Private Equity, Wealth Management, and Passive Income – Philip Palumbo: NYN E4

March 21


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As a high-performing individual, you understand the importance of implementing effective wealth creation strategies to secure your financial future. To further your financial success, this blog post will explore various aspects of wealth creation and management to help you make informed decisions for long-term prosperity.

We’ll discuss the three pillars of wealth creation – stocks, real estate, and private equity – as well as delve into the concepts of concentration vs diversification in investments. Furthermore, we will touch upon building passive income streams and how to identify lucrative investment opportunities.

In addition to these key topics, we’ll examine conflicts of interest when seeking trustworthy advisors and emphasize the significance of maintaining transparency throughout the advisory relationship. Lastly, our discussion on vision-driven investment strategies will guide you in aligning your investments with life objectives while adapting them according to changing circumstances.

By understanding these crucial components within wealth creation strategies and staying informed about market trends and developments, you’ll be better equipped to navigate the complexities of accumulating wealth for yourself and future generations.

Table of Contents:

The Three Pillars of Wealth Creation

Creating wealth over time can be accomplished by investing in stocks, real estate and private equity. Each investment avenue offers unique opportunities for wealth creation and passive income generation but also comes with its own set of challenges and risks that investors must carefully consider.

  • Stocks: Publicly traded companies offer long-term growth potential through the purchase of shares. By investing in a diverse range of businesses across various industries, you can benefit from market fluctuations while minimizing risk. To learn more about stock investments, check out this comprehensive guide on Investopedia.
  • Real Estate: Buying properties for value, cash flow, and appreciation allows you to generate consistent returns on your investment. REITs provide an alternate way to invest in real estate. For an overview of real estate investing strategies, visit BiggerPockets.
  • Private Equity: Investing in privately held businesses or startups provides the opportunity to capitalize on high-growth ventures before they go public. This type of investment typically requires significant capital upfront but has the potential for substantial returns if successful. Learn more about private equity in this informative article by Forbes.

When it comes to building wealth, it’s important to have a game plan. Here are some strategies to consider:

  • Start Investing: The earlier you start investing, the more time your money has to grow. Consider investing in a mix of asset classes, such as stocks, bonds, and alternative investments, to diversify your portfolio.
  • Save Money: Building wealth requires discipline and sacrifice. Create an emergency fund and save a portion of your income each month. Consider setting up automatic savings to make the process easier.
  • Maximize Retirement Accounts: Take advantage of retirement accounts, such as 401(k)s and IRAs, to save for the future. Contribute as much as you can afford and consider investing in low-cost index funds.
  • Invest After-Tax Money: If you have extra cash, consider investing it in a brokerage account. This allows you to take advantage of potential gains and build accumulated wealth.
  • Consider Real Estate: Real estate can be a great way to build generational wealth. Consider investing in rental properties or flipping houses to generate passive income.
  • Explore Alternative Investments: High-income earners may benefit from exploring alternative investments, such as private equity, hedge funds, and venture capital.

Remember, building wealth takes time and patience. By following these strategies and staying disciplined, you can achieve your financial goals and create a better future for yourself and your family.

Concentration vs Diversification in Investments

Achieving financial success often requires a balance between concentrating on specific investments to generate substantial returns while diversifying one’s portfolio to mitigate risk. Smart concentration involves strategically focusing on particular assets or sectors without putting all your eggs in one basket.

Importance of Smart Concentration for Wealth Building

To build wealth, it is crucial to concentrate investments in areas where you have expertise and strong conviction about their growth prospects. This approach allows investors to capitalize on opportunities that may yield higher returns compared to more conservative strategies.

Balancing Risk through Diversification

While concentrating investments can lead to significant rewards, it also exposes investors to greater risks if the chosen asset class underperforms. To counter this, diversifying your portfolio across different asset classes and industries helps spread out the risk and protect against market volatility. A well-diversified investment strategy ensures that even if some assets perform poorly, others will likely compensate with better performance.

Building Passive Income Streams

Creating multiple streams of passive income is essential for achieving financial freedom and peace of mind. By investing wisely across various asset classes such as stocks, real estate, and private equity, you can establish reliable sources of revenue that require minimal ongoing effort.

Identifying Lucrative Investment Opportunities

To build a strong foundation for your passive income streams, it’s crucial to identify investment opportunities with the potential for high returns and low risk. This may involve researching different industries or markets to find assets poised for growth or undervalued properties in up-and-coming neighborhoods.

Ensuring Consistent Cash Flow from Diverse Sources

A well-rounded portfolio should include investments that generate regular cash flow while also offering long-term appreciation potential. Some popular options include dividend-paying stocks, rental properties, and peer-to-peer lending platforms like LendingClub. Diversifying your income sources helps protect against market fluctuations and ensures a steady stream of passive earnings.

