BiggerPockets Money Podcast - How The Top 1% Actually Invest (Not What You Think)

Episode Date: October 28, 2025

The wealthiest 1% invest completely differently than you've been taught—and they definitely don't follow the advice most financial advisors give. In this episode of BiggerPockets Money, hosts Mindy Jensen and Scott Trench sit down with Tad Fallows, co-founder of Long Angle, to reveal the real investment strategies of high-net-worth individuals and how they differ from the FIRE community's approach. This Episode Covers: The most common paths to joining the 1% (entrepreneurship, tech executive roles, and high-conviction investments) Why the ultra-wealthy favor index funds, private equity, and real estate over traditional investments Why high-net-worth individuals largely avoid financial advisors and bonds How Tad went from consulting to founding a successful medical research software company to co-founding Long Angle Key differences between how the 1% manage their portfolios versus mainstream investment advice What the FIRE community can learn from the investment strategies of the ultra-wealthy And SO much more! Learn more about your ad choices. Visit megaphone.fm/adchoices

There's what fire advice tells you to do with money, and then there's what the top 1% actually does. Today, we're exposing the misconceptions about high net worth spending habits and the investment strategies that separate the ultra wealthy from everyone else. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and with me as always is my investment junkie co-host, Scott Trench. Thanks, Mindy. Always great to be here, bonding. Although that's not what the 1% does, apparently, with you over. another money discussion. All right, we are excited to welcome Tad Fallows. He is the co-founder of

Longangle, a private digital community of highly successful young entrepreneurs and executives. We're going to talk about the misconceptions of how high net worth people become high net worth in the first place and how they manage their money and invest and how that differs or is highly overlapping with the strategies of the fire community. Tad, welcome to Bigger Pockets Money. Thank you so much for having me here. It's a pleasure. Well, let's start with your story and get a little bit of background about you. Can you tell us about your entrepreneurial journey and how you currently invest? So my entrepreneurial journey, I tried to start a number of companies sort of throughout my childhood. I always thought that would be a fun thing to do. More in earnest

came in my early 20s. So I worked for a couple of years out of college in consulting. And the end of that, I was sort of on the fence of, hey, the traditional path would be go to business school, come back in the partner track there. But I didn't feel quite. quite ready for that. I actually loved consulting and I thought I'd be there longer term, but I said, okay, you know, I've had a lot of time doing cases and giving kind of general advice. I don't want to do more of that in business school of more analysis. I want to actually try and get my hands dirty and see if I'm able to start a company on my own. So I started a company with a couple of friends. We did medical research software. So that was a very niche thing selling to universities and hospitals

to help them manage their high-end research equipment. So if you've got like a mouse colony with thousands of mice or if you've got a 10,000 X microscope or some sort of superpower DNA sequencer, our software helped leading research universities and hospitals manage that shared equipment. It was a great learning experience. So we started a software as a service company before SaaS was really a thing. So in addition to trying to figure out, okay, in my early 20s, how do I build a company, how to open a bank account, how to get incorporated, et cetera. There was also a degree of trying to talk Harvard and Stanford and Princeton to, hey, you should

trust these three guys to manage a lot of your internal. accounting and, you know, core enterprise resources on this cloud-based software. It took a little while to get them convinced to that, but we were fortunate and able to grow it for about 10 years, got it to about 75 employees before we sold it to a strategic acquirer. And that was a great journey. I think it was one of those where we grew about 50% every year, which at the end, when you're growing, say, $5 million of revenue to $7.5 million of revenue is really exciting at the beginning when you're going from $20,000 this year to $30,000 next year. It was a much long. Congress log and, you know, weren't sure we were going to make it. But we were fortunately able to make

that and didn't actually take any outside venture capital funding. So when we had the exit opportunity, that all went to the three of us who'd started as well as our employees. And that was actually really exciting, not just for us, but, you know, to be able to give significant outcomes to the 75 people who'd been with us along the journey there. So that was, you know, about 10 years from the mid-20s to the mid-30s. Then at the end of that, I had a very abrupt net worth change because until that point, I had 95% of my net worth in this one, a liquid microcap stock. And then on one day, you know, since we sold to a strategic acquirer, there wasn't any rolling equity.

It was just a total payout on one day. So added a couple of zeros to the net worth and had a bunch of new questions I'd not encountered before, whether that was things like alternative asset investing, umbrella insurance, estate tax planning. I was fortunate enough to have a couple of very young kids, you know, zero and three and a half by that point of, okay, how do you raise kids with wealth, all those sorts of questions? and that was kind of what led to me to what I'm doing now at Long Engel, which was basically when I went through that transition. These questions were all new. And I'd been sort of a personal finance

hobbyist, but I found a lot of stuff that was fairly well covered or very well covered in more kind of general interest things. So like, okay, how do I set up a 529? How do I max out my 401k? Those were things you can look at a lot of good free resources out there and get very accurate answers. But when you get to some of this stuff that is a little bit more nichey, like a state tax is being a great example of that, where if you look at it and you say, okay, for a married couple, the estate tax limit is $30 million. So the general advice would be nobody ever hits it. Don't worry about it. But if you're saying, okay, well, I might actually hit that. Maybe I'm not at 30 million today. But if you're at 15 million in your 30s, you're almost certainly going to be above 30 million

