The Game with Alex Hormozi - Why You Should Buy on Margin | Ep 386

Episode Date: May 5, 2022

Borrow more til' the day you die and not pay taxes! Today, Alex (@AlexHormozi) talks about getting 1% loans and 0 taxes! This is called buying on a margin. Learn about the risks of buying on a margin here! Always remember, to ask your questions and seek the answers.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Timestamps:(1:18) - How do you get loans on margin?(3:47) - Ask the question and seek the answer.(4:28) - It's not all sunshine and rainbows, there are risks.(6:57) - Debt is a version of riskFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

It's the stock. They buy stuff and the amount that the stock goes up year over year exceeds what they borrow. They can borrow more and they keep doing that until they die and never pay taxes. All right. That's how this works. Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe. I'm going to talk you about the number one strategy of the ultra wealthy to avoid taxes and get the lowest interest rate loans humanly possible or even imagine more fathomable to humans. All right. If you don't know why I am, my name is Oxymose. I own Acquisition.com. It's a portfolio of companies over a hundred million dollars years. I make these because a lot of people are

broke and I don't want you to be one of them. I too was broke for a very long period of time and it's sucked. And so I hope that we can at least attenuate that situation so that you can then ask the larger questions of what is even worth it to begin with. And you can come to those conclusions on your own. That being said, how do I get one to two percent loans or as they call them margin, right? Lones on margin to buy shit, right? Or buy more assets or whatever. All right. So quick overview of what this topic is. You've heard me maybe talk about this in other videos, which is like if you have, let's say, $100,000 in stocks, okay? You have $100,000 in stocks. Depending on who you work with, if you work with a more established bank and you have a longer relationship with them, let's say you, you know, banker or you do wealth management with Merrill Lynch, you will have a banker and they will tell you how to do this. But I'm guessing that if you ask the question, you're curious, you clicked on this video, you don't have that. All right. So those banks will typically give 50, 60, sometimes 65, percent of the total assets in your portfolio as an asset backed loan, which is a margin-based loan, all right? And so that means that if I had $100,000 and I had 65% that I could take as a loan,

then I could get an additional $65,000 at 1 to 2%, which is crazy. Mind you, the interest rates can change over time, but for the, you know, for a very long period of time, it's been 1 to 2%, all right, which is very, very, very, very low. And the nice thing about this is that there's no closing costs, there's no fees, there's no startups, there's no nothing. You just pay the interest while you hold the money. And all you have to do is pay back and then your interest payment stop. All right. So it's nice as a revolving credit line for stuff that you want to make a quick purchase and then give it back, right? That is how you do buying on margin, right?

That's where the term comes from. Now, many of you guys have asked, how do I actually do this? Great question. All right? So what we're going to do is we're going to travel together through the realms of time. And we're going to use this new mystical thing. And I want to teach this process to you because I think that it's very, very valuable. It also serve you for answering any of the questions that you have in your life.

Google. All right. So, take loans against stocks. Let's see here. Oh, look, it looks like there's a lot of people who are willing to do this for us. Let's see if Alex did something ahead of time. He sure did. We clicked this guy, and let's see what it says.

They explained a little bit more, how useful. And if I wanted to borrow on margin, that, da, da, apply for margin. That's all you have to do. And if you're like, well, I don't bank with fidelity. Well, I'll bet you that wherever you bank, they do this. Now, let's say Robin Hood margin loans. There we go. Let's look here.

What is margin investing? Let's click. They give us an answer. Unlike its deposits, blah, blah, blah. You can upgrade to Robin Hood gold. That's how we have to do it. And that will allow you to then borrow on margin. And so all you have to do is sign up.

Upgrade to Robin Hood gold. Let's see what it does. All right. And so a reason I do this is because sometimes I get questions that have answers that are Googlable. And so please, for the love of God, of the best ways to stay poor is to have a question and then not Google the answer. Post a comment in something and then say, well, I guess I scratch my inch. I asked the question. No, find the answer.

And so the reason that this by margin-based loans and things like that are useful is that they are tax-free. All right. So if you wanted to pay for stuff, and this is what the ultra-wealthy do. When they go IPO and they've got a billion dollars with a stock and something, they just take loans against those stocks. They don't have to pay income tax. They take loans against the stock. They buy stuff. and the amount that the stock goes up year over year exceeds what they borrow. They can borrow more. And they keep doing that until they die and never paid taxes. That's how this works.