Conflicts of Interest & Trustworthy Advisors

The importance of working with expert operators or advisors who prioritize clients’ best interests cannot be overstated. Avoiding conflicts by choosing independent professionals helps ensure unbiased advice based solely on the investor’s goals rather than external factors like shareholder value maximization.

Selecting Trusted Experts Free from Conflicts

To minimize potential biases, seek out fiduciary financial advisors who are legally obligated to act in your best interest. Research their background and track record, as well as any affiliations that may influence their recommendations. Additionally, consider obtaining referrals from friends or family members who have had positive experiences with trustworthy advisors.

Maintaining Transparency Throughout the Advisory Relationship

  • Establish clear communication channels and expectations upfront.
  • Request regular updates on your investments and performance metrics.
  • Review Form ADV filings, which disclose an advisor’s business practices, fees, and potential conflicts of interest.
  • Avoid high-pressure sales tactics or promises of unrealistic returns – these can be red flags for dishonest behavior.

Vision-Driven Investment Strategies

Having a clear vision for your life plays an important role in making informed decisions about where to invest your hard-earned money. Tailoring your investment strategies around personal goals and aspirations can help you stay motivated and focused on achieving financial success.

Aligning Investments with Life Objectives

To create a successful investment strategy, start by identifying your long-term objectives, such as retiring early, buying a home, or funding education for yourself or family members. Once you have defined these goals, research various investment options that align with them – like stocks for growth potential or real estate for passive income generation.

Adapting Strategies as Circumstances Change

As life moves on, there may be alterations in your financial situation and priorities due to career shifts, family circumstances or market trends. It’s essential to regularly review and adjust your investment strategy accordingly so that it remains aligned with both current circumstances and future aspirations. This proactive approach helps ensure continued progress towards wealth creation while minimizing risks associated with outdated strategies.

The Importance of Understanding Investments

To make prudent investments, investors must possess an in-depth comprehension of the assets or businesses they are investing in. This knowledge helps them evaluate potential risks and rewards associated with each opportunity, allowing for more effective long-term planning and decision-making.

Researching Industries, Markets, and Individual Assets

To gain valuable insights into investment opportunities, thorough research on industries, markets, and individual assets is essential. By analyzing factors such as market trends, financial performance data, and competitive landscape analysis, investors can identify promising investments that align with their goals.

Staying Informed About Market Trends and Developments

In addition to conducting initial research before investing in an asset or business venture, staying updated on relevant market trends is equally important. Regularly reading industry news articles or subscribing to newsletters from reputable sources can help keep you well-informed about changes that may impact your investments’ performance over time.

FAQs in Relation to Wealth Creation Strategies

What is the Best Strategy for Wealth Creation?

The best strategy for wealth creation involves a combination of concentration and diversification in investments, building passive income streams, selecting trustworthy advisors, and aligning your investment strategies with your vision. Continuously researching industries, markets, and assets while staying informed about market trends will help you make informed decisions.

What are the 4 Pillars of Wealth Creation?

The four pillars of wealth creation include stocks (publicly traded companies), real estate (buying properties for value, cash flow, and appreciation), private equity (investing in privately held businesses or startups), and passive income streams. These pillars provide diverse opportunities to accumulate wealth through various investment channels. Investopedia offers additional tips on creating long-term financial success.


To maximize their wealth-building potential, individuals should consider a balanced approach that includes investing in stocks, real estate, and private equity; diversifying investments; creating passive income streams from multiple sources; selecting reliable advisors without conflicts of interest; aligning investment goals with life objectives; and staying abreast of market developments. These include investing in stocks, real estate, and private equity; balancing concentration and diversification in investments; building passive income streams from diverse sources; selecting trustworthy advisors free from conflicts of interest; aligning investment strategies with life objectives; and staying informed about market trends.

Realizing these wealth-generating tactics can assist individuals in obtaining fiscal autonomy and safety for themselves and their families. Achieving success requires dedication and hard work, no matter one’s professional background or level of intelligence.