by the time that you pass away unless something terrible happens. And so all of a sudden, that general advice is not as relevant. And one challenge I had at that point is I felt like all the good advice for that was kind of coming from Goldman Sachs or Credit Suisse or something like that. And I had high confidence. They knew the subject matter, but I had a lot less confidence in whether that was truly unbiased advice. So, you know, the famous, should you ask Barbara if you need a haircut? The same thing, you know, should you ask a life insurance salesman if there's really a place for whole life in that world? You know, of course not. And so that was actually what led us to start long angle. My partner serum myself is we said, okay, you know, we have all these new questions.

We want to get advice from people who are personally in the same situation, so who are not trying to sell us anything. Let's just put together a community of people who are either, you know, entrepreneurs, maybe started a hedge fund, maybe successful executives from technology. So going through these same questions first person and just as a place to give each other unbiased advice, it wouldn't necessarily always be the right answer, but it would be an answer where somebody is sharing what they actually do as opposed to what they want to sell you. So that's kind of been my journey. So your story about creating long angle reminds me a lot. lot of Josh Dorkin's story to create bigger pockets. He was a real estate investor. He couldn't find

any information from anybody who wasn't trying to sell him something. I'll answer that question if you come to my weekend seminar. I'll answer that question if you give me money for it. So I am a member of Long Engel and one of the things I really love about it is I don't have to make excuses or apologize for having a level of wealth. Like everybody's on the same, not on the same playing field, but everybody understands where you're coming from. So you're over that hurdle. I think that's really awesome. Yeah, it's funny.

I actually got to know Josh because he joined the community. So I think he had started bigger pockets and really with more of that real estate lens. But then he ended up joining us for, you know, a lot of those same reasons that you just mentioned there. Ted, I have a question about your journey here. Your journey to wealth is like the stereotype, I think, of how people think people get wealthy in America. Right. Like you went to Harvard, right? You were the captain of the rowing team at Harvard.

You went to McKinsey elite tier consulting firm, graduated, I'm sure, with top grades. And you had a very highly successful outcome at an early age with a company that you founded and sold. And then you have this great problem of your super wealthy early in life. You found it long angle here and you're meeting lots of other people in that top 1% of wealth in America here on a regular basis. And we've met a lot of people that have built a lot of wealth. And very few of them actually have your story.

There's a lot of more interesting. not interesting, but like weird places that that wealth begins to come from. Could you tell us what the makeup of the people that you know in the top 1% in your community? Where do they come from? How do they get there? What are the common themes that propel them into this upper echelon of wealth? Yeah, that is a great question. I will correct you. I was not the captain of the rowing team. So whoever was out there is, you know, not going to want me taking his credit. Yeah, it's a great question. And I would say we see a diversity of backgrounds. The biggest group is entrepreneurs, although that's not a majority. I'll call that 40%. And of that, maybe half is like myself as tech

entrepreneurs, but the other half is all kinds of other stuff. So we have people who made, you know, very good outcomes in terms of T-shirt printing companies or in terms of running fertility clinics or in terms of, you know, doing a roll-up in the veterinary space. So there's a lot of different things that one can do in terms of building an entrepreneurial business. And I think there's, you know, there can be pros and cons. If you get into technology, it has these great dynamics where your cogs or zero, you can have these outsized ROEs. The market is sort of infinitely sized. But by the flip side is you're competing with all kinds of other, very talented, very smart people have chosen to go into that. I think if you look at some of these other industries, while the fundamentals may not

look as attractive, sometimes there's fewer people trying to execute that strategy there. And so, you know, people have had very good success by by really focusing on a niche that gets less attention. So maybe 40% of them are coming from entrepreneurs. But then we see a lot of other different paths wealth. So, you know, another of the other two probably most, quote, typical, or if you said, okay, if I'm 20 and I want to really get to a good outcome, what's a predictable path I could follow? The other two are probably being executives. I'd say really working in the finance industry or in the technology industry. And again, this is probably surprising to anybody if you joined Nvidia 20 years ago, you joined Google 20 years ago, any of these, you would have done very well.

