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Does wealth depend on education or vice versa?

I often write answers on Quora, where I am the most viewed writer for investing, wealth and personal finance, with over 243.8 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:

  • Does wealth depend on education or vice versa?
  • What are the best ways to invest in yourself?
  • Is investing in commodities a good idea?
  • What kind of wealth building habits do successful people have?

Some of the links and videos referred to might only be available on the original answers.

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 (advice@adamfayed.com) or use the WhatsApp function below.

Does wealth depend on education or vice versa? Justify your stand?

Source: Quora

Education alone can’t build wealth. It can simply help a lot.

Let’s give some examples. People who are better educated do earn more for example, almost everywhere in the world:

main qimg 0da644225e590d6b09af29037aa7a0d9

The following things are unclear though:

  1. Are they earning more due to the outliers – in other words the top 10%-20% of wage earners, and the bottom 10%-20% of non graduates? Considering about 5%-10% of most societies aren’t motivated in general or can’t work due to illness, this could be influencing the results.
  2. Are highly-educated people earning more because they are more motivated to begin with, rather than the degree itself? After all, more motivated person are more likely to take graduate courses part-time whilst having a part-time job as an example
  3. Could other factors like the network of the parents be influencing these figures?
  4. Will automation change these starts in the future? Historically, technology has created more jobs than it has destroyed, but there is a chance that this time will be different.

In any case, highly educated people still earn more. Yet earnings isn’t wealth.

Net wealth is usually defined as assets – liabilities. A person who has a high-income can, therefore, even have a negative net worth.

We see this with many sports and entertainment stars once they retire.

Some have earned hundreds of millions and become broke. You only need to Google to find out how common this is.

Some people claim that the fact many of these people started out early, and in some cases missed out on many aspects of formal education, contributed to the outcome. That one is hard to prove.

People who educate themselves about personal finances are much more likely to become wealthy.

This is often because we can learn basic facts like how easy it is to build wealth if we do it slowly, and avoid some of the obvious pitfalls regardless of how much we earn.

Yet it is no guarantee. There are plenty of fat doctors in the world and lawyers who get into legal trouble.

In other words, having technical knowledge and understanding what is the best thing to do, isn’t the same thing as taking actions.

Only action taking over long periods of time, after educating yourself first, results in wealth.

Education is often just theory. Theory needs to be put in practice to have good long-term effects.

I do think highly educated people are more likely to get wealthy and be sensible compared to a 22 year old footballer who left school at 16.

It is hard to prove a direct link though and we can only speculate really.

Which are the wisest ways to invest in yourself, and why?

Source: Quora

In early life, it makes sense to learn as much as possible. That includes languages, maths and lifelong lessons from family and others we met.

Hardly anybody is self-aware enough to understand this at the time.

Most people, me included, would have tried harder in the language classes as an example, if we knew what we know now!

I took me a lot of work to learn a new language as an adult, but as a kid it would have been far easier.

Once adulthood comes, I strongly believe that investing in your own strengths is better than working on weaknesses.

It is “typical” advice to work on weaknesses, and improve strengths, but I now disagree.

Weaknesses can be delegated and we don’t usually do jobs in areas we are weak, or start businesses in these areas.

Doubling down on our strengths, and investing in those things, has a better ROI and you probably enjoy those areas as well.

This quote says it all:

main qimg 9c5e4dfac63c75a35e92a46a12f4bfe4

Investing in your strengths can mean different things depending on the situation.

If you are good at communication skills, it might make sense to further improve by taking a course online or in-person.

If your content is already doing good on Facebook, it might make sense to promote that content, depending on the exact details of the situation.

Beyond that I would invest in:

  1. Your network and relationships. Online and offline. Network up and not down. Get rid of toxic people who don’t care about you and drag you down. Replace with positive people who are better than you are (at a specific skill) at the time of starting the relationship. Like playing a sports game against a better opponent will increase the chances of you getting to their level, the same is true in business. By selective here though. Many studies has shown that 99% of networking is pointless, so be careful which events to attend.
  2. Your self-education online and not just formal education.
  3. Time. If you buy time, for example by leveraging other people as a business owner or using technology, you can free yourself up to learn more. We need 5–9 hours of sleep a day and only 24 hours. Technology doesn’t need to sleep.
  4. Financial assets

I would ignore people who say “invest in your appearance”. Most people see past that these days, and it is about time.

Even if it works with a minority of people, you are just impressing shallow people who think the suit you wear, or the car you drive, is a sign of success.

How good of an idea is it to invest in commodities and stocks?

Source: Quora

Long-term, commodities have been stagnant adjusted for inflation.