If you’re ready to get into the mindset of generating a wealth creation strategy today, try our online tool – free because you’re an avid listener of Investor Mindset or get your investment portfolio started at VonFinch Capital

Private Equity, Wealth Management, and Passive Income – Philip Palumbo: NYN E4 Transcription:

Steven Pesavento 0:00
Hi, I'm Steven Pesavento, and welcome to the name your number podcast presented by the investor mindset. As someone who comes from a challenging childhood, I've spent my life seeking financial security, personal growth, and ultimately freedom, the freedom to not wake up worried about the next paycheck, but rather with the confidence of knowing that my passive income pays my bills without the need to think about it. When you name your number, that you will learn passively, that creates your ultimate quality of life that I believe you've achieved real freedom. Welcome to my show, it's time to name your number. But you're also reinvesting into growing for an exit, right kind of the business you're building, although you want to pass it on from a legacy perspective, you're really building for an exit. So at some point in time in the future, you've got this, this, this amount of money that you can live off of, or you can simply hand that over to somebody else in your family, who keeps running it and being clear on that upfront is really important. Welcome back to the name your numbers show presented by the investor mindset, we're on a mission to create financial freedom for over a million investors. And when you name your number, the number that you want to earn passively each and every month that creates your ultimate quality of life, then I believe you've achieved real freedom. And if you're ready to name your number, and create your passive investment plan that you'll follow step by step to get there, then head over to investor to download the free guide to get started. And for those of you who are ready to build this plan together with me and a community of other like minded investors just like you, you'll be invited to schedule a call with one of my top advisors to see if it's a fit. Now let's get into the show. Today, I'm excited to have Phillip Palumbo on the show today. How're you doing today, Phillip?

Phil Palumbo 1:54
Great, Steven, thank you for having me.

Steven Pesavento 1:56
I'm excited to have you. And for those of you who don't know, Phil, he's the CEO and chief investment officers of Palumbo wealth management. And over the past 20 years, he served in senior roles with several major financial institutions. And he helps assist families and individuals figure out how to create their investment plan and then actually go out and execute that for them. So great to have you on really excited to get into your story about how you build financial freedom, how you're doing it with and for other people. Before we get into that, let's start off on a personal note, by looking back at earlier in your life. What events or influences from your childhood shaped who you are today. And what and how did that play a role in your money and investing journey?

Phil Palumbo 2:43
Yeah, so I seldom talk about my father growing up in a household we grew up in a blue collar background, my dad was worked as a local three electrician, and my mom stayed home. And oftentimes, oftentimes my dad was laid off anywhere from three months, six months out of the year. So I remember when I was 13 years old, we were sitting at a dining room table, it was a really hot summer day, we didn't have air conditioning on our house at the time, kind of fans blowing. So my father was shaking his head, put his elbows on his knees kind of looked at me and said, you know, feel life really is challenging. And I recognized it was more financial than anything else, because he was laid off so much. Now at the time, I was 13 years old. And I said to myself, like I don't want to be in that situation ever. So I started working at a restaurant, I was cleaning dishes and mopping floors at the age of 13. So most kids were coming home and hanging out with their friends. I literally I would go to school, I play a sport every season. And I would go straight to work until 1112 o'clock at night. And I do that all through high school. College, I played Division One lacrosse, it would be lacrosse in the morning, it would be school and then across an afternoon and I would work at a country club. And then you know that experience is growing up in his blue collar type environment, you learn the value of a strong work ethic and you know, the Steven one any and any of us, right. It's it's all about hard work. That's great. And that's how you achieve your goals. Right? Intelligence is great, you know, and we all have that. But if you don't have the grit, it does not matter. So the number one thing for me growing up without a doubt, was learning the value of strong work ethic.

Steven Pesavento 4:13
Well, that's that blue collar mindset, right? Work hard, put in the hours, grind it out, and eventually, you're going to be taken care of right? And that that absolutely got you where you are today. But you know, I imagine you've been able to make a lot of money, have a lot of fun doing it. And now that money's actually working for you. So, you know, talk to us a little bit about how you look at financial freedom, which I really labeled as the ability to do whatever you want, whenever you want to really have full control. Have you achieved it? Or is that a goal that you're personally working towards?

Phil Palumbo 4:46
Yeah, so I just finished my book called Work optional, which hasn't been published yet, but it's going to be able to next month. So what I wanted to do the part of what I do for a living, which is wealth management. This word retirement is so tired. It's So freaking tired, right? It's so boring. It's so archaic. I get off set up with this idea about retirement. And that's an awkward saying I want to retire because my cousin retired at 65, I'm gonna retire because I'm gonna get Social Security at 62, or full retirement age was 66, or 67, depending on how old you are, or I'm gonna get my pension, which is really not the case many times going forward, but some people do so so people wait for a specific age based on a certain income stream they go into to achieve that is completely, completely ridiculous, we change the word and retire the word retirement, and named it work optional. So when I speak to people, it's prospects. It's all about what point of your life is working to be optional, right. But what does work optional mean will work optional means that you're at the point where you have enough assets saved. Real estate investments, businesses that you have that are generating cash flow, that you can be able to maintain the exact lifestyle you have, as if you were in your work in yours. So maintain the same exact lifestyle, but you got to you got cash flows, passive income streams, coming from various sources, that are giving you the luxury to stop working if you want, that's number one. Number two, maybe you want to continue working because you enjoy it. But you know, you can stop working because you've saved enough and you have enough passive income. Or three, maybe you work part time or in that industry or consulting job that you always want to do. The bottom line is, is when you're in a work optional lifestyle, you can do whatever you want. Yeah, and that's, that's what we all need to be strived for. So, you know, fortunately, when I launched my own business three years ago, I'm 46. If I sold my whole entire business today, based on everything, I can make work optional for myself, I happen to love what I do three young boys, you know, 1310, and nine, you know, God willing, they take over this business one day, and I have a multi generational business that runs through for multiple years, which is a personal vision goal that I had. So I'm not ready to stop working. But yeah, the idea of work option is lifestyle is really what it's all about, Steve.