Or again, in finance, if you go into the right hedge fund, you go into the right private equity fund. There's kind of a path of least resistance there. If you're very smart and hardworking and energetic, you're likely to get a very good outcome there. But then there's a lot of other things as well. So I would say, you know, one is people who really, these are very much ordinary people with ordinary levels of assets, but really making big investing bets. So you guys talk on bigger pockets all the time about what you can do with real estate. And I think that's a good example. Probably won't go into too much because your listeners probably know it a lot, but real estate has these advantages of both tax treatment and being able to really leverage up your, um, up your

equity. And so if you make the right bet, you can get outside returns. But I'd say people who also make big investing bets in one or two categories. One is just in public markets where they don't have any inside information, but they have really do their diligence and really have uniquely high conviction. So I won't put in this category just, hey, you know, I put a thousand bucks into Bitcoin at my first job and never thought about it and kind of got lucky. But the person, you know, I can think of an example of I had one nurse who joined the community. And I was speaking with her and say, okay, you know, wow, this is great, you know, really impressed with the amount of assets you put together, you know, how did you manage to do that on nurse's salary? And she said, well, I really just,

I did the deep research on Tesla. You know, I became interested in it, but it wasn't just interested in. I really modeled all their financial performance and all their potential, you know, long-term advantages. And this was quite a while ago, not, you know, today everybody knows Tesla's a trillion dollar company, but back when it was maybe a $10 billion company, did deep analysis on it. And then she had the courage of her convictions and took out a second mortgage on her house. to buy deep out of the money call options on Tesla. And, you know, when the stock skyrocketed, ended up getting, I guess, you know, 100 X return on that. Now, I wouldn't necessarily recommend that to everybody. But I do think it was really impressive, both that she was willing to roll up her

sleeves and do the work and talking, you know, 20 hours a week for months at a time to really get that conviction there and then put all of her money behind it. It's funny, you know, you look at Warren Buffett and you think today he's sort of this paradigm of, okay, you know, responsible stewardship of capital and retains hundreds of billions of cash and advised people put their money into index fund. But if you look fairly on in his journey, he would often have a third of his net worth in one individual tiny stock because he really just had done the research and knew it was good. And that's how he got those returns. So I think there's a number of people who do that public investing or, you know, my partner, um, when we sold our company, he really led our

kind of technical and infrastructure as undergraduate and graduate degrees and computer science. At that point, this is what, 2017 was saying, hey, you should really buy this company called NVIDIA. You know, I didn't unfortunately listen to him because it had already gone up 50 percent and, you know, was now valued at $20 billion or something. That seemed crazy to me. But, you know, he knew he was talking about and put a lot of his money into NVIDIA. And again, no insider trading there.

Just pick something you really knew and made a conviction bet in the public markets. And then I'd say the other one's interesting is really unique niches that are not at all these trillion dollar asset classes like public markets. but an example of a member I've gotten to know who was interested in Bitcoin but was not taking a, you know, conviction bet on the direction it was going. But he just found that the Bitcoin price in Argentine pesos was about 25% different than the Bitcoin price in US dollars. No, the thing was at that point, maybe it's still true today, but certainly at that point, challenge was it was not easy to get your money into and out of Argentina quickly and conduct transactions there and that sort of thing.

So, you know, if this has been as easy as a wire transfer, the opportunity would have just been arbitraged away. But he basically worked his network of certain Orthodox Jewish contacts where they knew a guy in Argentina and sort of there was a level of trust in this community. So he was able to on kind of one week cycle times turn around these 25% returns quickly. You know, ultimately that opportunity did not last forever. I think there was, you know, at some point somebody who broke trust in there. And at some point, you know, the arbitrage opportunity went away.

But while it was open, he was just very quickly turning this. And again, he might have half of his net worth in a single trade there because if you see the opportunity to get a 25% return in a week, you know, the odds are in your favor and would just very quickly turn the wheel on that. I think that's actually how Sam Bankman-Fried got his start was doing the same thing in Korea. So before he became a felon, he actually did have a real arbitrage opportunity. He was leveraging properly there. And now a quick word from our show sponsors.

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your first audiobook free when you sign up for a free 30-day trial at audible.com slash BPMoney. Welcome back to the show. I think that this is more, this more fits the narrative around how America's truly wealthy families build their wealth, right? These crazy bets where there's very large upside and returns there, technology, entrepreneurship, the finance industry. Are you finding that there's a significant correlation in your group with people who went to elite private universities? There's a correlation, but I would not say is a significant correlation. I would, you know, if you look at the percentage of people who went to an Ivy League university, it's going to be higher than the general population.

But if you said, hey, I'm going to randomly pick 100 of these members. How many of them went to an Ivy League? Maybe five or 10. I think there's a lot of people who went to Purdue, who went to a state school, a number of members who didn't go to college, maybe because they dropped out, but maybe because I'm thinking of one of the most successful cybersecurity entrepreneurs, I know. The company was actually starred by two folks. One, he was a cop working in a relatively small town. He was doing their cybersecurity and he realized, hey, what I'm doing here, there's no reason this applies just to my one town. This applies globally. His partner was a Marine. They found this opportunity and they built on it. I'm not implying that being in the military is not an elite pedigree. It's extremely impressive and,

you know, a lot of discipline that's built there. But if you think that is not as stereotypical going to an Ivy League school, I think when I was applying to college, I felt like this was one of those existential things. And I think about this a lot because my son is 14 now. My daughter's 10s. They're starting to think about college. And I felt like when I was that age, okay, if you don't get into a real top tier school, you're kind of going to be off this track and you're off that track for life. And I try and tell them, and I really believe this is with a conviction that is much less

important than I thought it was at the time. I think of, you know, some of my most successful friends and colleagues who I work with every day. And they went to a wide range of colleges. How about is there a correlation between members of this group and, you know, And the kind of elite jobs out of college kind of along the lines that you got, like at a top-tier consulting firm, like a McKinsey or a Bain or a Deloitte or one of the big four accounting firms, for example. Is there a strong correlation between that, that kind of pedigree?

