In this blog I will list some of my top Quora answers for the last few days.
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Table of Contents
What is the fastest way to reach a 10 million dollar net worth?
In the literal sense of the word, the fastest ways are:
- To win the lottery
- Marry into wealth. You probably need to marry somebody who is worth at least $20million though and be in a legal system that consider your spouses wealth to also indirectly be yours.
Of course, you can’t rely on luck (number 1 and 2) and number 3 isn’t a good idea.
less than 0.1% of the world’s population reaches $10million, so it it was easy, then why doesn’t everybody do it?
The only people who reach $10million are those that have done difficult things, including:
- Started their own business and made money sustainably
- Are highly skilled + have good savings and investment habits
And the list could go up. The point is, you can’t easily get to $10million of net worth doing normal things.
At this point I would make a distinction though. The distinction is between those that are already well on the road to success, and those just starting out.
If you are already succeeding, and have your first million or half million, it is easier to get to $10m than to go from $10,000 to $1million in certain circumstances.
- You have somebody in their early 30s who started to earn big a few years ago, after years of building up a business. They aren’t “rich” yet but they are worth $600,000-$700,000, and they are now earning $300,000 a year, now business is going well.
- In this situation, 1–2 decisions could skyrocket there wealth. For example:
- Changing residency status from a high tax to low tax place could save 150k a year. If the place is also cheap, you can add another 50k. Let’s put it this way. Somebody who is earning 300k in some parts of Eastern Europe or South East Asia could afford to invest 5x-10x or even 20x more than somebody living in Central London or NYC.
- The aforementioned point is one reason why second residency and citizenship services are skyrocketing. As more business owners can live anywhere (online businesses), more are deciding to live in lower tax and cost of living places
- Let’s say this business owner has gotten success from running ads, or from other techniques in business. At this point, they can be focused on the 80/20 rule more intensely. In other words, doing more of what works
So it is never easy but those that are already 5%-20% of the way there, often can make that next lead up.
As an aside, it would be a mistake to assume that wealth solves all of problems.
It just makes it easier in many ways, but that is an answer for another question.
Are you still interested in investing in Africa and what determines your interest?
It depends in what sense. In terms of business-wise, countless economics in Africa could become powers in the next 25–50 years.
So regardless of whether businesses target the continent from the ground, or online, it makes sense to target the region.
Although, with the way the world is going, you can target the region without investing in the countries directly.
I am pretty sure Netflix is making more money from Africa than 3 years ago, even though they probably don’t have one employee in the ground.
In terms of the stock markets, China should be a warning, and emerging markets more generally.
Countless people invested in emerging markets 1–2 decades ago.
They were expecting the higher GDP rates to translate into superior performance for the stock markets.
They were making the same mistake as those people who assume that stocks will crash if the economy is weak.
What has happened since then? US and developed markets have regularly beaten Chinese and Emerging Market indexes.
Even if we extend the graph, emerging markets haven’t beaten developed markets:
Now sure, they do beat developed markets during certain periods of time, like 2000–2008, and will do again.
So it does make sense to have diversification. I just wouldn’t expect African stock markets to outperform in an era where technology and other companies can make plenty of money locally without being on the ground.
In the same way that the FAANG stocks have benefitted more from Chinese growth than many local stocks, African growth might actually help developed stock markets more than people think.
Remember also that significant risks exist when a country is starting up a relatively new index.
I lived in Cambodia briefly during a period where they created a new stock market.
The process is happening across some of the fastest growing frontier markets in Africa too.
The process is not without risks.
I want to start my own small business, but I don’t have any experience. I’m scared I will just lose my capital – any advice?
What is the biggest indication of business success I have seen?
- A good idea?
- The time place, right time?
- Your location?
- How the economy is going?
- The ability to manage cash flow?
- Marketing, communication and sales skills?
- Working hard?
- Working smart?
- Using social media well.
None of the above. They can all be important, but they aren’t as important as getting some experience.
Experience helps you execute and follow through. Execution is the key in business.
Good ideas don’t pay the bills, let alone make you wealthy. Ideas that are well executed consistently do.
So the best thing you can do is get experience. Get a job, and get good at it for 5–10 years.
See what other firms are doing. The good, bad and ugly. You will then know what to improve as customers complain.
Then start your own thing. If you really want to start your own thing in an area you don’t have experience in, try a new industry or a developing country.