Steven Pesavento 6:59
Yeah, it's so true that work optional is such a better word than retirement, because most people aren't really looking to retire. A lot of people love what they do, they just want to have the ability to decide for themselves, what they want to do in that given moment or chapter of their life. So I love that description. Let's talk a little bit about how you got there, let's talk about how you actually got to this point of being in a position to be work optional, to have the option to exit your business and do whatever you want. Obviously, you're in a position where you're running the business you like doing that I can tell that's the strategy that you've used to create income, talk to us a little bit about how you go about making money in that business. And then let's talk a little bit about some of the strategies that you're using as well to be able to start creating passive income for yourself so that you can be optional while you're doing that.

Phil Palumbo 7:53
So for a lot of business owners exactly like myself, a lot of our money gets reinvested back into the business. And that's been the case, 22 years, 23 years. So it's not like we take our income and invest in a portfolio, which I do with any retirement savings, I have in some asset and some after tax, extra cash flow that I have gets invested just like I invest my clients capital, but a majority of the money they make gets reinvested back into the business. And again, that's always been the case. So the return on investment capital that I get in doing so has been tremendous if I were to sell the business today, and if I was to factor in how much I put into the business, right? So the return I get on my capital annually, right is is extremely high versus what I'd be able to get in stocks, real estate, or private equity, which of those three are private equity is essentially what I have, which is a private business, right? So there are three ways that people really grow their money over time. One is through stocks, two is real estate three is, is private equity, right? Or owning a private business. So the biggest part of my net worth is in my practice. So to answer your question, if it came to work option for me would have to be selling my practice taking that capital, and then investing in in various investment strategies, like I invest my clients and taking a distribution from that portfolio to live on for the rest of my life.

Steven Pesavento 9:08
Yeah, yeah, it makes so much sense, right? Because so many business owners are just like you, right? They leave the career world of working for somebody else, they go start their own business, they hang their own shingle, and they start building that income flow that's quite active, right, running a private equity business versus investing into a private equity business is very operationally heavy. It's taking your time, your likeness, your ability to come on this show and be able to share your lessons is part of what it takes to run that business. So a lot of people they keep investing into their business, because majority of the time you're going to get the best ROI for the dollars that you reinvest in your business, because they're connected both to an investment you're making plus the time that you're actually putting in. So the dollar per hour that you get out of that is going to be way higher. And this is why it's so valuable for people to get to a point where they might want to hang their own shingle, they might want to go out and start their own business, because the dollar per hour they earn invested into that business is much bigger. And then of course, there's the option for the exit. The downside is, if you do that for 15 or 20 years, and everything's tied up in one asset, you're not well diversified. Diversification isn't everything, it's important to invest and focus in one thing. But talk to me a little bit about, at what point do you think it makes sense for people to start pulling some of that money out, and start investing it into either traditional, like stocks, or into alternatives like real estate and PE that can then start building other income streams alongside their business? At what point? Should somebody start considering doing that themselves?

Phil Palumbo 10:52
What I was gonna say to you before is, the risk that I have in other business owners is the idea that you're investing all this capital into your business. And yes, it's working, the business is growing. But if one day, all of a sudden, for some reason, from technology, the wealth management business went away, I don't believe that's ever going to happen. They tried many times. I think that personal touches what people want. So my belief is that I'm okay with still investing in my business. Because I feel like the wealth management space is here to stay for a very long time. But you still never know. So if all of a sudden the value of my business, one two was cut in half, for whatever reason, or 75%, that's problematic. And your whole point is, well, how do you figure out how much should I if I have $1? So I put it all in my because right now, every dollar I make after tax or before tax, because anything I get back into businesses is deductible. Right? Yeah. How do you figure out what makes the most sense, as your question is asked, and it's a tough one, because I do have for my seat case, personally, is, I believe so much in the wealth management space where it's going, I only think it's getting larger and larger. Yeah, that for me, you know, whoever probably 6070 cents on the dollar is going back into the business. And yeah, because I'm seeing really good growth. I don't think I would advise that for everyone. I do think, yeah, you know, 3040 cents on the dollar should get invested in, you know, stocks, real estate, private equity, again, because of the best performing asset classes over time. Nobody can dispute that, right? And do that as your safety bet in the event your business doesn't work out, you need some type of fallback, right. So that's what I that's what I would recommend, if you're really conservative, it depends on your personality. I mean, there is no doubt no matter how you slice it, people get to where they are in life, super, super wealthy, is through concentration. Yeah, well, it's concentration in a business concentration, real estate concentration, single stocks, one, two, or three, four, if you're or executive at a major publicly traded company, they became wealthy because of their stock, the wealthiest people in the world today is Bill Gates, one of the wealthiest right, Buffett's the other. Well, these guys in Munger, they don't personally like three or four stocks plus their Berkshire Hathaway. So yeah, concentration is important. But concentrating in a smart way is even more important. And that's kind of what I am doing. And I have confidence in going forward.