I think it really depends what path to wealth you're looking to follow. I think if you're saying, hey, I want to get it, and this applies both to your question around educational pedigree and professional pedigree. I think if you're looking to follow this path of maybe medicine, law, finance, and maybe to a degree tech, but certainly those professional services there, I think it does make a big difference if you go to Stanford undergrad and Harvard Business School and Yale Law School and that sort of thing, then you will get into the Wachtel or other white shoe law firms or, you know, you are much more likely to get a job at a hedge fund like Millennium. And those are very strong paths to wealth, but I think that is only one path. So I'd say it is most

true there. I think tech, it probably cuts both ways. I think there is a significant amount of, you know, intellectual snobbery in the tech community of, okay, you know, if you studied symbolic systems at Stanford, you know, you're going to start the next Google and everybody wants to hire you. But I think there is also, you know, given the lack of supply of truly great engineers, people are going to look past and say, okay, well, this guy, you know, didn't go to college, but he's a fantastic engineer. And so, you know, still very happy to hire him. I think when you get outside of that and into, you know, really the entrepreneurial world, nobody cares at all where you went to school, right? It's how good is your product? How charismatic? Are you in the sales

process? How good are you at spotting talent to hire on your team? Also, I mean, I'd love to hear what you guys think. My perspective is this matters a lot for your first job. I think it matters much less. If 10 years on, you're trying to say, hey, should I hire this guy? Whether he got a great score as SAT, whether he went to, you know, a great prep school undergrad, that sort of, or then a great undergrad. I think that's a lot less relevant. You're going to look at what's he done in his last five or 10 years working at GE or working at Facebook or whatever it is. I think that's really how people will hire. So it might help get you on that right path, but I certainly won't keep you there forever

if you're not performing. Well, the reason we're so fascinated and enjoy this conversation and your answers and truly interested, we don't know these items here. We've studied data sets at large, but our podcast, Bigger Pockets, money, doesn't really talk about or two or four people in the top 1% of wealth, you know, and well past $10 million. in personal net worth well past, you know, $500 to a million in annual income in any given year. I mean, maybe some of our members will have a year like that every, sprinkled in every once in a while when they sell a business or, you know, something like that. But that'll be rare.

That'll be, that'll be a lifetime event for them. And so that's where I think we don't talk to a lot of people that are in this level of wealth and how they get there. And so that's where I think we're more asking these questions and more interested. On that note, one last question in this, in these buckets. How important is. the concept of carried interest in this group of non-entrepreneurs in terms of there creating large amounts of wealth and joining the community? I mean, I guess it depends what you mean by carried interest. If you're looking specifically at the investing terminology there, where a typical private equity fund might say we've got a two and 20 model. So two means, okay, if you put in

$100, I collect a $2 management fee from you each year. And then the 20 is I get 20% of the profits. And so that 20% is the carried interest there. That really is only going to apply the people who work in private equity, in venture capital, in a hedge fund, in something where they are the general partner there. That certainly, at least in our community, is a very small fraction. I'm not saying those people don't exist, but that is, you know, 5, 10% of the path to wealth. So in specific, if that's where you're working, that's just kind of, okay, that's how you make your big upside.

You may pay the bills on your 2%. And then the way that you hit a home run is you get a 10x in your portfolio and you're collecting 20% of that upside. But if you think about carried interest more generally is, hey, how much is equity the path to route? So how much of it is just coming from I'm making a salary of whatever it is, 50,000, 100,000, 200,000 a year versus how much is I am creating value in some other way and getting to share in that equity value. There's sort of a selection bias of our community where it tends to be first generation wealth creators, often on the younger side, so in their 30s, 40s, 50s, to get a really significant outcome there, it's almost

impossible to get that on a salary basis. Now, okay, maybe you're a professional athlete. We've got some of them. Yes, you know, you can make 10 million a year. You'll get a lot of money after a few years of that salary. Or maybe if you're some special kind of retinal surgeon doctor, you're making millions of dollars a year. But in general, there's not a lot of jobs out there, W-2 income where they're going to pay you a base salary in the seven figures. It's great for those that exist, but that is not common. It is much more common that to get really millions of dollars of outcome, it is some form of equity. Again, it could be working at a job where my example of Nvidia, if you went to work at Nvidia and you got options worth 100,000, and then the stock went up 100 fold, now your options

are worth $10 million. But that is really, you're an employee, but that is equity exposure. That's what your options were. Similarly, if you're an entrepreneur, you know, most of them are taking outside venture capital, so you're getting equity exposure and you're having some leverage of other people. Same thing, you know, real estate as you guys know. So I'd say carried interest, if you really mean I'm driving equity. value from the work that I'm doing, that certainly represents the significant majority of it

because there's just not that many salaries that are that high. All right. This is our final ad break. We've got more than 1% of the show left after this. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going. And more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed

to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place, so every decision actually moves the needle. Achieve your financial goals for good with Monarch,