I have seen less newbies fail in a brand new industry or developing country for a simple reason; there is less competition.
In some cases you can be the first company of your kind in the market.
As an aside, try starting your own business online first. Keep your costs low.
That way you will lose your time, but not money, if you fail. Once you start succeeding, then focus on hiring well or using paid tools (like ads) to improve further.
Don’t assume you need money to make money in business. It isn’t always true.
I have met countless people with huge marketing budgets who fail, and others who do well with little to no budget.
If you become extremely rich, is it possible to keep it a secret or is it bound to become public?
It depends how you define extremely rich. If you are high net worth (tens or hundreds of millions) you could keep it a secret from most people, in the majority of countries.
The US and China might 600+ billionaires in the country. A few of them aren’t famous at all, apart from people who read Forbes every year.
They aren’t completely secret though, as most have publicly listed assets.
If you are at the $30m-$300m range, it is much easier to keep it secret from most people.
There are countless people that are only famous in their industry niche at most, and worth hundreds of millions.
I personally know 2–3 people who are worth $250m-$500m, and they aren’t know by 99.9% of people.
The reason is simple. They are famous celebrities or influencers.
Just think about some of the shows like Dragons Den and Shark Tank.
Most of the judges are wealthy, but few were famous before the show.
Take the relatively new judge in the UK, Taj Lalvani:
He is a full billionaire in USD, but hardly anybody knew who he was before the show.
To keep something 100% private is very hard though. That is why some of the conspiracy theories about wealthy are silly.
If you become a billionaire, you won’t be able to keep it secret forever.
You can just have a low profile, therefore ensuring most people don’t know who you are, at least until you become one of the richest people.
Bezos is an example of that. Few people knew who he was even 15 years ago.
When he started to be in the top 1–10 wealthy people globally, people took an interest.
The reality is most people don’t care that much about people who are very wealthy and well down the list, unless they are a celebrity like an influencer or sports star.
What’s the highest interest rate of return on a million dollars?
In terms of fixed in the bank? In most developed countries now, you get 2%-3% in a best case.
In other words, you lock the money away for years. It is hard to even get that in most accounts.
In plenty of mid-income and developing countries you can get 6%-10%, or even more.
However, the currency depreciation is a huge risk. As an example, nobody in South Africa, Pakistan or India has actually made money adjusted for that fact given what has happened in the currency markets.
Falls like this are common:
In terms of fixed return investment, some are much higher than 2%-3% of course.
Plenty of property-related investments pay a fixed rate of return, but you should know how to analyse risk.
Likewise, some indexes pay 4.5% dividends, like the FTSE100, and then you have the long-term capital appreciation that should be expected.
You have hit the nail on the head in terms of why many people have decided to invest in the last few years.
In an era of 0% interest rates, even some people who aren’t usually investors have decided to invest for the long-term
The reason is simple. There isn’t a lot of alternatives other than maybe rental property, and that requires a lot of expertise to get it right.
So often a better option is to focus on a good long-term, risk-adjusted, return.
Often that beats a fixed return in the long-term, and is not more risky.
As per the above and currency depreciations, a fixed return isn’t a no-risk return.
It is merely a non-volatile return.
What are the reasons most degree holders are poor?
Well most people, in the majority of countries, don’t build up signifiant wealth.
That is true of degree holders, and non degree holders. Degree holders do earn more, and have more wealthy, than non degree holders on average:
Statistics can be misleading though. People who take degrees, by character, are more likely to be proactive, than non-degree holders.
Or let’s put this another way. Comparing somebody who went to Oxford with a non-degree holder isn’t as useful as comparing somebody who was smart enough to go to Oxford, but decided not to go to university.
More importantly, the key reason why many degree holders are poor is the same reason countless non-degree holders are poor.
Lack of money management is one of the key reasons for low-levels of wealth.
60% of former professional basketball players are broke within just 5 years of retirement.
We see a high percentage of lottery winners and inherited rich becoming broke some years later for the same reason.
Meantime, 10%-15% of the world’s millionaires are teachers, with managers and other mid-income professionals sometimes doing well.
The point is, income and wealth aren’t always connected. If you have bad spending and money management habits, you can become poor even if you earned millions before as an athlete.
Likewise, you can get wealthy slowly on a mid-income, if you have the right habits.
So if money management habits were taught early at school, both degree and non-degree holders would benefit.
