I often write on Quora.com, where I am the most viewed writer on financial matters, with over 250.6 million views in recent years.
In the answers below I focused on:
- Is home ownership the key to wealth accumulation? Or is the situation more complex?
- Is ESG and sustainable investing just a trend?
- Does it really make sense to only invest $100 a month?
- How common is social mobility in the UK?
- What are the best jobs if you want to become a multi-millionaire?
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If you look at studies globally, many countries with low levels of homeownership have high average wealth per capita.
An example is Switzerland:
It has a relatively low rate of homeownership by mean and medium wealth per capita is very high compared to almost every country. In fact, some surveys put it at number one or two.
It is true that wealthier people are more likely to own property, but that doesn’t mean property increased their wealth more than other assets.
There has been plenty of academic works which has shown that property isn’t the number one best performing asset over long periods of time, even if you factor in things like leverage.
What is can do, however, is give somebody diversification. It can also increase wealth exponentially for those professional real estate investors, like people who own development companies.
We also have to make a distinction between a primary residence and a rental property.
For many people a primary residence acts, indirectly at least, more like a liability.
It costs money to maintain. Many people die in the same property as well, which means it is more like on paper wealth.
A rental property is quite different and can be a decent asset, but most people who aren’t professionals would be better off keeping it down to a small percentage of total net worth.
The ultimate key to wealth is living below your means and investing the surplus wisely.
That might seem obvious, but many people forget the basics.
This isn’t just affecting ESG funds. It is affecting all types of investing.
I was listening to the Shark Tank judge Kevin O’Leary today:
He was mentioning that he now doesn’t consider private investments into start ups which aren’t focusing on a real sustainability mandate.
So, if you pitch an idea on Shark Tank which is damaging to the environment, he won’t consider the investment even if the business is profitable.
This trend is coming from the consumer who are fed up with marketing talk on this subject, but also institutions.
When he put a small percentage of his holdings into Bitcoin, he had countless institutional investors call him and ask him:
- Where the coins were mined
- If they were mined in any country which is sanctioned by the US or has serious human rights abuses
- How much electricity was used to mine them
He then realised he didn’t know these question so mined them himself.
The point is, the average DIY investor doesn’t care as much as institutional guys, even though this is changing with younger investors in particular.
Yet the general trend is towards sustainability in both private and publicly-listed companies.
Nobody can predict the furore, but I suspect the overall trend is towards ESG.
In the early and mid-2000s many people thought the internet was just a trend.
The bubble had burst and we were all barley shopping online, at least in most countries.
Looking back now, it is clear the overall trajectory was towards online and digitalisation for over thirty years.
It just took time for the consumer to catch up with what institutions were seeing in places like Silicon Valley.
The 2010–2020 period, even pre-pandemic, was a game changer.
The pandemic just accelerated that trend and we are only ever going to use more technology going forward, even if people are right now “loving their freedoms” in places like the UK which has just came out of lockdown:
The same is the case with ESG. It won’t be a straight line but I can see the market moving in that direction.
That doesn’t automatically mean that ESG ETFs will outperform. They might do or might not.
It could just mean that traditional businesses also become more sustainable by merging with the existing digitalisation trend – getting more people to work from home, downsizing office spaces etc.
You can imagine how much CO2 would be decreased by if people reduce commuting times.
Either way, what convinced me that this was a real trend (I was previously a bit sceptical), was when many non-environmentalists also started taking this seriously.
Not all institutional and savvy investors are “pro-green”, but they see the need and also the money that can be made from it.
It depends on where you live. Vanguard only accepts direct clients in some countries.
In the countries where they can accept directly, there is usually no minimum investment amounts.
Most of the people who invest in Vanguard do so on investment platforms which can accept many investment houses such as iShares and BlackRock.
These investment platforms exist in almost every country in the world and have their own rules.
Some allow you to pay on debit or credit card, whilst others don’t. Likewise, others have investment minimums and some don’t.
The bottom line is this. The answer to your question is yesprovided you can invest in a cost-efficient way.
If you are investing $100 a month by bank transfer, that is pointless, as the cost of sending the money are too high as a percentage of the total amount invested.
In comparison, if you invest on an investment platform which allows you to pay online without big credit or debit card processing fees, then you are onto a winner.
The reason is simple. Small amounts of money will eventually become bigger sums over time.
Many people who now have multi-million portfolios started out small when they were young.
Getting into the habit of investing early is one of the keys of successful investing, as at least you are getting started.
Remember some other things though
- Starting is great. It is 80% of investing success, but you also need to keep it going long-term.
- Investor A could get 10% per year (on average) in Vanguard funds, and Investor 4%. The reasons are simple – investor behaviour. Vanguard’s own research has shown that the average DIY investor does poorly compared to clients who are advised. The reason is simple. People tend to sell out during the crisis like 2008 and 2000. What is more, even people who never previously sold out, are likely to think “this time is different” every time there is a crisis. Last February and March is a great case in point. I was amazed how many people, many of whom claim to know that you can’t time markets, panic sold for this reason. Needless to say, they regret it now.