Some proponents of commodity investing have even admitted that is the case, and have used the recently weakness to imply that now is a good time to buy.

This graph shows an example of that:

main qimg 4dd531f6e9c9638f03d632122bd384b2

Commodities do have great period. Look at oil and gold in the 2000–2011 period, and especially 2000–2007.

2010–20211 was a good year for commodities as well, after the falls in 2008–2009.

Yet it isn’t a long-term, buy and hold play. Almost everybody I know who has invested in commodities either losses money, or got in at the right time.

Getting in at the right time, in turn, is much more difficult than it looks.

Hindsight is a wonderful thing, and some turns seem obvious looking back, but they weren’t at the time.

In addition to that, we now face new technologies and threats to commodities, now the world is taking the climate more seriously, and people can work from home.

I make no predictions about the next few years and commodity prices.

I am merely saying it is a high-risk bet, and you will probably make inflation or inflation +2% if you buy and hold for a lifetime.

There is a simple reason for that. Commodities don’t pay a dividend or a coupon.

They also don’t have business earnings unlike stocks which can grow quickly.

So, you only make money on the supply and demand. If the supply is stable, and demand is also stable due to factors like new technology reducing energy needs, then the price will be stable long-term.

Many people got excited in the 2000s about “rising demand” in the East and peak supply (peak oil), but long-term there is just a big chance that renewables will disrupt the space.

With stocks, in comparison, you get the same volatility as with commodities, but with a better outcome:

main qimg 521609bfac919cc0a6279987c0a5a696

The only way you are taking a comparable risk is if you engage in highly speculative bets like buy individual stocks compared to the markets.

There is an argument around diversification and commodities, but there are other ways to do that.

What are the wealth building habits that usually a successful person does?

Source: Quora

main qimg f7324092afa3ce1e159769b6342c9ae4

I saw a great picture today. A school encouraged students to look at the person responsible for their:

  • Grads
  • Success
  • Actions
  • Words
  • Classes

It focuses them to look in the mirror and understand that they can change their life.

The majority of the most successful people I know take personal responsibility for their own lives.

They don’t blame others, like “the rich”, immigrants or politicians, and focus on themselves.

That doesn’t mean that external focuses can’t affect our lives.

Of course, where we are born, our genes, when we graduate, whether there are recessions and so many other factors influence our end results.

Yet our own behaviours and actions also do, and they can be controlled more.

You can’t control who will be elected, the economy and who your parents are as much as your own actions, thoughts and decisions.

It is a bit like fitness. Somebody can eat healthily, exercise a lot and not smoke and still get sick.

Another person can smoke, drink and eat a lot and live healthily until 100.

That doesn’t mean it is rational to follow the second person, just because a small minority have even better health outcomes to the average.

There are no guarantees but just focusing on what can be controlled tilts the balance in your favour.

Beyond that successful people are more likely to

  1. Be persistent and not give up. Some even don’t give up for a decade or longer
  2. Take calculated risks rather than silly ones or none at all
  3. Focus on their health, mental and physical, as much as wealth
  4. Care about time at least just as much as wealth, as looking after time will also indirectly health wealth
  5. Invest, rather than save, money. Money needs to be put to work
  6. Use leverage. That could mean leveraging other people as an owner, time (compounded returns as an example), technology or money in a prudent way.
  7. Be more focused and avoid procrastination
  8. Not allow negative people, and indeed voices including the internal ones, stop them from achieving success.
  9. Expand ambitions once some initial success has been achieved and avoid complacency.
  10. Have good communication skills. Those have always been important, but we are moving into a world where machines can outperform humans at “hard skills” like maths and maybe good software engineering. Softer skills, like communication, are becoming more important.

11. Not care as much about what is normal in their industry or society and instead are willing to think out of the box. This is especially important in business. Too many just follow what everybody else is doing and seems normal, and “the way things are done”.

And finally, actually know what the objective is. Success for person A might be different to person B.

Sounds obvious but many people let their parents, friends and society tell them what success is

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 243.8 million answers views on Quora.com and a widely sold book on Amazon

Further Reading

In the article below I looked at the following issues

  • Can I apply for a mortgage in the UK as a non-resident? This answer applies for both UK expats living overseas and other nationalities.
  • Why is China cheaper than Japan? Is the premise of the question even true? I explain why China is no longer as cheap as people assume, at least in the big cities.
  • What’s the biggest cause of irrational investment behaviour? The media, peer pressure or something else?
  • Is it a good idea to lend money to friends and family members?
  • Am I willing to take a risk in the stock market? Are the stock markets even risky to begin with?

To read more click on the link below.

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