Now, the risks. So the risks of doing this are that, let's say for some reason, you borrowed at. And I think there's other ones. There's like M1 finance, I think, is one that I heard of that does up to 35%. And the percentages will vary based on the size of your portfolio, how long you've been doing business, blah, blah, blah, blah, blah. And so it's usually 30 to 60%-ish. All right. And so let's say that you took out a 60%. You max this puppy out right on your $100,000. Hey guys, real quick, if you're new to the podcast, I have a book on Amazon called $100 million

offers that over $8,000 five-star reviews and it has almost a perfect score. You can get it for 99 cents on Kindle. The reason I bring it up is that I put over a thousand hours into writing that book. And it's my biggest gift to our community. So it's my very shameless way of trying to get you to like me more and ultimately make more dollars to that later on in your business career. I can potentially partner with you. So that's my give. Go check it out. Amazon and back to the show. Let's say that your portfolio, because of a crash in the marketplace, drops to $50,000. So you took $60, right? And now your portfolio is worth $50. Well, to be in accordance with the risk tolerance that they have, you need to be 60% of the new

$50,000 value, which means that's $30,000 is what you're allowed to borrow, which means you have to pay back the 30 of the 60 that you borrowed originally. And if you don't have the money, they sell your shit. Crazy. I know. It sucks. That being said, that is the risk. And that is why people lose their asses on margin.

Now, as a quick transition to this, and you might ask, Alex, do you borrow a margin? I have in the past. I have also repaid it back quickly. I tend to use margin for very short-term type things. So like six months, 12 months, transaction stuff. So like if I do like private lending for hard money loans, things like that, that's a perfect thing for me. So it's like if I'm making 12% or 15 or 20% on the money from a hard money loan,

I can borrow at one to two. And I know I'm going to get paid back. And the money that I'm lending out, I'm securing against another asset. So if they don't pay me back, I get the asset and then I can sell the asset and pay back. That's how I do it. That being said, like at this current moment, this current juncture in time, I have zero debt, not even a mortgage. And you'd be like, Alex, you're crazy. Probably.

Probably. But for me, I sleep really well at night knowing that I just don't owe anyone anything. And for me, the objective of money was. freedom, not more money. Just a side note. Now, I do subscribe to something that Dave Ramsey said that really resonates with me. He said, I'm paraphrasing, that debt is a version of risk. And risk, if extended over a long enough time horizon, exposes you to zero, meaning you can lose it all. And since life is long, that means that there is a high possibility between now and the time you die, that you do have one of these situations where you could get exposed to zero. And for me,

I would rather not sacrifice what I do have and that I do want and need for more of something that I don't want or necessarily don't need. Because me doubling my money makes no difference in my life, but me losing all my money makes a very big difference. And so for me, why risk something that I don't want to lose for something that I don't need? Right. And so for that reason, I have been not a big leverage proponent in general. I am very, very under levered in general. All right? And so I have run my life that way and I focused my life on increasing the value of the assets that I have. I'm in just continuing to do that rather than juice everything through debt. And that's just not my game personally and we still built a nine figure net worth without any of that. And so I think you can

do it. And maybe I'm selling, which is very possible. And maybe when I'm 60, I'll think that I was an absolute idiot for thinking that way. It's very possible because you know what? We learn things and we grow. But as current state in 2022, I don't think that. So anyways, keep being awesome. Keep crushing, Mosy Nation. I hope they give you some illumination to like, how do you do margin loans? My recommendation to you as a final parting words and disclaimer around this is that if you we're going to partake in this risk, okay, because it is risk, borrow significantly less than the limit, all right? So if you want to use your, you know, borrow on margin, draw 10%, bar 20% tops, keep it way underneath so that there's literally no way that a margin call would come up where you'd

actually have to sell some of your stuff. Because the thing is, is the moment when they get you to sell it is the moment when it's worth the least. All right? So you get double-hosed. All right, so you lose the power of the money that you had, and then you have to sell stuff at a massive loss. All right, so That's when you want to be buying and instead you're selling. And that's what crashes markets. A lot of people borrow that way. And that's when they ride the bull and bear cycles. And we want to be a little smarter and try not to do what everyone else is doing so that we can have what no one else has.

All right. So Mosey Nation, keeping awesome. I make these because I enjoy it, apparently. And I do this because, you know, maybe some of you guys will crush it and cross three million or 10 million and want to work with us atacquisition. com so we can get you to 50 and beyond. So keeping awesome. Love you all. See the next feed.

Bye.