I often write on Quora.com, where I am the most viewed writer on financial matters, with over 309.1 million views in recent years.
In the answers below I focused on the following topics and issues:
- Are there any other stocks like Google (or for that matter Amazon) that just continuously go up? Or is that a myth in of itself, considering Google has regularly gone down in value during periods like 2008?
- What is the best financial decision I have ever made? I look at one umbrella term which has helped me in many areas including business and investing.
- What are some good ways to pay off debt and start saving + investing? How can using cash, investing at the start of the month and not giving in to peer pressure help you?
- How can people earn over $100,000 a year in the UK without having a degree, apart from starting a business? I discuss the various routes I have seen work, and how times have changed, since the days when “working your way up” was tried and tested.
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Firstly, Google hasn’t just gone up. There has been many falls, such as in 2008:
Or for that matter during the worst of the Covid/lockdown sell off and 2000–2001.
I know what you mean though. Google has gone up over a long period of time.
So have many of the following companies:
- Berkshire Hathaway
- Microsoft, although they were stagnant from 2000 until 2016
- Coca Cola. Again though, they have a huge period of stagnation
- Numerous international firms outside the United States.
Google is an unusual company in that it has a sustained advantage – it isn’t easy to compete with them.
However, unlike firms like Coca Cola or Gilette, they can grow more quickly due to the fact they are a technology firm.
Many tech firms are fast growing but then fall away, like Yahoo, but Google has avoided that.
The bottom line is
- Google, like Amazon, has a strong market position. It isn’t easy to compete against them unless the regulators get involved and break it up/on purposely make it more difficult for them
- Every individual stock, including Gogole, is riskier than say investing in the whole S&P500. Will Google be up in a hundred years? Will it even exist? I am not sure. Whereas I am sure the S&P500 will be much higher in a 100 years, adjusted for inflation.
- Even Charlie Munger admitted that Berkshire Hathaway, which has outperformed for longer than Google, almost went out of business after a brief scandal. With individual stocks, you never know when the next scandal is around the corner.
So, if you want to something which will “go up forever” but be volatile, you don’t even need to be in individual stocks, or find the next Google.
That’s a difficult one. I will focus on an “umbrella term”.
Something which has helped me in many different situations, and on countless occasions.
It has helped me when starting my own business, emigrating, and dealing with others.
That umbrella term is taking calculated risks.
Taking calculated risks has helped me:
- Invest rather than save. Money in the bank is a 100% loss to inflation. Volatility is not risk. Investing, if done sensibly in a long-term and diversified fashion, isn’t risky.
- Starting my own business. This was a great decision, but only after working for somebody else first.
- Emigrating. Moving around can save you a fortune in taxes and cost of living, improve your network, broaden your outlook and help with language acquisition.
Oftentimes, my biggest mistakes have been when I haven’t made decisive and quick decisions.
Enough nothing, in some situations, is riskier than doing something. This is often the case when your instinct tells you that you are making the right call.
The issue is human nature, the media, and family. Often well-meaning, we are told from childhood that “it is better to be safe than sorry”.
This is despite the fact that this expression is a contradiction of other well-known expressions like “you have to speculate to accumulate”.
That doesn’t mean people should take silly risks. Those aren’t calculated. They are just reckless.
If investing, it makes no sense to put it all in one stock, or even twenty. It does make does to get a job first, at least in most situations, compared to starting a business without experience.
As we age, moreover, it makes sense to take some risk off the table, as we have more to lose.
A 60-year-old wealthy investor, shouldn’t be in the same portfolio as a 21-year-old just starting out.
If there is a major stock market crash, which takes ten years to recover from, the 21-year-old will only benefit from lower prices.
The older investor won’t benefit if they are 100% in stocks unless they delay retirement.
Therefore, it makes sense to become more diversified with assets over time.
Yet the broader point is, I have seen more people lose far more from playing it safe than taking a calculated risk.
I also know that when I am on my deathbed, I won’t regret taking calculated gambles.
I definitely will regret playing it too safe. Most people are the same.
The best ways to save money and pay off debts are things that don’t affect our quality of life.
There is a cognitive bias which assumes that “we get what we pay for”, and it is impossible to live better (or the same) for less.
