RE: Extropy Investing Group

James Rogers (
Sun, 12 Oct 1997 17:54:55 -0700

At 12:39 PM 10/12/97 -0700, Ramez Naam wrote:
>Natasha, just out of curiosity, could you share with us your target
>annual growth rates?=A0 I myself have found it fairly straightforward to
>make 40% annual returns over, say, a 5 year period, as long as one is
>willing to ride out a few ups and downs.=A0 I'm curious as to what other
>extropians see as viable investment targets and strategies.

I'm uncertain what you are saying here. 40% growth every year for 5 years?
Average of 40% growth every year for 5 years? 40% growth for a five year
period? The first is excellent ( 40% annual growth ), the second is
average for a good stock mutual fund ( 13% annual growth, compounded ), and
the last is poor ( 7% annual, compounded ).

40% growth every year is quite accessable if you have a cool head for
investing. And gives a healthy 500+% return for the five year period as=

>For the record, my next strategy (as yet untested - awaiting capital) is
>1) Pick a nascent industry with a potential for stellar growth in the
>next 20 years. (E.g., biotech, space exploration, nanotech).

Biotech: Best bet. Huge growth potential within 10 years. And plenty of
viable investments to choose from.

Space Exploration: No way. There are currently no viable, investment-grade
space exploration companies around...yet. In 10 years, maybe. I'd wait
for the market to mature a bit more.

Nanotech: The potential is starting to emerge, but it may be too early for
small companies trying this stuff to survive. I actually expect the first
viable proto-nanotech technologies to come from a company like IBM or the
like. It is simply too expensive for a small company to operate this type
of research without a source of income.


>My favorite hidden feature of this strategy is that most of your income
>is essentially tax-deferred.=A0 Why?=A0 Because stocks in a nascent,
>high-growth industry are growth stocks.=A0 Thus your return on investment
>is in the form of higher stock prices.=A0 Stock price gain is taxed as
>capital gains rather than income.=A0 Capital gains tax is only due when
>you sell the stock.=A0 Thus rather than losing 30% of your earnings each
>year (and having that compound over a decade), you only lose the capital
>gains rate at the very end.

I would have to agree that taking advantage of tax-deferred status allows
one to realize a greater growth for less effort, but it also puts a ceiling
on how much growth you can reasonably expect annually. Going the other
route requires considerably more work (to attenuate the added risk), but
raises the potential (post-tax) growth ceiling by a factor of 2 or 3.
Obviously, the returns have to be *significantly* greater to counter-act
the tax loss. Of course, the third (and best) option is to invest in
yourself and start your own company. This type of investment, while more
risky, has a potential annual growth ceiling that positively dwarfs the
growth ceilings you can expect doing any type of investing in the stock

-James Rogers