Steven Pesavento 13:14
Well, I think that makes so much sense. And especially when you're kind of early in the development of a business, you want to reinvest everything, I've been doing real estate for nearly a decade, and I started with, with no dollars in the bank negative and was able to build millions of dollars of net worth. Through this process of continuously reinvesting some of those investments didn't pay off, maybe you spend a couple 100,000 on marketing, and if it doesn't work out, or you hire somebody, and it doesn't work out, but in the long run, you're always going to get a better return on investment investing in your own business. It's only after a certain point of time when it starts to make sense for you and your specific situation. And I know you help people go through this planning process, and it's something we're very passionate about. Because what I've found is that me personally, I was so focused on building this business, everything was about the exit real estate doesn't exit for five or 10 years, and majority of my income is based on the success of those deals. So the change that I made personally was to start focusing on creating passive income for myself. And that's really where name your number was born out of. Because I realized after investing in my business so long, it's it's time to actually start creating passive income that's outside of it. What's great in my business, I get to do both together. And it sounds like you are probably in a very similar situation because your your hands are so connected to that. I want to get into your personal vision of what you're building. And then we'll come back to talk about how you can actually kind of create a plan that kind of fits your life. So tell me what is that vision of the life that you're creating? You were in a career for decades. You started your own shop, you're serving tons of very successful, wealthy people. What is the vision that you're you're creating for you and your family? What does that look like? How do you want to spend your time If, and why is it so important for you to be focused on this?

Phil Palumbo 15:04
yet? I'm gonna answer that. In two seconds, it's worrying about the concentration, make sure your audience understands this right? You got to make I said it's smart concentration. Yeah, trading in Bitcoin is stupid. Concentrating the currency is stupid concentrating in speculative investments is stupid, taking 5% or less of your capital and going into those areas. That's okay. Right? I still don't agree with that. But that's okay. So make sure that's why I'm saying constant repeat, if you're gonna concentrate, it's got to be smart. I agree. So the vision for what I'm how I think about everything, right. So the reason why I left image wirehouses, is really because the conflicts of interest number one to constant headline risk, where they be doing something erroneous or egregious would be in newspapers, I get calls from clients, etc, etc. So getting out of that world, and also, what people think about advisors, really is not in such high regard. Yeah. And that always frustrated me and bother me, because I know the passion about what I'm trying to achieve here for my clients, what I do for my clients, right is, is so paramount. And I always compare it to, you know, the three legged stool, where the three most important things in people's lives is number one, you have to have your health, right, if you have your health, choose your family, you can enjoy your family, if you have the health, right, and creating a stable family and then three is money without money, you can't really enjoy it, you can't really enjoy your family the way you like to enjoy it. And when you have money, it does help you know, most people who have money have the ability and access to great health care and, and do other things to really keep yourself healthy. So money is a really was one of the three legs of a stool. So my job is so important in my clients lives in directing them, and I manage the money on a discretionary basis. So it's not like I call them and say, Hey, let's buy this, let's invest it, they depend on me to make those decisions for them. So for that reasons, for that reason, you know, I want to set up a platform where my clients know, anything I'm recommending to them, there are no conflicts, like these large Wall Street firms. Right. In other words, we don't have products to sell them. We don't make extra fee conditions on other products to sell them from other companies. And or have analysts that recommend stocks based on based on banking deals that they have going on. Right. Yeah, is, which is completely ridiculous, right? When you think about it. And I know this because I was there, Steve for 20 years. And I've been and he put me in a room saying Why don't you sell clients more, this is some clients more that I'm like, these are people's life savings. And you're telling me this because you want to increase shareholder value as a publicly traded company. I have no interest in that. So it's creating this platform where people know when they come to me their wall could come down. Let's just talk about like, what do you want out of life? What's your vision for your life? Right? What is your number? You said it before? That's what I said, What is your number? Is it 10,000 20,050? What is that number? What are your assets and going through risk and understanding everything. And then as their personal CFO just helping them with everything as relates to money, because if something happens to them tomorrow and they die, you know, they know that quote, Phil Caulfield Coalfield, it'll take care of everything, you know, so.

