I often write answers on Quora, where I am the most viewed writer for investing and personal finance, with over 222 million views.
On this article, I will use my answers from Quora to answer the following questions:
- Is investing a good way to become a millionaire?
- What skills are required to be a good business owner? A great product? Technical skills? Perhaps this answer will surprise you!
- Why are some of the wealthiest people in the world not highly educated, and likewise, why are many highly educated people not wealthy?
- Do wealthier people neglect generational wealth or is this a myth? Besides, is giving too much inheritance to adult kids really a good idea?
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 (email@example.com) or use the WhatsApp function below.
Yes it is assuming you have an income to begin with and you can be long-term.
Investing small amount to begin with, will really compound over decades of investing.
As per Einstein’s quote below, compounding is one of the best ways to grow your wealth safely:
And really, there are only two ways to get wealthy if you don’t inherit money, marry into money or win the lottery:
- Invest into yourself. Your education (formal and informal) and improving yourself. Starting your own business in some cases.
- Invest into financial assets – which will give you more money than the bank offers.
Ultimately, it is leverage that makes somebody wealthy. By leverage I don’t mean debt per see, but:
- Leveraging people and/or technology if you have a business
- Leveraging money
- Leveraging money + time (compound returns)
If you don’t use leverage, you can only become wealthy if you are exceptionally highly paid and have good spending habits as well.
You will need to invest far more, to get back less, by just working and having money in the bank.
What investing doesn’t do is
- Get you rich quickly unless you already have a lot to invest to begin with. In the 1990s, and recently with Tesla, people think it is easy to spot those opportunities paying 70% or even 700% per year. It isn’t easy long-term.
- Stop risks like your own emotions. No matter how good an investment is long-term, it is pointless if you just panic sell every time the market goes down. Nobody, not even 0.00001% of people, has lost money investing into MSCI World or the S&P500 for their whole lifetimes. Yet many people have lost out after buying these investments. Usually people lose faith after a few years and stop investing if the markets are negative or panic during a crash. So, emotional control is key.
- Help you out if you don’t have a surplus to invest to begin with. Investing $2, Euros or Pounds a month won’t make you a millionaire. So, investing should be something which helps grow your surplus achieved from your income being bigger than your expenses. It shouldn’t be soon as a get rich quick scheme (passive income which is returned every month for example).
Starting at a young age is a big advantage but plenty of people start later on and do well as well.
In this case, investing more aggressively is needed as opposed to just investing a few hundred a month.
I will focus on skills, attributes and personality traits. These are only commonalities I have observed – exceptions exist.
- Pragmatism. There has been a rise in people being idealistic. You hear things like “the product will sell itself” or “only produce products that you yourself would buy”. Yet the consumer, or businesses, out there don’t care about our values and needs. They care about what they want. I know countless people who succeed without loving what they do. I know a former world-class alcohol salesman who now started his own business in this area despite being…..teetotal because he doesn’t like the taste of alcohol. Andre Agassi admitted in his book that he hated tennis. It didn’t stop him becoming one of the world’s great’s. The problem is that few people admit this publicly, so aspiring owners get the wrong impression.
2. The ability to listen – to consumers, research and so forth. Yet listening critically is key and not taking 100% of things at face value.
3. You know how to execute. Great products and services, and great ideas, don’t pay the bills. Long-term execution pays the bills. Any skills which are linked to revenue (marketing, skills, branding etc) and cost control (accounting) are highly prized if there is consistent execution. How many times have I watched a show of Dragons Den or Shark Tank and the owners have a great product but don’t know how to manage costs or maximize revenue? Countless times.
4. Hard skills (in some industries). You are more likely to succeed if you first get a job and get good at it. In some instances this might mean becoming a doctor, engineer or lawyer and then starting your own practice. In other industries, you might not need these hard skills.
Other things worth mentioning are
- The ability to take calculated risks. The key word is calculated. It is important to manage risks by spreading out your product offerings and/or geographical locations. Also have private investments as a business owner.
- Having a thick skin. People will say you can’t do it when you have nothing. Some people will criticize you once you have a lot.
- Don’t be afraid to put yourself out there.
- Never give up if you fail.
