I often write answers on Quora, where I am the most viewed writer for investing, wealth and personal finance, with over 237.2 million views in the last few years.
On the answers below, taken from my online Quora answers, I focus on a range of topics including:
- Open a business vs invest to make money. Which makes more money long-term?
- What are some of the cheapest countries to retire to, that also happen to be safe? I look at various countries in South East Asia, Europe, Latin America and Africa.
- Can a person born with many resources ever be considered self-made?
- Where in the world are there more self-made people – rich, poor or middle-income countries? I discuss the typical development cycle and how that can influence the answer to the question.
If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email (firstname.lastname@example.org) or use the WhatsApp function below.
I don’t know what I want to do, open a business or invest to make money. Which do you think makes more money?
Many people wonder why the top 0.001% of business owners eventually invest in stocks.
Bill Gates, and many other billionaires, now have most of their wealth invested in stocks despite getting wealthy growing businesses.
There are many reasons for this.
The main ones are:
- Risk. Investing, long-term, in a broadly-diversified portfolio is less risky than running your own business. Running your own business requires you to maintain your health, mind and motivation. There are many moving parts, many of which can’t be controlled. Look at Covid and lockdowns. Some very successful businesses have gone bust.
- Time. Investing takes less time than running your own business.
- Returns. When you are running a start up it is possible to grow by hundreds of percentage points a year. Even more. Even some medium sized online businesses can grow by tens of percentage points a year. Eventually, however, it gets harder to scale. When you have a $100,000 revenue a year business it is easier to grow by 30% a year than it is to grow at 15% above $10m. In comparison, in investing, everybody gets the same percentage terms. If person one invests 1 billion into the S&P500, and person two invests $1,000, both people will get the same percentage returns. Your returns won’t go down because you have invested more.
- A liquid portfolio can usually be passed on more easily to charities and children for inheritance, especially if your business isn’t big enough to IPO. A transition to the next generation for a family business can be tough.
Now most people aren’t in the same situation as Gates and very wealthy business people, yet some of these factors (like risk) have to be taken into account even on day one.
Realistically, most people need to focus on both income and managing wealth.
If you are a salaried employee who thinks you can make more money from going it alone, then that is fine.
Investing time, money and effort in a business can pay off big time.
It pays off, however, more for people who actually have experience in the domain as opposed to people who just think they have a good idea.
At the same time, it makes sense to build up private assets, as I have ran out of the number of people who have gone broke from putting all their eggs into one basket.
So, I would do both. If you can’t do both straight away, start reinvesting some profits into private investments once you have got some traction.
In either case, in a capitalistic system, of course it makes sense to own assets rather than depending 100% on your labour and time.
The difference is that almost everybody can invest these days, whereas some people can genuinely make more money working for somebody else than they can going it alone.
Where is the cheapest and safest place to retire in the world?
The cheapest and safest places are not usually the same. In terms of some of the cheaper places, the following places are reasonable in terms of safety.
- Some parts of Thailand like Chiang Mai even though it has became more expensive
- Malaysia outside of Kuala Lumpur. It is reasonable for most things, unless you want the super luxury end or drink a lot.
- Some parts of Bali are amongst the cheapest parts of South East Asia, even if Jakarta isn’t.
- Believe it or not, Cambodia in a place like Siem Reap also has acceptable safety levels and is quite cheap. The added visa and insurance cost is what can hit retirees hard though.
- Numerous parts of Eastern Europe like Plovdiv in Bulgaria.
- Some parts of China are still very cheap. Safety from violent crime can also be excellent in these places. Yet, if you define safety more generally to mean safety from pollution, food and political reality issues, then China is no longer that safe for foreigners. In fact, on issues like pollution and food quality, it never has been. So, it also depends how you define safety. In some countries you are very safe from being murdered or mugged on the street, but you aren’t safe in other ways.
- If you want somewhere which is very safe, try some of the second and third tier towns and cities in places like Japan, South Korea and especially Taiwan. These places might not be very cheap but they are reasonable and safety is world class. In these three countries you are safe in most ways, and not just from violent crime.
Some people would argue it does also depend if you are male or female when it comes to safety in some of these places.
In any case, most of the places listed above will have reasonable or good safety, and pretty good prices too.
Yet the issue is that most of the very cheapest places are either not safe, or most people don’t want to live there.