Steven Pesavento 18:26
And when you succeed at doing that, for from a work vision, from a mission vision from helping these individuals, what does that do for your family? What does that do for your fulfillment? What does that do for your ability to have fun and enjoy your life? Like what what is that outcome that you're living every day and that you're working towards? And and what does that look and feel like?

Phil Palumbo 18:50
So Steve, and I remember when I was in the business three years into the business, I was at Merrill Lynch, and I was cold calling at the time. And fortunately, I got this new client, Mr. Nikhita, own business business owner in Queens over a year and he became a client and he's doing it he had a $25 million business. And when I became a client, he started to get to know each other. And I sat sat down with him. And I asked him a question said, Mr. Keith, I said, How'd you because it was an Asian immigrant, right? super successful guy who had to become so successful. And he said, Phil, he goes, let me tell you, he goes, I had a passion for what I was what I do, right, I had a passion for importing goods, right that he that he was that he was doing. And that passion, money followed me. It wasn't the reverse. It wasn't like I was looking, I was following money. And then, as a result, I started this but it was the opposite. He loved what he did. And as a result, money followed him. So to answer your question, I love what I do have a passion wanted to do fortunately, it is a business where you the economics are very beneficial. And those economics benefit my family from the standpoint that you know, thank God we live in a great community, you know, great school district, which is Most important when you're raising a family, we live close to my mom and dad, my mother in law and father in law. And we can do pretty much anything that we want to do. You know, and but yet we don't spoil our children, which we feel is really important. So you know that that that's how all of this and started my own business I parked my my firm, seven minutes from my home, three boys were totally busy with sports and stuff like that. So I get to leave here in the home within seven minutes and, and do whatever I want to do. So that's been a tremendous benefit of my career.

Steven Pesavento 20:29
I mean, it just sounds like such a beautiful life that you're creating. And you have so much control over that because you're a business owner, you're in that position. But you're also reinvesting into growing for an exit, right kind of the business you're building, although you want to pass it on from a legacy perspective, you're really building for an exit. So at some point in time in the future, you've got this, this, this amount of money that you can live off of, or you can simply hand that over to somebody else in your family, who keeps running it. And being clear on that upfront is really important. Because if you are building the business in order, purely from an income standpoint, you build it differently than if you're building it for this legacy piece. And a lot of folks oftentimes aren't clear on that. So I think it's a great example, about somebody like yourself, who's building that for a purpose. And everything else that you do is really connected to that purpose. And so when you are pulling money out of the business, when you are going about investing, you're somebody who has a special set of skills, I talked about the importance of investing with expert operators, expert investment advisors, most people who try to get into stocks and do it themselves, they have really no idea what they're doing. And I honestly think the the deck is stacked well against them, because there's big fund managers who have way more information. And their job is to be able to make a 10th of a percent. And that can be huge on billions of dollars. So talk to us a little bit about what type of investments you like, knowing that you're an expert, and that you do this for people. And then what do you like about those different different buckets that you can go about investing into?

Phil Palumbo 22:10
I tell you what I don't like I hate that word stock, right. So that's just have to do is you have to be an investor right investment in being an investor means, right? You're going to invest in stocks, but stocks are great businesses, you actually earn a piece of the business. And that's how you should be looking at it. Right. So, Stephen, if you sold some a piece of real estate property for $3 million, and you went down a road to buy the local candy store, or or if you bought the carwash, right, you took that $3 million, you would buy that carwash now you own that business, there's cash flow the business, and you only bought that business because there was cash flow that you understood, right, and there was high returns on investment capital when money was being reinvested into the business. Right. And so that's what attracted you to buy that business and the cash flows you receive from that business was greater than buying a 10 year treasury bond. If it wasn't, you wouldn't have took in $3 million and buying that, that carwash, right? Well, that concept is the same thing. When it goes to investing in stocks of great businesses, you should first understand the cash flows of the business, the returns on investment capital of the particular business, understand leadership. And the most important part, you have to really understand the product. Like if you buy Apple, like you understand Apple, they sell iPhones, iPads, Macs and services, that's predominantly their business, right? Yeah. Like you can conceptually understand that. And you know, everybody around you has an iPhone. When you buy in a video, when you buy in the video, you don't really understand the video, they made chips. They said, but Okay, who did they sell? What did they do? What does it do? I get that Gchat GBT thing, but you don't really understand it. When you buy Coca Cola, American Express and Apple like you understand it. And that helps you stay in the game. So when it comes to investing, you have to think of it as like, now you own a piece of the business. And because of that their cash flows, you understand it, guess what you understand you did all your homework and understanding that and then buy it today. below its fair value, because every company has a fair value based on the future cash flows of that business. discount that till today, right? So now you have a value of the business of its trading below that value of your estimate. You buy it and you hold on to it for the next 20 years. Yeah, I don't care if there's no reason to care about what the markets doing today, tomorrow, next three months, six months, if you're wasting his time, worrying about where the markets going tomorrow, you're wasting time investing period. And the story is you don't buy the market, you buy stocks, every businesses in the US

