Matt I was hoping you would give a nice poker analogy here :)

My brother is a pretty good player, but he is quick to 'chop'. In fact I mock him all the time for it, but it really depends on what your comfort level is. At a certain point it is not desirable to take exchange risk for reward. Inevitably whenever you wish to get out of the game, you are going to have to take a discounted rate. In poker, if the final 2 guys chop due to the highly top-heavy prize structure, you are obviously going to take some sort of discount.

Chopping does work similarly. I always had a no chopping policy though, because pretty much any tournament with a life-changing prize is televised, and therefore chopping is banned.

In fact, poker tournaments in general have the concept of chip devaluation, which is fairly similar to how money works in real life.

this is the crux. will it make your life any better? I'd say the law of diminishing returns applies here. 1 million will make you happy because you don't have to work anymore, 2 million will make you happier, but not twice as happy.

It depends on what you're using it for. When I cash out, I'm considering putting much of my earnings into fusion research.

Bad decision. You should diversify it is economy 101.

I meant I would fund my own research.

Also, diversification is a decent passive strategy, but not one that you'd take if you were intent on making substantial gains.

As Warren Buffet says, "no one ever got rich on their seventh best bet."

Agreed, I want to get rich to fund my own research as well.

That sounds like funding a passion, not managing an investment. Your passions shouldn't be nearly as evenly diversified as your portfolio.

Right. My thought is take $x, diversify to ensure that if all else goes wrong, I'm still set, then take the rest and do fusion research.

This sounds more sensible:-)

Do you really think 1 million means you don't have to work any more? 1 million is 10.000 per month for less than ten years. Unless you invest them I'm not sure you can't stop working forever if you have that amount of money.

I do. Put the million in a savings account, move to an affordable area and rent, or purchase a living space and bank the rest, then live (modestly) off the interest. Or if you can tolerate greater risk, pursue investments with higher returns, and/or expatriate yourself.

The question is, could you stop working and retain your sanity? I wonder about people who achieve success too early in life--they have many years ahead of them and much to learn, and wealth in some ways may be a hindrance.

People undervalue $1 million (or similar numbers) incredibly. It doesn't mean you don't have to work, but it pays for just about all of the things you end up working the first 15 years of your life for - house, furniture, "stuff". Once you've purchased all that crap, any money you make over and above that actually seems like a lot more because it's not going toward buying couches and bedroom sets.

I made my first million when I was 22, and though it didn't keep me from working ever again, it basically paid for all of the things I needed. Anything beyond that has been incremental gains. It's a lifestyle changing amount of money.

Thanks you all for your interesting replies (all comenters replying to my original comment).

Yes, but remember to subtract inflation from the expected return! 5% interest means you get like 2% post-inflation.

The problem is of course, that after taxes (you forgot those), and inflation, 5% interest is really more like -0.5% return.

5% interest (which is meager) is 50,000 a year without touching the million itself. after taxes it isn't a fantastic salary but anyone who can't live on it is living in some kind of fantasy land.

do 8-10% and you're talking serious money for no work.

I know people that tell me they can not live on less than 100,000 a year. If i could I would send them to ethiopoia, one way.

I used to think that I needed to make enough money so I would not have to worry about working.

But anyway you should always produce (See pg essays). So the thing about money is not to solve the problem now, but to be able to have enough resources so you can have more freedom on deciding what to work on. If I am lucky, I should be able to work until I die.

One million with no investment wouldn't last you long, but only a retard would stick it under their pillow. It's trivial to earn 5% and live off of the $50k in much of the country. That's the worst case and assumes no effort at all.