- Learn from other people’s successes and failures as much, if not more, than your own. It will be cheaper and more efficient
- Be confident but not arrogant
- A strategic mind which sees the big picture is a major plus
- Learn how to do all the tasks yourself in the early days. Delegate your weaknesses later on
- Be ahead of the game where possible. It isn’t always possible but look at Covid. The world was going online before February 2020. Yet many conservative people waited until the problem was there (lockdown) before having an online presence
- Don’t care about “norms”. If being normal was so profitable, every business would make loads of money. It doesn’t matter if your idea is eccentric or abnormal. In fact, an abnormal idea can often work.
- Play the numbers game. It might take 100 well-executed ideas to get 5 to monetize.
- Surround yourself with the right people and get rid of toxic ones.
- Keeping yourself mentally and physically fit is also important, but this one is partly out of our control.
And finally, being never complacent once success is achieved. Building on existing success is theoretically easier than starting from zero.
Yet many people lose their hunger and get complacent over time, once success is achieved.
So, your mindset and personality can be more important than hard skills. There are plenty of successful business owners who aren’t highly skilled.
In general, people with higher education levels do earn more than those that don’t.
Although we have to remember the following facts:
- Wealth and income aren’t the same thing. Somebody who has a high income but little or no financial responsibility won’t become wealthy
- The above figures are distorted by people at two ends of the spectrum – people who go to the best universities and those who are unemployed and never go to university. For those in the middle, the figures would be closer.
- Knowing loads of facts, and theoretical knowledge, doesn’t always convert into better execution. It also doesn’t mean you are more motivated than others, have good people skills or any other type of skills, traits and attributes which are useful for making money and keeping it.
- A certain percentage of people never use their degrees well. This especially happens during recessions and periods of high unemployment. Employers can accept it if somebody hasn’t used their degrees after a year, two or even five. People are young and they mess up, after all, and maybe the economy was bad. If people haven’t used a degree after 7–10 years, it gets harder to find a specific role in the industry.
- I have noticed that a certain percentage of highly educated people are also analytical. Not all, but some. This can be a great trait but it can also result in negatives as well. For example, analysis paralysis, where somebody never makes a decision on something.
- Great natural talent, whether that is academic or otherwise, doesn’t beat average talent with a better work ethic.
- Some people peak too soon. There are some who peak in their 20s and then get demotivated, and others who peak later on.
- Some professions that require highly educated people, like academia or medicine, tend to only pay very well later on, when people are significantly older. This is unlike something like consulting, banking, online activities and sports and entertainment which favours younger people. From the perspective of wealth, it is better to earn more in your 20s, 30s and early 40s, so you can invest and compound, rather than earning much more in say your 50s and 60s.
- In some cases, especially with very young and highly educated people, there is a sense of entitlement.
- Of course, for a certain type of person, wealth isn’t the main goal. Now sure being comfortable, and having the ability to retire if given the chance, is something most people want. Yet most people don’t become teachers or doctors for wealth.
So, it just depends on the individual really. There are loads of reasons which can contribute to this issue you allude to, beyond the ones I have mentioned.
What is for sure though is that academic knowledge can be very useful, if it is combined with other skills over time.
In comparison, academic and theoretical knowledge alone isn’t so valuable.
It depends on the individual. For some wealthier people, passing down money to loved ones is highly important, and one reason for wealth creation.
This isn’t the case for everybody though. There has been an increasing number of wealthy people who don’t want their kids or grandkids to inherit anything, or at least not a high percentage of the wealth.
The media focus on people like Bill Gates and Buffett and their pledges to give 95%-99% of their wealth to charity after they die:
What the media speaks less frequently about is the number of merely rich and upper-middle people who don’t want their kids to inherit a large amount of money.
The main reasons tend to be
- A lot of money given as inheritance can distort the incentives for adult kids. Numerous studies have shown that wealth seldom lasts three generations or more, and that adult kids who have been given inheritance tend to have lower wealth compared to their peers on similar incomes. That also apply to everybody of course, but people are less likely to invest and save for themselves, and be careful with money, if they have been handed a lot of money.
- Inheritance can cause family arguments even before death, and certainly after the fact. Giving most of it away can sometimes avoid this occurrence once people have accepted the idea.
- Plenty of people want to support charities and leave a legacy after they are gone. This isn’t just a billionaire’s club desire.
- Another group of people want their kids to have enough money through inheritance but not a huge amount.
In any case, few people completely ignore it. There might be a percentage of people who are so busy that they just take every day, and week, as it comes.
Most people, however, do get around to inheritance planning if they have means.
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