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Meet the Investment World's New Warren Buffet – Entrepreneur

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10 business commandments from lifestyle investor Justin Donald.

January
22, 2020

5 min read

Opinions expressed by Entrepreneur contributors are their own.


The Holy Grail of investing is generating passive income, and I recently interviewed someone I consider to be the godfather of lifestyle investing. His name is Justin Donald, and he’s perfected a system of low-risk cash-flow investing that enables tremendous financial freedom.

Just three years ago, Donald left his job as a division manager of Cutco and began investing in a few different areas, primarily real estate. Since then, he’s amassed tens of millions of dollars in net worth — all before his 40th birthday.

In our conversation, Donald revealed his 10-step system that’s enabled him to generate true wealth with low risk, almost instant, passive earned income, a rapid return on his principal and massive tax advantages — without a job or a business he’s stuck working in. He also shared several case studies of how he discovers, structures and negotiates deals like these.

Donald focuses on cash-flow investing, which he defines as “investments where you make some sort of return on your money in the present.” In other words, your investment provides cash flow today and with regular increments in the future. The common convention is to invest in companies where the payoff doesn’t happen for a long time (if ever). Donald would rather make the investment now and get a return on that money in real time.

Related: Warren Buffett’s 3 Top Pieces of Advice for Entrepreneurs

Donald’s perspective on investing is unique. “We all need to make enough money to live at a standard we’re comfortable with,” he says. “That’s really important, but once you get to a point where you’re not just trying to make enough money to survive, you’re making enough that you can invest it gets really fun. And once things get fun, you look at money differently.”

When your investment represents your livelihood, you tend to put more pressure on its return. Ideally, your lifestyle investing reaches a point where it doesn’t matter whether a single investment performs well. You’re still going to learn a great lesson from it, and the experience becomes more of a game than anything else. This mindset enables you to make much smarter decisions because you’re less emotionally involved.

Donald has developed a specific ruleset for his investing. Here are his “10 Commandments of Lifestyle Investing.” 

1. Lifestyle First

Each investment must truly represent passive income, where your earnings don’t depend on your time spent on it. Your income is fully independent of you and happens whether you’re asleep or on vacation.

2. Reduce Risk

Structure each deal to minimize risk, so that a good return feels even better. For example, you can collateralize assets against investments so that your collateral is twice as much as the actual amount of the loan or investment. 

3. Invisible Deals

Pay attention to emerging markets or unseen opportunities outside the mainstream, like new technology innovations or companies in a reinvention.

4. Get Principal Back Quickly

Part of cash-flow investing is replacing your earned income. Donald’s goal is to get his money back within one to three years rather than five to 10 like most investments.

5. Immediate Cash Flow

The goal is to negotiate some form of cash flow at least on a quarterly basis, and ideally monthly.

6. An Income Amplifier

Donald typically finds one by negotiating preferred terms. He also sometimes amplifies a deal by using a “sidecar agreement” with a direct investment, so that he can bring in a second investor with specialized expertise or negotiate more lucrative terms.  

7. Cut Out the Fat

Minimize exposure to banks, financial institutions and middlemen that charge you fees. 

8. ‘Plus’ the Deal

Deconstruct the details of perks and terms to negotiate the best deal. There’s always room to lower your risk or create a higher return.

9. Use Leverage

In some cases, financial institutions provide benefits that outweigh their fees. For example, a non-recourse loan can protect you if an investment fails. Instead of you owing the loan amount, the financial institution would simply take the asset as its collateral.

10. Every Dollar Gets a Return

Use financial, legal and tax professionals to educate yourself so that you can recreate an investment in the future without having to pay those people to do it for you.

Related: Here Are Some Investment Tips for Newbies

Donald has done more than 50 deals maximizing his commandments. One of his favorites was with a well-known franchise business in the fitness world that delivered a cash-flow return within the first month. In this case, he partnered with two operators with expertise in the franchise space. Since he wasn’t interested in an operational role, it made sense for him to be a capital partner in the deal and advise with minimal time commitments. He entered the deal with out-of-pocket capital, repaid with interest on an accelerated schedule and has one-third equity in the operation. He expects to have his loan returned in one to two years with additional kickers around it.

To learn more about the new Warren Buffet of the investing world, including his upcoming book, podcast and advisory program, check out Justin Donald’s website, and watch my whole video interview with him here.

 

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 100 points, U.S. stock markets mixed

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX up more than 200 points, U.S. markets also higher

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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