It wouldn’t increase incomes in all situations, but it would decrease the amount of debt in society, add to wealth etc.
A degree in isolation won’t help somebody manage money in a more productive way.
Even the best degrees simply increase the chances of somebody getting a well-paid job, if they are studying something very specific like medicine.
Degrees, and professional qualifications, are arguably becoming less important in the digital age but that doesn’t mean that non-degree holders have an advantage in wealth.
It merely means that youngsters should consider more carefully which subject, and university to attend compared to past generations.
Is day trading more profitable than long term investment?
Look at it this way. What has been the best performing index globally in the last 30 years?
The Nasdaq has produced about 11%-12% per year, with incredible volatility, but the average has been that.
The S&P500 and Dow Jones have produced about 9%-10% per year long-term, if dividends are reinvested. Sure some years and decades are much more, but that has been the average.
One of the few individual stocks to beat the markets regularly, at least until the say 10 years, was Berkshire Hathaway, which did about 20% per year:
So if there was somebody out there who could see daily or weekly trends, they would be incredibly rich.
Let me give you some examples. If somebody was able to sell the US Stock Market in 2000, buy again in 2002, less in 2008, buy in 2009, sell in late 2018, buy again in January 2019, sell in February 2019 and buy again in March they would have made about 30% per year!
If somebody was able to see daily trends, they could consistently get thousands of percentage per year.
If so, they would be on the Forbes rich list within 20–30 years if they sustained that.
So buy and holds beats trading, and market timing for that matter, in 99.99% of occasions long-term.
There are billions of people on this planet, and tens of millions investors, including professional ones.
If there was such an obvious daily trade/profit to be made, then everybody in the know would do it.
All the information is out there in the public. If you have secret information, you are engaging in insider trading, which is illegal.
So the irony of day trading is everybody thinks they are the smarter one in the trade.
It is a zero sum game. Both people can’t win from the same trade. The Euro can’t go up against the USD at the same time as the USD beats the Euro (currency trading).
Amazon can’t beat the market at the same time as losing to it, and we could go on with the examples.
In comparison, buy and hold isn’t a zero sum game. Everybody can win if they are doing it in the right way.
100% of people who have bought and held the S&P500 index fund or ETF, as just one example, have made money if they held on for long enough.
Now sure, people can get lucky short-term, but that is another point entirely. I have yet to meet one person who has gotten rich, long-term, from day trading.
It must be less than 0.01% of the total at best. In comparison, statistics have shown that a lot of “get rich slow millionaires”, often middle-income and middle-aged, have just bought and held assets for decades.
Holding on also has additional benefits like the ability to pay less taxes and reinvest dividends.
Why won’t you save money when it is so easy to do?
I don’t save money, apart from a small amount for unexpected emergencies/cashflow.
I invest money because saving in an era of 0% interest rates is pointless.
Investing isn’t less risky if done long-term, it is just more volatile.
If interest rates were 5%-6%, I would consider having 10% of my portfolio in cash instruments, but that isn’t the case.
I know your question is probably speaking about why people spend 100% of what comes in, rather than saving and investing.
When I look around me, there tends to be a number of reasons people don’t save or invest.
There are two differences here.
- The majority of people
- Most people think saving or even investing money is depriving them of things – services, products or whatever
- To “loss out” on something, is always more painful than gaining something is pleasurable to most people. So if people frame it in their minds, that they are losing out, they are likely to do less of it
- Marketing has really tapped into this aspect of human nature. These days, big firms, focus on what a consumer can miss out on, by not over consuming, than what they will gain alone
- Many people don’t like their jobs and “live for the weekends” and get into the habit of using consumption to fill a vacuum in their lives
- Of course, habits play a huge role as well. People are very likely to follow their families lead, when it comes to attitudes to money
- The media has tried to imply, in a misleading way, that investing is dangerous. They make no distinction between long or short-term investing, investing in individual stocks vs the whole market.
- People feel confused about money so spending is the path of least resistance. If something is confusing why bother? That is what some people think.
2. The minority of people
- Most wealthier people don’t like to save, but prefer to invest in themselves, in businesses and in financial investments
- This has grown during the era of close to 0% interest rates. Cash has never been a good investment, but it used to be more viable than now.
It depends on the person as well, and is partly cultural. In some parts of the world, it is normal for people to delay gratification.
At the end of the money though, money needs to be put to work.
That can only be done by investing in yourself and things that appreciate in value.
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