Investor talks about his path to success

You don’t have to be a genius, a smart guy or even just particularly talented to become rich – hard work and the right goals are enough, investor Madis Payo said at the Investment Festival.

According to him, you need to, figuratively speaking, buy yourself a hen that lays golden eggs every month. What does this mean? Based on his experience, Payo formulated three steps that, with consistency and hard work, will lead to financial confidence.

In short: Create income for yourself, whether through employment or self-employment, and use the money you earn to buy assets that will also generate income for you. The ultimate goal is for those assets to generate twice the amount of passive income that you spend each month.

According to Payot, it is important that neither the eggs nor the hen be disturbed until there is a sufficient supply of eggs from which new hens can be hatched.

Payo shared the content of the three steps at the Investment Festival.

Taking care of income

Pajo comes from a small town in Rapla County, and from an early age he started working summer jobs at his school – he managed to get a job helping with construction work, collecting stones and sorting boards at a sawmill. Such work was paid by the hour, and the young man quickly realized that no matter how hard you try, it’s hard to get rich with a fixed hourly rate. You have to find another way.

Presentation listener Madis Pajo has his own special system for taking notes on the “eggs” and “chicken”.Photo: Vahenurm in the mail

During his high school economics lessons, Madis Pajo decided that the stock exchange was the place where money would flow into an account without much effort. At the age of 17, he bought his first shares during the boom of the time. His portfolio included shares of Olympic Entertainment, Tallinna Kaubamaja and Tallinna Vesi: “2006 was like 2021 – it didn’t matter what you bought, whether you knew anything about the market or not, everything was growing rapidly.”

The success prompted him to invest even more money into the stock exchange, and to do so he borrowed 2,500 euros from his parents. The portfolio grew quickly, and the initial amount soon doubled.

“But then came the spring of 2007, the economy started to cool down. My profits were melting faster than the spring snow in the Canaries,” – only then did Payot realize that the economy is cyclical and stocks can also fall. “Investments follow a certain logic and knowledge – I need to learn and acquire knowledge,” he concluded.

Self-education

Pajo entered the Tallinn University of Technology, where he began studying business administration. For several years, he did not dare to look at the stock exchange. There was not enough money, and he needed to find a job to support his studies and live.

While studying at the university, Payo began selling pension funds in shopping malls. He did not consider himself a good salesman, and his first attempts to close a deal were accompanied by great uncertainty. With a red face and an awkward smile, he signed his first contract with two girls. “I just smiled at the beautiful girls and thought that maybe this is how I will get rich,” Payo said jokingly.

The weekends were spent working, and success was not long in coming – soon Payo became the team leader, and the money became easier, although it was still not enough. Something more was needed.

Friends invited him to the US to sell books. The desire to become an entrepreneur was itching in his brain, but he didn’t have the initial capital for it. The opportunity to step outside his comfort zone and the dream of earning good money overseas pushed him to seize the chance.

When the first weeks did not bring the desired success, Payo briefly considered giving up. But his father’s advice – always finish what you start – inspired him to continue, and by the end of his first summer he had earned a decent amount.

“Learn and grow, get out of your comfort zone and do difficult things,” is how Payo summed up the second step on the path to financial confidence.

Big goals and clear action plans

The ambitious young man set himself two goals: to have an investment portfolio of 64,000 euros (one million crowns – ed.) by the age of 25 and to save at least 50 percent of his income every month. It took him three years to achieve his goals.

The hard-earned sum of 4,500 euros went towards setting up the first company. Soon, together with a friend, a sales and sales training company was founded. “I really didn’t like the philosophy of cutting costs, so I focused on increasing my income,” Pajo said.

During his summer trips to the US, Pajo worked hard to become one of the best booksellers, and his income had already grown to a six-figure sum. When the entrepreneur returned to Estonia after the summer, 20-30 percent of his earnings went to living expenses, the rest went to investments.

Madis Payo’s Road Map

Create a good income for yourselfLearn and developSet goals and achieve themJoin the 50% Club (invest 50% of your income) quickly and stay there for 10+ yearsInvest wisely and, if possible, with successful people

The money was growing. Together with Jaak Roosaare, he bought his first rental apartment in the city centre. Of course, this also became a lesson for the investor.

“From the photographs, it looked like a dream apartment – Venetian plaster on the walls, a bullhide carpet on the floor, chandeliers. A miracle, not an apartment!” The decision had to be made quickly, and the answer “yes” was given promptly. But already at the notary, it turned out that the apartment was located in an uninhabited basement, which was in joint ownership, and there was no right to use it: “And we still bought it. At the notary, we were like before the altar, where you have to say yes or no, marry or refuse,” recalls Pajo.

According to him, determination is half the battle, and in the end he managed to exit the project with a profit.

A few years later, Payo and three of his friends bought 17 micro-apartments together. Then they found more friends and partners, and the number of apartments grew even more: “I invested 50-80 percent of my income for more than ten years and increased my assets.”

Payo remembers the teaching of American billionaires – the basis of success and prosperity is largely a constant internal attitude. “What you tell yourself is important, it is what makes you think and act. If you set yourself up for bad things, you will act in the wrong direction,” he believes.

At the end of the performance, Madis Payo’s children also ran out on stage spontaneously. “Remember these faces, they will definitely be performing here on stage in a few years,” said moderator Juhan Lang (right).Photo: Simon Sepp

Diverse portfolio

Currently, Payot’s portfolio generates €18,000 in passive income per month, and his goal is to earn 12 percent per year.

Payot’s portfolio is divided among four asset classes: real estate – 24%, secured loans and bonds – 20%, securities and shares in companies – 20%, almost 30% – agricultural and forest land. The rest is idle finance, waiting for exciting investment opportunities.

Jaak Roosaare’s book describes three levels of financial freedom. Pajo calls them the pasta level, the hamburger level, and the lobster level. At level one, passive income covers unavoidable expenses, at level two, all expenses are covered, and at level three, the investor has passive income twice as much as expenses. “To be truly well off, you need to reach the lobster level,” Pajo says.

Investment Festival 2024

This year, the Investment Festival, organised by the investment club of investor Toomas, took place for the tenth time.

The festival attracted around 2,000 investment enthusiasts, making it the largest open-air investment event in Estonia.