+44 7393 450837
Follow on

What is the risk of not investing?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 277.4 million views in recent years.

In the answers below I focused on the following topics and issues:

  • What is the risk of not investing? Too many people worry about the risk associated with investing, but what are the risks of not deploying your money to begin with?
  • What’s the point in getting a job if you are a millionaire?
  • Can financial risks be eliminated? If not, how can we limit them?
  • What surprised me when I first went to a developing country back in 2007?

Some of the links and videos displayed on the original answers might not show up on here, and if so, you will need to refer to the original answers to view that.

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.

What is the risk of not investing?

Source: Quora

The biggest ones are:

  1. Losing out to inflation. Inflation is 2%-3% or more in most countries and could go higher. The banks don’t pay that much in most countries. Since 2008 and 0% interest rates, many people have indirectly lost over 30% of their money, as this loss to inflation compounds.
  2. Currency devaluation. You do manage to beat inflation in bank deposits but you live in a country which experiences a currency shock. This harms expats more than locals, but it can affect everybody, because imported costs associated with a weak currency will eventually push up the inflation rate.
  3. Institutional risks. The two previous points does sometimes push people towards higher-risk options. Places like Georgia and Cambodia have seen an increase in foreign deposits as both countries offer reasonable deposit rates on the USD. Yet this is taking a risk, for a return which isn’t as good as the stock markets
  4. Relative losses. Let’s say you manage to beat inflation in the bank in a safe way, and avoid currency risks. Even in this case, cash has never beaten other investments long-term. If you can deal with a bit of volatility, it makes sense to invest rather than save. You will also feel bad if you have friends who have became wealthy slowly from investing, whilst your money just stays in cash earning 0%.

One of the key things is hidden risks. Ray Dalio explains below why holding a lot of cash is actually risky and a bad idea.

It does make sense to have some cash for emergencies. If you are in private business, moreover, you might need to build up cash for acquisition or another reason.

But staying in cash due to fear of the unknown isn’t a productive strategy.

What’s the point in getting a job when you’re a millionaire?

Source: Quora

Imagine seeing some old people sweep the streets in a rich, developed, country like Japan:

main qimg 79de36d110faa53652dfefc91f9a0e7a

What would your assumption be? They are poor and they need to work.

That isn’t a wholly illogical assumption, because most older people who work in low-paid jobs at that age in the West need the money:

main qimg 20953de6e415ce27e9e3c3006422594b

Yet in Japan there is a concept of japan ikigai, which is the art of doing something and being useful.

I am not suggesting that all street cleaners in Japan who are 80 are millionaires, nor am I suggesting that everybody needs to keep working.

The ability to retire early and have that choice is brilliant as everybody is different and we never know when our health will fail.

Yet numerous studies have shown that people who keep working live longer, and happier, lives overall.

So, unless you really hate your job, it might make sense to keep working, even part-time, if you get wealthy.

Failing that, try volunteering and other non-profit activities.

Also factor in these points

  1. In some parts of the world $1million isn’t enough to retire early on. Depending on your lifestyle you may need less, or much more than $1million.
  2. If somebody made millions in a business they are passionate about, it is unlikely they will quit just because they have earned a few million. Think about all the multi-millionaires and even billionaires who work until their 90s like Charlie Munger who is 97!
  3. Most people who quit work after getting rich, like lottery winners, become broke. If you have money but are busy, you are less likely to waste it compared to somebody who is rich and bored.
  4. If you are independently wealthy, you might want to get a job in a new area. For example, let’s say you studied politics at university, but never went into the field, becoming wealthy might allow you to take low-paid jobs that interest you in that area. That is harder if you have loads of bills to pay and people to support
  5. In some cases, the person might have quit work and then got bored, only to come back. Covid-19 has made this understandable for more people: I personally know people who are in their early 60s who ‘couldn’t wait to retire’, only to be stuck by long-Covid. Many have been unable to work for half a year or longer, and during a lockdown have became bored.

It just depends on the person, but most people need meaning in their lives.

That means it is easier to quit a job you hate compared to if the job or business gives you broader meaning.

With that being said, it is always good to have the option to retire early, even if you never use it.

Can financial risk be eliminated?

Source: Quora

main qimg dc7ee34930173974ed2d7c536045ba36

In the U.K. and many other countries, the government uses the word ‘protection schemes’ rather than guarantee.

Not only that, but the word ‘guarantee’ is actually an uncomplaint word in some highly regulated financial jurisdictions.

There is an obvious reason for this. In life, there are no guarantees. Only tax and death.

Would government guarantees work in the following circumstances:

  • Nuclear war?
  • Environmental disaster?
  • A revolution and change of the status quo?
  • Societal collapse?
  • A civil war?

No, probably not. Even if they did hold up, would the government protection schemes protect your money against inflation if there was a spike in prices?

No. In fact, they don’t already. If you have 50,000GBP in the bank, the government protection schemes just ‘protect’ the principle.

As inflation is running at 2% higher than what the banks pay, this indirectly means you can lose 30% of your money to inflation over a 10–12% year period.