Steven Pesavento 24:33
so different because you're really saying you're not a trader, you're you're kind of anti trading, you're like, Yeah, we're gonna make trades and make different investments and buy and sell these assets. But really, you're looking at this business from a long term perspective.

Phil Palumbo 24:50
Your real estate guy, you're exactly right, right. You trade real estate. I prefer not to right. Most likely you don't trade real estate if the stock market goes down or if the economy goes into recession, recession or if you're predicting that you sell your real estate properties

Steven Pesavento 25:05
most of the time now. So you own your

Phil Palumbo 25:07
real estate because it shows it's proven great cash flow. And if you hold on to it for 20 years or greater, we know that the return on investment is very, very good. So this is exactly how people should be thinking of it no different than anything else, whether you're buying real estate, or you own a business. It's the same exact concept that changes the whole game when you think this way.

Steven Pesavento 25:27
Yeah, it's, it's so it's so intelligent to think about that. And, you know, I'm a guy who is very close to real estate, I'm much closer to private equity, individual businesses, being able to invest in those kinds of opportunities. And I'm a big promoter of thinking of that as a phenomenal path towards creating income and long term wealth, gain and appreciation. Right, I always think it's important to know what the trade offs are, because there is trade offs when you go into something that's a publicly traded equity versus getting into something that's private and all of the investments that we do at Vaughn Finch, when we're buying and selling real estate, these are all privately traded securities. So it's just like buying into a stock in the stock market, except the difference is, you're typically invested for a longer period of time. Let's talk about some of the trade offs. What's the upside of going into public equities? Versus what are some of the downsides of going into those type of assets? And what's the trade off that you have to consider when you're going into privately held private equity? And how should we be thinking about that?

Phil Palumbo 26:35
Let's just make sure it's clear. I love private equity. I love real estate. I love public companies equally. Yeah.

Steven Pesavento 26:40
Yeah, totally. Totally. There's trade offs in between them, though.

Phil Palumbo 26:45
So that the the benefits of public companies are you can buy into a slice of a business and you don't have to worry about managing the business. Yep, dealing with management or anything like that. It's very liquid. Right? I go in today, I can go out tomorrow. And if you want to trade it, but it is very liquid, yeah. You can diversify a little bit easier. Right? I'd say those are the three benefits and is a selection of, you know, 100,000 publicly traded companies all around the world. Private businesses, so that's so that's the benefit. The negative is, is really the emotional aspect, the biggest problem with with public stocks for investors, the worst thing in the world, for their for the, for public investors, is the internet, the ability to go into your account, and trade. Right? If you I guarantee you, if Trump or other big real estate, people in the world had the opportunity to trade their real estate investments daily, right, from 930 to four, five days a week, I guarantee you there will not be a billionaire today. Yeah, I would guarantee you, it's the idea that you it's not liquid, you're gonna hold on to it for a long time, he got his case closed. And that's why people succeed so much more in real estate than they do on public stocks. And the same thing, what I would argue with private businesses, right, because they're not liquid you hold on to for a long term. And that's how you get returned, great return on your investment. So those are the biggest differences, one versus the other, you can make great money in all three areas. Going back, you said before being a trader being a trader, I understand the statistics behind that 95% People fail. So why would you want to do something where there's 95% chance of you failing, number one, who wants to sit in front of a screen 930 to two, four, I know people that don't go on vacations, they bring their laptops, and they're like sitting in front of a laptop and trading, and then spending time with their family who wants to deal with that. So there are plenty of monies to build wealth over time. And the most success just look at the most successful people have done. You know, whether it's real estate, private businesses, public stocks, you know, it's long term hold in those particular areas and buying good quality.