In some situations it is possible.
Here are some examples
1. Use cash more than cards. You can save up to 5% a month from this method without trying. It feels more painful to give over the money
2.Set up a direct debit to your investment account one day after you are paid. Many studies have shown people can double how much they invest using this method.
Most people keep up with their mortgage. If you automate the savings process, then this makes saving and investing the path of least resistance
3. Give up all forms of peer-pressure related spending. This is things like buying expensive things to show on Instagram or Facebook.
Don’t get into the habit of impressing people you don’t care about, with money you don’t have, to buy things you don’t need.
4. In a post-lockdown world, ask yourself what you really miss. Most of us have had the experience of doing less travel and socialising these days. The majority of us probably miss some of the “old days”.
Yet few miss it completely. For example, some people in my network would go to bars and cafes daily before the pandemic. When the world opened up, or at least partially did, most didn’t do it as much.
They realised they didn’t need it.
5.Linked to points three and four, question whether you could be doing things differently.
Look at working from home. It saves people a fortune due to commuting and lunch costs. Few wanted to do it before the pandemic, as they often wrongly assumed it would affect their quality of life.
Another example of doing things different would be emigrating, or moving in your home country, for lower costs and sometimes taxes.
6. Move away from brand names. Big firms spend a fortune on marketing and branding for a reason.
It helps with profit margins. Often times, people can’t even taste the difference between luxury brands and the rest, with some exceptions.
In some specific industries, the big brands are better and more convenient, but this is less likely with the majority of consumer goods.
7. Be careful with big ticket items. Even many frugal people tend to overspend with buying houses and cars.
Don’t “go low when renting, but high when buying”. This will often decrease disposable income and how much you can invest into other assets.
What is more, a house is a home and not a liquid asset, so unless you downsize in retirement, any increases in home values are irrelevant.
All of the above is easier to do if we are very selective with who we associated with.
It is far harder to be good at spending if our friends and spouses have different attitudes to money than we do.
One route is a trade. Not if you are employed as the figures below show:
However, self-employed trades people can even a lot. So can anybody who starts their own business.
You don’t need a degree to start your own business. It can help, because the most successful people in business typically start out with a day job in the industry they start the business in.
For instance, the doctor who went to medical school, worked and then started their own business.
University can also increase somebody’s network. Plenty of people use university alumni to further their business.
The old “tried and tested way” was to work your way up. In other words, get a job at 16 or 18 in a restaurant or another place.
Become the manager, then senior manager and so on. The employer would sponsor some forms of higher education.
This is sometimes possible now, especially in hospitality, but it is becoming more difficult.
I can remember one of my closest friends telling me an interesting story. He is a technical IT person who is good at IT security.
Before he got a degree, he could show his skills quite conclusively. He got offered many positions.
Yet after he got a degree, he received more calls from recruiters, and opportunities in general.
That doesn’t mean that the old “tried and tested” route for non-university graduates never works.
Another one of my close friends got a good job recently, but that is because he has a very specialised skill – he speaks Mandarin fluently and has sales, marketing and communication experience.
The firm wanted a British person to work with Chinese customers, and they already have native-Mandarin speakers, so felt he could add something better.
He took the risk of applying for the job even though they said a degree was needed, and seldom hire non-graduates.
If you don’t have a degree, the best route is to focus on skills which every business needs.
For instance, do professional accounting qualifications and become an accountant without getting a degree.
Or learn digital marketing, sales or whatever. If a company thinks you can increase their bottom line, or save them money, they will be at least open-minded about your application.
For somebody who is unskilled and doesn’t have a degree, it is getting tougher every year.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 309.1 million answers views on Quora.com and a widely sold book on Amazon
In the article below, taken directly from my online Quora answers, I spoke about the following issues and subjects:
- Can foreigners get a pension in Japan? Should expats living in any country put all their eggs in one countries basket?
- Why is Tim Cook not as rich as Jeff Bezos?
- What are ESG funds and why are they growing? Should these funds be part of your portfolio?
- Will the US stock market keep going higher?
- Is $4,000 a month enough to support a family of six in Cambodia, if they want kids to be educated privately at International schools?
- What are some great examples of “durable competitive advantage” and why is this related to stocks?
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