It has already happened since 2008 that many people have lost money to this ‘silent’ killer inflation.

In terms of investing it is possible to reduce almost all risks by

  1. Diversification – not putting all your eggs in one basket.
  2. Even more importantly than diversification is being long-term in that diversified portfolio. The figures below show the chance of you being down in a diversified index like MSCI world or the s@p500 go down with time:
main qimg 5a3daa9f66b1ab77f6131c1767f84ba1
main qimg d43b18e2a970a2e09c0aaceaf3d4ac82

3. Be careful about black swan events. Many people get caught out by these events. We can’t prepare for all of them though as some are beyond our control. These types of events tend to affect people’s main income/business more than their investment portfolio. Most people have the common sense to diversify in terms of investments. When it comes to a primary income, many business owners get complacent and don’t manage risks properly. Complacency in this situation is understandable in some ways. Business owners who succeed have usually been rewarded for taking calculated risks or even huge ones, but once a business gets a bit bigger, managing risk becomes just as vital.

4. Avoid thinking that volatility is risk. Many non-volatile assets like cash can be very risky. Ray Dalio l Buffett have even suggested that cash can be one of the riskiest, if not the riskiest, investments out there.

Think about something. If financial risk could be 100% eliminated, without any downsides, then why wouldn’t everybody do it?

But 99% of financial risks can be eliminated if done properly, and the 1% isn’t worth thinking about.

It always makes me laugh when I see these eccentrics online who stockpile food in case the very worst case happens, like a nuclear disaster.

If things ever got that bad we are probably all dead anyway, so it isn’t worth thinking about.

What surprised you most when you first came to a developing country as a foreigner?

Source: Quora

main qimg 073d4bf4ae20b69fd595b18a15a9ce90

I first visited Shenzhen in 2007. What surprised me was how many opportunities there were to make money.

I wasn’t there to make money. It was just a trip which included Beijing, Hong Kong and Thailand.

Yet I spent a lot of time with somebody who did live there.

It sounds obvious in many ways, but in most developed countries, people aren’t taught to be internationally-minded.

People think ‘high-income = high wages’ and almost everybody is poor in developing countries.

Of course, the average person is poorer in a developing country, but that doesn’t mean there aren’t special opportunities for locals and expats alike.

For one, things are cheaper than when a country or city develops.

If you have even a decent amount of capital that means opportunities.

Second, fewer people want to move to these places. More people want to move to Switzerland or Singapore compared to say Nigeria or indeed China in 2007.

What does that mean? Average expat executive packages are higher.

Where do some of the biggest multinationals, like the oil companies, pay the most? In ‘hardship’ locations.

China was a hardship location in the 2000s. There wasn’t a Starbucks on every country and all varieties of expat amenities like now.

Therefore, some of the USD packages at the higher level were huge.

Competition is also lower in more frontier markets. Therefore, sometimes you can be the first to the party.

I have met some expats in frontier markets making big money with relatively simple ideas like starting piano shops or even moving cement for an obvious reason – they were the first in or at least one of the first serious people in.

Of course, that doesn’t mean opportunities dry up when a country becomes richer.

A higher GDP means a bigger cake for all. Yet, at the same time, people’s ability to get a slice of the cake goes up, as education advances and competition heats up.

So, just because a country is poor now, doesn’t mean that it always will be and you can’t make great money there.

With that being said, risks are higher in emerging markets and it is a huge misconception to assume that higher GDP growth will result in superior stock market performances in those markets.

It seems like common sense. Investing in emerging market stocks will be a lower risk way of gaining superior returns than developed market indexes.

It just isn’t true long-term. It is true that emerging markets ‘win’ during some time periods.

But if you look at even ultra long-term data, it isn’t true.

One reason is that some of the most innovative emerging market firms IPO in the US and beyond.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 277.4 million answers views on Quora.com and a widely sold book on Amazon

Further Reading 

In the article below, taken directly from my online Quora answers, I spoke about the following issues and subjects:

  • Can a ETF price go to zero? I explain the difference between different types of ETFs, and why some ETFs won’t go to zero.
  • Coca Cola’s share price decreased this week after Cristiano Ronaldo told people to “drink water instead”. Elon’s Musk’s tweets can move Bitcoin prices. What does this show about personal branding vs company brands? 
  • Is it better to live in a low cost country, with a tiny salary, or a high cost country with a high salary? I come down on one side of the fence, but argue that in the world we live in today, it is a false choice. 
  • Is Japan really one of the ten worst countries in the world for expats to live in? I explain why the InterNations survey might be misleading.

To read more click on the link below.

This website is not designed for American resident readers, or for people from any country where buying investments or distributing such information is illegal. This website is not a solicitation to invest, nor tax, legal, financial or investment advice. We only deal with investors who are expats or high-net-worth/self-certified  individuals, on a non-solicitation basis. Not for the retail market.



Gain free access to Adam’s two expat books.

Gain free access to Adam’s two expat books.

Get more strategies every week on how to be more productive with your finances.