It also depends on your age. If you are older and need health insurance, then some of the European countries like Bulgaria and some parts of Spain and Portugal will be better.
That is because premiums can become expensive overseas for the over 60s, but especially 70s and 80s. I know some people who spend more on it than their rent!
As a final comment, I wouldn’t pick a destination on cost and safety alone.
I would also look at the ease of getting visas, if they are open with Covid going on, how much you like being there and many other things.
What can be good is to spend time in a few places and compare.
Can a person born with large resources ever be considered self-made?
Nobody is 100% self-made because we are all born with advantages beyond wealth.
- When we are born in terms of the year. This book, below, has some strong arguments about why that is an advantage. If Bill Gates or Buffett were in the pre-industrial age where physical straight was key, they would never have become wealthy, even with the same skill sets. Likewise, being born as one of the older students in your class (in other words you were born in September/October/November) is a big advantage compared to people who were born in May and June. At age five, that is an extra 20% life experience, and that initial advantage can compound, as teachers often assume such kids are more talented, so pay more attention to them.
- Our parents’ habits, how they taught us and many other things
- Where we are born. Even though this isn’t as important as it used to be when most countries were born, you still have an advantage based on which country you were brought up in.
- Health. For most of human history people died before 50. That would mean that many of today’s self-made millionaires and billionaires would have been dead before they become wealthy if they were born in some previous generations.
- The economy and many other things
Yet I think your question is more about financial resources rather than other forms of luck.
Most wealthy people will say that the initial million is the hardest to obtain.
After this amount of money, compounding gets easier. For example, if somebody would have put $1million in the S&P500 30 years ago, without adding one penny, it would now be worth about $12million adjusted for things like dividend reinvestment.
That doesn’t require a lot of work, talent or persistence. So, of course having a head start in life can make a huge difference.
Yet the ironic thing is so many people don’t take advantage of it.
In the same way that most lottery winners and former millionaire athletes go bust, studies show most inherited wealthy people end up losing the cash.
How many wealthy second generation rich have I met? Loads. How many third generation rich have I met?
A lot but less than the second generation. How about fourth generation?
I am struggling to think of anybody. I have certainly never met a fifth generation wealthy person.
They do exist but statistics show they can be quite rare. So, it is only an asset if people take fully advantage of the luck afforded to them.
That can be easier said than done for an immature 20 year old who has just inherited a fortune.
Partying the money away is often an easier choice.
Where in the world can we see more self-made people, and why?
You can see it all around the world. Most wealthy people are now self-made.
Yet there is a commonality. That commonality is that there is like a curve.
When a country is very poor, and especially a dictatorship, like North Korea, there will only be a very wealthy people.
Those wealthy people usually inherited the money, often corruptly.
Fortunately there aren’t many countries like that left compared to one or two generations ago.
Then there are those fast developing economies who have only developed in the last few generations.
This is the major of the world’s countries – places in Eastern Europe, emerging Asia, Latin America and Africa.
These countries have improved and became lower-mid income, middle-income, upper-middle income or high-income in the cases of places like South Korea, Japan, UAE, Qatar and some others.
In most of these countries, there are loads of self-made wealthy people, because the economy has improved in recent decades, and there is more money to be made compared to when a country is poor.
Yet eventually wealthy gets inherited by the second and third generation.
So, the countries with the most inherited wealthy people have been developed for the longest times.
That includes places in Europe and increasing some parts of developed Asia like Japan.
The graph below isn’t very clear but it shows that only 2% of China’s billionaires inherited a large amount of their money.
That comes to 29% in the US and 65% in Germany:
Yet eventually the inherited wealthy tend to lose their money. There aren’t many fourth or fifth generation rich apart from royal families.
Complacency, arrogance, divorce, bad spending habits and not preparing for unexpected events like world wars, has all seen to that.
So, often those “inherited wealthy” are just second and third generation rich, rather than the tenth generation.
In terms of towns and cities, rather than countries, the bigger megacities tend to produce more millionaires.
That could change these days due to the internet and more people working online and remotely.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 237.2 million answers views on Quora.com and a widely sold book on Amazon
In the answers below I speak about:
- Which ones are the best countries to become a millionaire, and why? There are some surprising statistics here.
- Is 100,000 Pounds before tax a good salary in London?
- It is possible for wealthy people to buy up the whole stock market?
- Why should everybody have a second income source?
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