I often write on Quora.com, where I am the most viewed writer on financial matters, with over 369.2 million views in recent years.
En las respuestas que figuran a continuación me he centrado en los siguientes temas y cuestiones:
- What are some tips to follow if I want to retire at an early age?
- Will the Russia-Ukraine conflict result in a worldwide stock market crash in 2022?
- Are international stocks a good investment right now?
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What are some tips to follow if I want to retire at an early age?
Firstly, it is important to make a distinction between the signal and the noise.
If you want to retire early, you need to invest your money. It is almost impossible to save your way to retirement, never mind early retirement.
But what puts people off investing is when there is market volatility across many asset classes, such as the stock market.
This volatility comes with the territory though. It has always been there, and always will be.
It is important not to get distracted by short-term news, media reports, and declines in asset values.
Apart from that here are some other ideas
- Retire abroad. Or in a cheaper place in your home country. This way the sums are more likely to work out. Or alternatively, merely semi-retire and do some consulting work
- Focus on outsourcing. Get a job. Become really good at it. Start your own business and gradually outsource more tasks, until you reach a level where you can hand over the day-to-day running of the business to somebody else. The funny thing about this one is that you might discover that you are able to retire early but voluntarily carry on because you like what you do.
- Don’t put all your eggs in one basket like real estate, or a business. Have assets linked to the stock market and beyond
- Start from a young age due to compounding returns. If you fail to do this, you are still never younger than you are today
- Take calculated risks. The more risks you take at a young age means the better chance you have to come back from it. For example, if you are in the real estate industry, leverage can be key…..but too much can kill you.
- Don’t just spend loads more money as you earn more, otherwise your surplus won’t grow. Especially be careful with houses and cars, as people tend to overspend on those things.
- Take advantage of some of the few “free lunches” on offer. Examples include employers matching your retirement contributions, assuming you want to retire at 55 rather than 35, considering many of these schemes don’t allow you to withdraw before that age.
I would also be careful who you associate with. If you want to get fit it is better to spend time with others who have the same goal or have achieved what you hope to get.
The same is true for finance and early retirement.
Will the Russia-Ukraine conflict result in a worldwide stock market crash in 2022?
Let’s look at history.
When Nazi Germany came into WW2, the S&P500 fell 25% in the next few weeks.
One year later the market had recovered most of the falls, despite the war continuing.
After Japan attacked Pearl Harbour, the US stock market fell by 11% in a single day. One year later the S&P500 was up 15%.
The Vietnam and gulf wars saw much smaller falls.
On average, the S&P 500 has been down 6.5% 3 months following the conflict, but around 13% positive a year after.
So, even over a one-year period, it has little effect. Over the medium to long-term, it has never had an impact.
As the chart below shows, the stock markets have gone up during most wars:
They also went up during 2014, despite the Ukraine-Russia situation.
That doesn’t mean they went up because of the wars. They likely went up in spite of wars.
Markets do tend to rise long-term, after all, so if a war goes on for a few years, markets are likely to rise.
That doesn’t mean there isn’t some volatility on hearing news about the start of a war.
I would also be careful in reading anything into the stock market falls of 2022. The FTSE in the UK hasn’t really fallen, in fact, it has often been up this year (even if it is 0.09% down at the time of writing).
10%-15% falls are normal and happened twice last year despite the stellar stock market performances we saw.
The biggest mistakes investors make is thinking too much about these things.
There will always be wars, pandemics, trade wars, government shutdowns, disputed elections, and new and unexpected events such as 9/11.
Each time the same pattern emerges. Markets either unexpectedly rise, or they do fall, but then recover.
Look at all the events that have happened in the last few years, including the unexpected stock market falls if there was a disputed US election in November 2020.
In fact, markets rose about 15% in that month, meaning investors who were afraid and in cash missed out.
This is why the news media is so profitable – there will always be new news to frighten people.
Various research has shown that trading based on the news isn’t as profitable as just buying and holding – in other words not caring about what is going on.
This is one reason why dead investors outperform the living – they don’t have emotions and therefore ignore the news.
If anything things like this are always opportunities!
As a final point though, i will say that local Ukrainian and Russian stock markets are more likely to take longer to recover than the worldwide ones.
Are international stocks a good investment now?
There are two things to remember.
Firstly, international stocks, if you mean non-US stocks, have always been a good long-term investment.
Any major index linked to the global stock market excluding the United States has done well very long-term.
They just have tended to not do as well as the US stock indexes like the S&P500, Dow Jones and Nasdaq.
However, this leads me to a second point. The performance tends to go in cycles.
Sometimes US stocks beat international and vice versa:
In the 1990s, the US outperformed. From 2000 until 2008, international vastly outperformed, especially emerging markets.
Since then, the US has outperformed. International stocks are due for a rebound, especially because the P/E ratios and CAPE are much cheaper.
If you look at the graph below, the EAFE index (which tracks 21 developed markets excluding the US) looks very cheap:
I wouldn’t get too “cute” and smart though. If it was so easy to beat the US stock market by buying and selling indexes because on looking at ratios, then everybody would do it.
The trick is more to hold a portion in the US, and some in international markets.
The problem is, recency bias means people focus on short-term performance, and only become interested in unfashionable markets once they do well.
This year is a great example. One of the best performing stock markets has been the unfashionable FTSE100 in London, which has regularly been slightly up for the year, despite some stock markets being down 10%.
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Adam es un autor reconocido internacionalmente en temas financieros, con más de 830 millones de respuestas en Quora, un libro muy vendido en Amazon y colaborador de Forbes.