Steven Pesavento 28:52
And that's really the investor mindset is realizing that you're not a trader, you're not looking to operate and run that business, you're looking to invest in it. So you want to invest in that business for the long term, whether that's publicly traded, and there's a lot more information available. And there is the liquidity of you being able to sell at any point in time. But the downside is if you're emotional, if you are doing that, if you are pulling the trigger and pulling out of something, it'd be just like real estate today, the stock market's down compared to what it was a year ago, give or take, depending on when we're listening to this. If you were to then exit the same private real estate in that type of market. Fortunately, real estate doesn't trade often. So you don't have to sell it. But if people were doing that, it's exactly what you're talking about. There's that emotional piece and when people are emotional, they make bad decisions. So I I 100% agree with you. I just don't have the experience on the public equity side to know and have that expertise to make those decisions. But that's what's so intelligent about the Warren Buffett my Model, he's believing the same thing that I believe by for value buy for cash flow, buy for the opportunity that there's going to be appreciation at some point in the future, but you're just buying a good business doesn't doesn't matter what it is, it's just that in the future, it's going to be, you're gonna be able to exit it for more correct. So as we're getting close to wrapping up here, I'd love to give you an opportunity for you to share a little bit more about what you do, and how you serve clients and then share how people can get in touch with you before we wrap up on our our final question of the interview.

Phil Palumbo 30:34
Appreciate that. So, so very simply, you know, we're personal chief financial officers, for our clients, the goal is, and the mission is to help our clients achieve peace of mind. And the way we do that is because we're personal CFOs, anything that has to do with money that's on their shoulders, that they're worried about dealing with day to day, you know, put it on our shoulders, let us deal with it, let us worry about it. So you can go out there in the world, to live your very best life. So we are very comprehensive as it relates to managing your money. It's all about understanding your vision for your life. For the rest of your life, what that looks like, the engine behind being able to achieve your vision by far is how you're going to manage your money. So how we manage money in for our clients is going to be everything in terms of them achieving their vision, and then three is really the stable part. So working with us to secure platform, you know, we are legal fiduciary to our clients, which means your interest has to come before ours, which is not the same where it was in my prior world. So we're legal fiduciaries, we have no conflicts of interest here. So you know that when you sit down with us, and you talk to us, that will come down, and you can share with us what's most important to you, and we can help you with that. So those are the that's kind of the high level, main part about our firm.

Steven Pesavento 31:48
Yeah, and so if you guys are in a position where you're looking to bring on a great advisor, definitely set up some time with Phillip and his team so that you can understand how that can support you. And if you're looking to help create that clear vision, that's exactly what we put together in this passive investment planner. So you can grab that planner at Investor And however you take that information, wherever you work with, you're going to have a clear vision, and an understanding of what you need to earn every month to cover your expenses. So grab that at Investor So wrapping up on this, this has been phenomenal, Philip, I love your energy. I love how you look at the world and I have a feeling that there's going to be some great opportunities for us to work together collaborate really make an impact on this mission of helping support a million people to become financially free. As we've dove in into your experience, what advice would you give to the listeners who are on a path towards creating that life that matches their vision so they can live the life they want financially,

Phil Palumbo 32:59
work your butt off, you know, work hard, and everybody around you to achieve high levels of income. Number one, the income that you earn on an after tax basis, get everything fully invested. Don't let cash drag on your performance, invest in real estate, private equity, single stocks, learn about single stocks, right and how that works in it from an investment standpoint. And continuously do that over and over and over being asset classes, like I just stated that historically have reduced CAGR returns, which is compound average growth rates north of 10%. If you can do that, with all your savings every single year, you're going to accrue a great amount of wealth which would be which will help you achieve the passive income stream that you need over time. But you have to put the money to work and invest it You can't be scared. You have to just get some good advisors speak to some good accountants, people you trust, and put that money to work, but really achieve a high level of income so you can save more and more every year.

Steven Pesavento 33:57
Phillip, thank you so much for joining us. And for all of you out there listening. Thank you for investing the time into learning how you can get on this journey towards financial independence and freedom. And remember, if you're listening to this for the first time, or you come back every week, hit that subscribe button and do me a favor. We put this content out in order to help us support on that mission towards creating a million financially free investors. Share this with a friend and pass along these lessons that you're learning. So you can be a part of that mission and help people that you know love and trust. Thank you so much for joining us and we'll see on the next episode. Today's episode is sponsored by von Fitch capital. If you're interested in investing alongside me in the same type of real estate opportunities that I personally invest in, then head over to Vaughn Finch capital and join their private investor network. You can do so at Vaughn Join me on that next deal. I look forward to seeing you on the inside Thank you for listening. If you liked what you heard, make sure to rate review, subscribe and share with a friend. Head over to the investor to join the insider club where we share tools and strategies from the top investors and entrepreneurs and how they take it to the next level.



advisors, allocating capital, blue collar household, business owner, Cash Flow, Community, conflicts of interest, Diversification, emotions, financial stability, Investor Mindset, legacy, liquidity, long term gains, multigenerational business, net worth, passion, Passive Income, personal CFO, private equity, publicly traded companies, quality investments, Real Estate, reinvesting, Retirement, ROI, school district, smart concentration, Success, value, Warren Buffett, wealth management, work ethic, work optional

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