Friday, April 11, 2008

You only need to Get Rich, Once

Quite often I read Suze Orman’s articles on Yahoo! and occasionally I watch her show on personal finance. The thing that always catches my eye when I read her articles is the comments. She seems to have quite a following of nay-sayers that like to comment negatively on nearly every article she writes.

One of the big beefs that these bashers have with Suze is that she only has $1 million of her $25+ million in the market. This is considered a low proportion of her assets and consequently, they claim she is not qualified to give advice to the average investor who has less than $10,000 in the stock market.

One million in this volatile market – that certainly qualifies as skin in the game, boys. From what I gather, Suze is a pretty conservative type. For instance, she’s a big advocate for insurance. I recall comments where she suggested that one can never have enough! That sounds like a rather conservative, risk adverse individual. I don’t agree with her on that point, but that doesn’t discount all of her advice.

Anyway, by investing the majority of her assets in bonds, she is employing one of the golden rules of investing that 99% of the investors in this world never “get”. And that is - You only need to get rich, once. Once you have a high net worth, you dial back the risk and let the money work for you in safer investments, like bonds.

Most people understand that concept, but they will never be able to apply it. Why? To apply that concept, you must be able to recognize when you have become rich. Survey after survey reveals that no matter how much people have, they always look up to someone else as being rich. This is also known as the wealth effect. The more money you acquire the higher the bar goes, consequently, you never want to take your money out of the market, because that’s where the big money is made, right? Bonds? Who needs stinkin’ bonds?

The fact that she has so much invested in municipal bonds tells me she is one of those few that actually understands and is able to apply the concept of wealth preservation.


  1. True, rich people retain and grow their wealth through risk management and diversification. Those who put all their eggs in one basket are at greatest risk of losing their wealth.

  2. I would call her investing style anything but conservative; it is downright radical to me. I understand though, when you are that wealthy, taxes can make radical even sensible.

  3. First, great blog...I really enjoy all of your posts...

    Of $25 mil that Suze has, $1 mil or 4% is in the stock market? That is insane. Radical is the perfect choice of words...

    I can't think of any person in the world that should have their portfolio at 4% equities. She must have some skin in the game to yap about finance and how to "get out of debt" and "retire rich", doesn't she?

    She does a good service, but knowing this information, things she says must be put in the proper light...

    This is NOT what folks should do with $50K or $25 million...EVER, regardless of age.

  4. Appreciate the comments, as always.

    Suze's allocations may seem radical to those of us investing to get ahead. We must take some risks with our money.

    Things look a lot different when you are on top of the mountain. She has little to no reason to take on additional risk - she is already there.