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Investing strategic but bigger bets in the publicly traded markets. specifically the tech stocks starting in the late 90s. And I think with our audience, we're going to start seeing people who are, their net worth is growing such that this is going to be something that they have no experience with. You know, people are always coming through Longmont and I'm talking to them. I'm super nosy, so I'm asking them about their money situation. And, you know, I always give the caveat that they don't have to tell me if they don't want to. But we talk a lot about money. And I'm noticing a lot of people with the $3, $4, $5 million net worth in the fire community simply because we've had this growth in the stock market since, what, 2012, 2013?

You know, what I'd say, Mindy, though, is this doesn't just have to be tech stocks. I think one can look at today and say, well, you know, I didn't study CS undergrad and I didn't go to Carty-Mellon and, you know, I wasn't early in Facebook. And so I've kind of missed that train. And while, you know, they say history doesn't repeat itself, but it rhymes. I would say it's that same thing in public equities, you know, that has been what's delivered really outside returns for the last one or two decades. But if you look back over the last 50 or 100 years, it wasn't always tech stocks. And if I had to place a bet,

it's not always going to be tech stocks. You know, if you look at, you probably know this, but the number one returning stock of all time, if you'd own this for the past 100, 120 years, Philip Morris is up something like 200 million percent. And, you know, the number two is, I think, Vulcan Materials, which is like a having and aggregates company. So it's not all, you know, Google and Nvidia. And even if you look more recently, you know, if you looked at the, the stocks that delivered exceptional returns in the 70s and 80s, Walmart, you know, and you think, okay, well, that's not a tech stock at all. It's, you know, running these stores. It's from rural Arkansas, et cetera. So I think the point is more finding exceptional companies that are exceptionally

well run. And I just wouldn't want people feel like, okay, this was a one-time thing or this is a one-industry phenomenon. It has been tech. It could well be something else, you know, Nexon. For example, remember when Russia first invade Ukraine, I certainly don't want to look at that primarily as a financial thing, but I have this bad habit of having a good idea, but not being willing to overpay on it and end up missing it. So I said, okay, you know, it looks interesting here. I bet those German defense stocks are going to do well because somebody's going to have to, you know, pay the bills to and produce the munitions to help defend against the Russians. This company called Ryan Mattel, which is sort of the Lockheen-Barden of Germany,

that stock is up tenfold in the last five years since Russia invade Ukraine. All you had to do was look and say, what's the biggest German defense stock? And kind of think a little bit of where this might go. And again, I saw I was up 20 percent, so I waited for the pullback that never came and missed out on that ten bagger there. But I think the point is these things can continue to happen. And it doesn't have to be part of some one-off bull run. There can be these little, I think, Jim Kramer, who I enjoy more than most, says, you know,

there's always a bull market somewhere. So I think that that really is true. Let me ask you about a mentality item here because I think Mindy's spot on. We have plenty of people in the bigger pockets community who have gotten to that three, five, maybe even seven or ten, maybe even approaching 10 million. We've met a few people worth well more than that. Typically when we find folks who come through the W2 earner path who make that much money, it's because they were at a fang or they invested in a fang very early on and really saw

that carry through. But there have been exceptions even to that. In this world of very high net worth individuals who got there fairly early in life, typically self-made to some degree, you're talking a lot about stocks. Like here's an idea for this concept that I'm putting a lot of money into that. Is this a common theme? Are folks really spending a tremendous amount of time looking for that next high-leveraged investment position?

And if so, are they doing this with major portions of their net worth? Or is there a very defensive core portfolio and small allocations with a lot of brainpower? are dedicated to these types of investments. Yeah, that's a fantastic question. And I want to make sure I'm not giving the wrong impression. I think partly the reason I'm talking about these, hey, big bet on Tesla or big bet on Nvidia, something like that, is that is how you could make a, you know, 100 extra turn and, you know, with a lot of money there. But that is not the typical portfolio. We actually do, once a year, we do this asset allocation survey where we ask all of our members across 60 or 100 categories, hey, you know, how's your money invested here? And I'd say a few

interesting things there. It is first very heavily in stocks, certainly not entirely in stocks. There's a lot more in the private market assets among our community than there is in the general population, so things like private equity. But stocks being the biggest component of it, but actually, most people are not heavy stock pickers. Overwhelmingly, people are believers in index funds. So, you know, an S&P index fund, a total world index fund, et cetera, that's probably going to represent 50 to 60 percent of the typical. typical portfolio is going to be an index fund. And as you know, as of today, that that is probably more technology heavy than I'd be comfortable with. You know, you've got 30 or 40 percent of that

coming from your top tech companies. But also one other interesting thing there, which you might not expect, is the significant majority, 60 to 70 percent of members totally self-managed their portfolio. I think there is this sort of narrative probably coming from the wealth management industry that if you get over a million dollars or over $10 million, it's just not responsible to manage your own portfolio anymore. You need professional help. And one thing I can say definitively is that is definitively not true. Most people with more than $10 million, at least in our community, are managing their own portfolio. And largely, they're doing the math and they're saying, okay, you can call it 1%. 1% of $10 million is $100,000. And that's not tax deductible. So that's