The stats below tells its own story:
So, yes, it is usually possible and definitely worth it. Just do it long-term and avoid typical investor mistakes.
It is common, but class is still a big thing, and in some ways this situation has become worse.
One reason for that is trends like unpaid internships:
At the age of 21–22, many fresh graduates would do internships on an unpaid basis to gain experience.
What is more, they became popular in many high-paying careers as well such as law, consulting etc.
They became so prevalent that I think the government restricted or abolished them.
The point is though, things like unpaid internships and indeed making funding difficult for masters programs, does often start to separate young adults in their early 20s.
During a recession, kids with means (parents willing to support them) can do things like internships and master’s degrees, which poor parents can’t.
Against that there are some positive trends
- It is easier than ever to start a business compared to before. Sometimes you need zero capital. Look at all the young YouTubers and TikTik “stars”. There are also thousands of ways to earn small amounts of money online as well, which can help youngsters fund education and other things they want to do.
- Emigrating has become easier, as has getting remote jobs. People no longer have to be constrained by geography.
Moreover, I have noticed a trend. Those people who complain about their own lack of choices being from a certain group, and just engage in protests and complaining, aren’t likely to improve their situation.
In comparison, people who only try to control what can be controlled, and assume they will succeed regardless of the odds, tend to eventually do well.
That is because they have the right mindset for success. I saw this issue first hand during the last major recession before COVID-19 (2008–2009).
I emigrated in 2011. In my network in the UK, I knew poor, middle and rich people.
Within the poor and lower-middle groups, there were two kinds of people:
- Those who complained about the recession and didn’t do anything.
- Those who took massive action. That could have been moving cities, emigrating, starting their own business etc.
You can guess, a decade on, which group is doing better on average.
This is a global issue though, and not UK-centric. The point is, the world isn’t always fair, and you have to work with what you have.
I notice the same thing in business. Markets aren’t fair. A horse that wins a race by 0.001 centimes can win millions more money than horse two.
Those who just accept this fact do better than those who complain.
So, I am convinced that social mobility would improve if people only focused on what they can control, as opposed to complaining or looking for politicians to take action.
No job, in isolation, will make you a multi-millionaire. Being a multi-millionaire is about assets, and not income.
There are plenty of people out there who have earned millions and are broke. At least half of former lottery winners go broke.
In addition to that, studies have shown that up to 15% of the world’s millionaires are working in the teaching and education profession!
It is basic maths. Net wealth = net income – expenditure x compounded net returns.
If you are earning a middle-class salary, it is therefore possible to become a millionaire by middle-age, or sometimes before, if you invest wisely.
If you want to become a multi-millionaire in your 20s or 30s, you only really have a few choices:
- Inherit the money. This isn’t a choice. What is a choice is investing the inheritance well. We can’t rely on luck though even though we should take advantage of any that is afforded to us, so we should move on
- Go into some of the highest paying corporate jobs/industries – Silicon Valley style IT jobs, investment banking, law, consulting etc. In reality, it is only the elite companies that pay a lot. For example, if you want to earn a lot in consulting, it is better to join Boston Consulting, Bain or McKinsey and climb the ranks, rather than an average firm. It is hard even to get into these firms.
- If you don’t have the academic ability to try number two, an alternative is to get a job. Any job. Get good at it for five years or more. See what is wrong with the way that most firms do things, Then start your own business with that experience. This is higher risk than the second option but also less competitive.
- Go into a trade in some countries. For example, become self-employed tradesmen. In some countries, the money you can make is huge. Again though, you need to then invest the surplus money wisely.
- Of course some very niche areas like elite sports and entertainment celebrities as well.
All the four of five routes have one thing in common – they allow you to earn much more than average but in order to become wealthy you also need to care about your spending and investing habits.
If you earn $500,000 as a stressed top young hotshot lawyer, but spend $500,000, then you aren’t going to become wealthy.
Your question also refers to becoming a billionaire. This is a different case.
Becoming a billionaire is very different. As the billionaire Mark Cuban said, that requires some luck.
If admitted that if he started out again, he would be confident that he could become a millionaire but not a billionaire.
You need to be in the right place, right time, and scale a business beyond what most people can do.
So, the bottom line is, don’t just think about your salary/career. Focus on doing something you are good at.
In terms of wealth, focus on the choices we make as well such as marriage partners, spending and investing habits.
There aren’t too many wealthy 55-year-old men who have divorced multiple times and also have bad spending habits………regardless of how much they earned in their life.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 250.6 million answers views on Quora.com and a widely sold book on Amazon
In the answer below , taken from my online Quora.com answers, I spoke about the following issues and topics:
- Can expats invest money on the Canadian stock market? Is it even a good idea in the first place?
- Should you use leverage when investing? I mention how Bill Hwang’s 20 billion loss should serve as a lesson for us all.
- Is the US stock market overvalued? Are non-US markets therefore undervalued? In any case, what should people do if they assume that any of these two statements are correct?
To read more click on the link below