring to? The past year has been far less volatile than usual.

        Cheers,
        Andrew

        • Evie says:

          Play a blinder:
          To do something exceptionally well and with a great amount of skill. Primarily heard in UK. The whole team played well, but that new scrum-half really played a blinder out on the pitch! I have to say, for a newcomer in the political arena, the newly elected MP for Middlesborough played an absolute blinder this election.

          I didn’t mean the last year, I meant the last week!

          • Evie,

            Thanks for the great definition. On a different note, you shouldn’t bother about what the stock market does in a given week. I could never tell you what the markets do in a given week. Although, in 2009, some caught my attention. I remember the markets plummeting 10% mid-day in 2009. That was exciting. But recently? Nope. The markets haven’t been volatile.

            Cheers,
            Andrew


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