$100,000 after tax. That's the same as earning almost $200,000 if you're in a high tax bracket. So they say, well, that is well worth my time to do. And also, I have, you know, I can be responsible. I can do the research. I can figure this out. So maybe an interesting aside. And then, you know, outside of public equities, probably the thing that's most different from conventional 6040 portfolio sort of advice is going very light on the bond and other credit type instrument sides. So I would say bonds represent probably 5% of the total portfolio because I think people look at and say, okay, with stocks, I don't know what the returns will be. That's the nature of equity. But historically, 8 to 10% if you look at the U.S. market, maybe you say the U.S. has been unusually good,

but saying 5 to 10% is probably not crazy there. With bonds, I do know what it will be. It really can't exceed the interest rate unless I'm talking about some distressed Argentine bond that might recover, but it just conventionally buying a treasury that pays 4%. If I hold that to maturity, I'm just going to make 4%. And most people are just saying, hey, that is not an attractive way to go. And so they're only holding a few percent there heavily in stocks and then outside stock's, real estate equity primarily in the form of their primary residence, and then a lot of private market investments, whether that is in private equity being the biggest one, crypto, venture capital, wide variety of other more esoteric private market things, be happy to talk about.

What I heard you say a moment ago when you were talking about those German defense stocks is that there's always opportunities out there, but you have to be willing to take the bet. you have to be really willing to, you know, take that risk on. And, you know, you're thinking outside of the box, I didn't look at the start of that war and say, oh, let me take into account where German defense stocks are going. I looked at it and said, I hope that ends quickly. It's a different thought process. On the other hand, I have taken outsized bets on technology stocks because that's what my husband knows. And he will bring up. What do you think? of this stock. What do you think of this stock? However, my Chipotle stock is returning great. I think it's

a 400% over the last five years or something like that. The key thing you're saying there, and I think this is equally true in public stocks and also private things like real estate or private companies, is making a bet in something you actually know about. And I do think that's a big part of the reason that if you look a lot of people who've made a lot of money, it may be in real estate or in company they started because they were heavily concentrated there. So if you look at the people in the world, Elon Musk, super concentrated in Tesla and SpaceX, or Mark Zuckerberg, super concentrated meta. Same thing. Larry Ellison, super concentrated in Oracle. Part of that is, okay, they picked a great tech stock. But a lot of that is just their concentration. And so I think that's

the reason you've got people who can make millions, tens, or hundreds of millions in real estate is effectively they're taking a very high conviction bet where if I'm buying a single family house, nobody just reads a 10K, thinks about for an hour, chats with their spouse and says, okay, you know, I'm going to buy this house here. They're really doing deep diligence. They're looking at the comps. They're trying to, you know, they're building a model about what might the rental returns on this property be. They're trying to think about, okay, what's the property tax structure here? Is it California with Prop 13 treatment? When was the roof put on? People generally don't do that level of research on public stocks, right? They're just kind of, hey, I like the look of it. I mean, I put some money there. And then they're

making smaller bets. But I think something like real estate, it kind of forces you to make a more concentrated bet and it forces you, therefore, to think about more deeply. And same thing. If you're going to start a company, you're not just going to think about it for an hour or one evening, talk with your spouse, and decide to start a company. You're really going to do research. You're going to talk with potential customers. You're going to figure out who you want to hire for it. You're going to have to justify it to investors, et cetera. So I think a lot of the reason that you see wealth outside of the public markets is because it does force those big conviction bets. And again, that's certainly been true for myself, most of the money from starting a company

because that was all I did for 10 years was just building this one company here. But that could apply across, you know, could apply to crypto, could apply to almost any asset class. If you're willing to do that much research, you'll probably never understand Apple better than your average analysts because there's so many smart people trying to understand Apple. But if you get to, you know, things smaller than that, like you spend a few million dollars to buy a piece of real estate, you're not competing with some hedge fund in Connecticut where they've got all these PhDs and warehouses full of servers, writing algorithms trying to understand what's the proper price for that house. Or even if you look at microcap stocks, what's interesting is that I've got some friends

who've done very well running hedge funds for microcaps. And they say part of the issue is there's a stock that has a $40 million float. They just cannot invest enough money in it to make it worth their while to do the research there. So if you as an individual, you know, for us, $100,000 is a very big investment and the market can easily absorb it. But if you're running a billion dollar fund, you know, at most you can put a couple million dollars to work in this thing. It's just not worth your time to do. So I think if you get outside of really the large public companies, that's a place where putting in the sweat equity of really trying to understand what the good investment is. Or if you look at private markets, something like private equity, really doing the research,

