$5 Billion Dollars of Investing Advice, from a Penny-Stock Investor in PayPal
In a few broad strokes, here's how one founder of PayPal, Peter Thiel, used the same kind of Roth IRA that you and I have, to create $5 billion in untaxed income. You do have a Roth IRA, right? Tweet
Highlights
Smart investing is like body-building...
...you start small with what you've got, get a little obsessive, and never stop.
Peter Thiel is very rich.
He was a founder of PayPal.
He is one of Silicon Valley’s most powerful VCs, with early-stage investments in Airbnb, LinkedIn, Yelp, Spotify, SpaceX, and many other companies.
He was also Facebook’s first outside investor; in fact, if you saw The Social Network, you might remember the scene below where Thiel basically gives Mark Zuckerberg and Sean Parker a $500,000 investment in Facebook.
I think we can all agree that Thiel’s investment in Facebook was pretty smart; but what he did in his Roth IRA was a few billion times smarter.
In a few broad strokes, here’s how Peter Thiel used the same kind of Roth IRA that you and I have to create $5 billion in untaxed income:
- When he opened his Roth IRA, he invested as much as he could; which, in 1999, was $2,000.
- He used the money in his Roth to make a single shrewd investment: early shares of PayPal for $0.001 per share.
- A year later, thanks to PayPal, the value of his Roth IRA was $3.8 million or a gain of 227,490%.
- He then used the $3.8 million in his Roth to make additional investments which now have a value of over $5 billion; and he will never pay a dime of taxes on any of this gain as long as he does not withdraw any money from his Roth IRA until he is 59 1/2.
Should you be doing the same thing?
If you want to know more about how Thiel pulled off this $5 billion dollar tax coup, it’s all spelled out here.
You can read this ProPublica article about Thiel’s $5 billion Roth IRA one of two ways:
- You can be appalled that Thiel will never pay any taxes on this income (which is the tone the writers of the article strike);
- Or you can consider the article something of an instruction manual for how you can build a giant nest egg for retirement without paying taxes on it, too.
Assuming you, like us, are inspired by the article rather than appalled, we offer this last piece of ass-covering advice:
We recommend that you talk with a qualified accountant or financial advisor before you make any significant investment decisions.