okay, how do I build the right relationships or how to get access to the fund I'm really interested in there? You can kind of see the returns for that effort. We've talked about a lot of things around the investment approaches of this, I'm going to call it the top 1%, maybe even a little bit higher than that on average in this community, the average of the 1%. And it sounds to me like the theme is almost all of these folks got there through, entrepreneurship or some form of carried interest likely relating to technology or finance. And once they're there, they almost all go to a more defensive, diversified approach with the index as a major part of the portfolio. And that's a theme, that's not a rule, but it's a theme that I've heard

you observe today. Is that correct? Is that the way we're to take away from this? I think everything says right. It's funny, though, to hear you say it that way, because I wouldn't have thought of this as defensive, because I think if I compare it to, if you go to a typical financial advisor. And I know I had this exact conversation with Goldman after I'd sold my business. So, okay, you know, it's how much money I have. And they said, okay, great, here's what we can do for you. We can get you half of the market return for a quarter of the risk. And I'm saying, well, I'm in my 30s. Like, why does that make any sense? How about you give me four times the return for twice the volatility? And, you know, they looked at me like I had two heads. I looked at them,

like, why would anybody ever want this? So clearly, we didn't have the same objectives. And I didn't hire them. But I do think, you know, there's a spectrum of defensiveness. I think you could say, hey, I, you know, made all my money a T-shirt printing company. I don't want all my money in perpetuity in one T-shirt printing company. But I think the flip side is what, you know, conventional wisdom would say with these, or conventional financial management advice with these Monte Carlo simulations, et cetera, is to have a portfolio that is not optimized for maximum long-term expected return. It's optimized for sharp ratio, which is expected return divide by volatility. And so I would say a lot of our members are less concerned with a volatility. They might say,

hey, if there's a crash tomorrow, there's another COVID and general markets fall 50%. They're willing to accept that 50% drop to be in asset classes that have the maximum long-term expected returns. So it is diversified, but it's not, you know, Peter Lynch, the famous guy from Fidelity, called it de-worsification of buying stuff that is no longer your best three or four or five ideas. So they don't really de-worsify into things, as I said, like bonds that are reduced volatility, but are almost guaranteed to drag down returns. They diversify among things that all have high expected returns. And so again, some of the stuff I've mentioned, public stocks, private equity, crypto, venture capital, real estate with appropriate leverage. If you want credit, maybe private credit, all of these things have,

you know, somewhere from, call it, eight to 20 percent expected returns. And you're not able to get probably as much dampening of your volatility as if you, you know, just went into cash or if you went to bonds. But you get some reduction of your volatility because you're finding things that are less correlated, but you're not sacrificing your long-term returns. And I think a lot and, you know, not all. You can't make generalization about everything. But most of our members say, hey, I'm willing to accept continued volatility because maybe if I got 10 million now, I'm still earning money, I'll be fine if that goes down to five in the interim. If I know that 20 years from now, it's going to double to 20 as opposed to a very linear path from 10 to 15?

It makes perfect sense, right? Why would someone who got very wealthy in their 30s, 40s or 50s have a high concentration in bonds in 2025 when the yield curve is inverted and they're likely still in a high income tax bracket and likely don't have access to large amounts of taxable retirement funds? Like you're just not going to put your money into a 4% safe yielding bond fund that's going to then, you know, you're going to get taxed at 30 or 40% for most of these people. it would be ridiculous, right? It's a form of insurance. So surely, an alternative to that in your community will be cash. Do these folks have larger cash positions than you might otherwise expect?

No, probably smaller than you expect. It's interesting. Their investments are high on the risk end of the risk curve, so low on cash, much more equity like exposure. But I think what they do do to mitigate that risk is they're also very low on the amount of leverage that they're taking on and debt, where your typical member, for every $100 of net worth they have, they only have about $10 of debt. And that's typically just a 30-year fixed on their primary residence. So what they're not doing is saying, you know, with the exception of maybe that's how they made their money, as I said, you know, taking out the mortgage to buy Tesla. But the typical thing is saying, hey, I'm going to put into stocks, but I'm not going to take out big portfolio loans to be 150% long.

I'm just going to buy, you know, straight up stocks there. They don't carry much debt. And then flip side is don't carry much cash. And I think you could make argument. So, hey, you want to have a cash. And when I say not much, if you're carrying 5% cash, but you're worth $20 million, well, then you have a million dollars of cash. So it's a large and absolute number, but not large in a percentage number. You do then probably miss out on some of the opportunities to opportunistically say, okay, if there is something that I think is a flash crash like a COVID, now I can't, quote, go all in on buying stocks there because I was already all in. But I think people look at and say, private equity, venture, any of these things, on average, they go up over time. So rather

than trying to time the market. They just try and be invested in the market or the markets, plural, you know, these multiple markets they're expected to go up. Tad, this has been really fascinating to get a glimpse into the practicalities of at least one group of very high net worth individuals, how they got there, what they're doing differently now. Obviously, I have some assumptions. You challenged and changed some of those assumptions today, and I learned a lot, and I really appreciate it. So thank you very much. Where can people find out more about you and Long Angle? Well, really appreciate you having me here. It's a very fun conversation. If anybody, wants to learn more about Longangle, they can go to our website, longangle.com. I should mention it's a

totally free community. We don't charge any membership fees. So anybody who thinks this sounds interesting to them, would love for them to check it out and then apply there online. And that would put you in an interview with the current member where they could tell you more about it and see if it seems like a fit. I also am pretty active on LinkedIn. So Tad Fallows, you want to follow me or connect with me there. It's a real pleasure to speak with you here today. Well, thank you for all you're doing for the community here. And congratulations on a wildly successful career. Can't wait to see what happens next for you.

Thank you, Tad. And we will talk to you soon. Thanks, Scott. Thanks, Mindy. Okay, Scott, that was Tad Fallow's founder of Long Angle. And that was a lot of fun. I really enjoyed that conversation, especially right at the end. What did you think of our chat?

I thought it was great. I had a number of biases and assumptions about the top 1% based on our time doing bigger pockets money that I think were, to the large part, validated with a couple of really fun surprises that are going to change my worldview and evolve it around there. And I think some of the things that that were confirmatory for me were things around, hey, there's a large number of ways that we can get into the top 1% here in America. It's not exclusively private schools or these kind of elite careers or whatever, although there is a bias towards entrepreneurship and opportunities that allow you to get access to equity

as a form of compensation to some degree. I was expecting a very concentrated bet to get somebody into that top 1%. And I was expecting a shift in mindset to a more defensive strategy for folks that are in the top 1% to begin keeping that wealth, right? There's a getting rich and staying rich. And I imagine that all these folks had to take some kind of risk or have some kind of really outsized economic outcome concentrated in one area to get there. What I think is interesting is, and I want to dive into this in the future, is how are folks applying to that concept of staying rich in this community?

I imagine that my question around bonds and cash was not a satisfying answer to many people in that community. And they're trying to get that safety somewhere else, right? Unlevered real estate, perhaps. Those are questions that I want to dive into more with this community. And it was surprising to me that a larger percentage of that population is not, more kind of safely invested, for lack of a better word, in a way that I could instantly probe at. Scott, you said the word risk multiple times during this conversation.

And so did I and so did Tad. And I think that's the key there. The top 1% have seen firsthand that risk equals reward. So they're willing, because they have the experience with risk working out, they're willing to take calculated risks. Absolutely. And so that's the piece that I think I need to continue to wrap my head around is 50 to 60 percent allocation to socks makes perfect sense, right? Very, very consistent with a lot of things that we talked about in a retiree or, you know, a financially independent portfolio.

What is that other 40 percent? What are the rules that people apply to that? How do they think through it? That's what I'm really interested to learn from more people that are at that level of net worth over time. Well, I think that there's a lot in private equity, private opportunities that, may not be available to somebody with a lower net worth or just aren't available to people who aren't willing to take those risks. I'm not surprised to hear that a lot of that wealth is in index funds and that most of these portfolios are actively managed, or at least

self-managed by the investors. That makes perfect sense to me. And I think you're going to see very small percentages of elite wealth in America giving that money to other professional managers to manage as a portfolio outside of specific small allocations, at least in each individual instance to private equity funds or targeted bets that they're making in a specific category. So, Scott, I was surprised that people of this net worth are not giving their portfolio over to a professional manager. There's the idea worked on your business and, you know, make the, use your time where it has the most return and you're only returning, you know, $100,000 on 10 million. So you could just hire that out. So I was,

I was actually surprised that that that isn't being hired out. On the flip side, Carl and I manage our portfolio 100% by ourselves. Do you manage your, not your real estate part, but your stock part? Do you manage that yourself? I manage all of my investments myself other than a small percentage of my portfolio that I've handed off to syndication sponsors or funds in that regard. And that's, that's for very targeted specific theses in the real estate space. And I don't know why I'm so surprised that other people just like me are not acting just like me. It's probably just who we associate with in the world of finance and the groups that we join or whatever, but I just rarely come across people who have their money actively managed with like a traditional financial

advisor because I think that, you know, I guess the folks that we associate with are largely DIYers, largely, you know, big savers, big long-term investors, those types of things. And the math is just so not compelling to hand it over to these active managers for folks of that mindset. So I think that that's, that's, that was not surprising to me. I would have been much more surprised to hear that, hey, we've all got these men, this get this manager over here who does this. That would have been news to me and caused me to change my worldview a little bit more. I see what you're saying.

All right, Scott, should we get out of here? Let's do it. That wraps up this episode at the bigger pockets money podcast. He is Scott Trench. I am Mindy Jensen saying we're on the run, skeleton.