Scrivo spesso su Quora.com, dove sono lo scrittore più visto in materia finanziaria, con oltre 267,5 milioni di visualizzazioni negli ultimi anni.
Nelle risposte che seguono mi sono concentrato sui seguenti argomenti e problemi:
- How do you invest as an expat earning over $105,000 if you do not know where you will eventually settle?
- Does the 4-Hour Work Week by Tim Ferriss really work?
- What is meant by a sustainable competitive advantage?
- How do I avoid fraudulent investment?
- Why are doctors not usually millionaires?
- What will be the price of gold in 2030?
- Is it wise to buy a house where your payments are twice as much your rent? Bay Area, California properties have good appreciation but is the opportunity cost of forking out almost all of your paycheck worth it?
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How do you invest as an expat earning over $105,000 if you do not know where you will eventually settle?
As you mentioned $105,000 a year, I presume you are an American living overseas, because that used to be the threshold for paying overseas taxes.
Being an American citizen is quite different from essere un espatriato investor from most other countries.
Unless you renounce your citizenship like Tina Turner or the co-founder of Facebook, you often pay punitive taxes on offshore investments as per the article listed below.
This is due to rules like PFIC, FBAR and PFIC.
The only way to get around this are
- Deal with a US-based brokerage that can deal with expats. Mostly, US-domiciled, rather than offshore funds, will be suggested.
- Invest in individual bonds and stocks as these aren’t taxed in such a punitive way as overseas ETFs and funds.
If you are non-American, offshore investing makes more sense – meaning a country other than your country of residency and usually citizenship.
If you send too much money back to your own country as a British, Canadian or Australian expat, you might fall foul of ‘ties tests’.
Even if you don’t, it isn’t tax-efficient. For example, if you are British and buy UK property as a non-resident, you need to pay stamp duty and other taxes.
You also need to go through the hassles of UK tax returns on your UK assets only.
Offshore portfolios are easier to manage and cheaper from a tax point of view.
Does the 4-Hour Work Week by Tim Ferriss really work?
The reality is, unless you inherit money or get very lucky, there is no substitute for hard work when you are establishing yourself.
However, once you reach a certain level, it is possible to automate most tasks to a team.
Getting to that stage is the hard part.
If you do get to that stage, it is likely that you love your business, so want to voluntarily work more than 4 hours a day, never mind a week.
What is more, if you only work 4 hours a week, it isn’t as easy to keep up to date with changes in a given industry, especially if you don’t read outside of those 4 hours.
So, it is possible to only work a few hours a week once you are established as an owner, but not as easy as working say 20 hours a week.
It is a bit like spending as well.
In the early stages, there is no substitute for a frugal business owner who reinvests back into the business and themselves.
Once a business is established for a number of years, it is more likely that the owner can relax a bit.
In other words, don’t try to run before you can walk.
What is meant by a sustainable competitive advantage?
Well, let’s look at what isn’t a sustainable advantage.
Imagine you have somebody who is great at face-to-face networking.
They play golf and go drinking to drum up business.
Even if they are one of the best at it, it isn’t sustainable, because:
- They probably can’t live their life like that forever. If they get sick, or injured, they can’t maintain it
- It isn’t scalable unless you hire loads of other people who are just as good as you. You can’t network in-person for 25 hours a day!
- Consumer preferences change. Look at the online world and what happened during the pandemic
- In some cases, your target consumer or business might leave that area, so unless you move, you lose business.
- It is replicable. Others can easily copy
- You might change. You might be a great networker at 25. That doesn’t guarantee that you will be at 45 or 55.
These six factors combined are an issue.
Eventually, over-performance will likely cease to exist.
The only way it will continue for any length of time is if the person keeps experimenting with new ideas within the same niche.
The same is true for old fashioned techniques like cold calling.
Even if we assume that they can work in some cases, it isn’t usually sustainable to do that for your whole life.
Conversely, nobody can compete with:
- Coca Cola and big brands like that. Now sure, some big brands get superseded by upstarts, but few people want to experiment when it comes to a cheap drink. Coca-Cola couldn’t even outcompete the original product when they started New Coke! The same is true for top brands in areas like chewing gum. People are happy with the incumbents. Why experiment? It isn’t like you will save a lot of money like with a car.
- Personal brands. Nobody can be you. It is true that others can also create their own personal brands, but that doesn’t stop the incumbents, if they play their cards right. They have their own market. George Clooney has his own market, rather than being dependent on the average price or the economy. Even the best social media influencers aren’t playing by the same rules as the rest.
So, having a sustained competitive advantage doesn’t have to just be for huge companies.
I know some people who have it, and nobody knows them, apart form the consumers and businesses in their target market.
There are some people who are real estate agents in a specific area who have a sustained competitive advantage.
Of course, getting to the stage where you have a sustained competitive advantage is the hardest part.
What is easier is simply making it more difficult for people to compete.
If a company who already has an advantage online starts spending $30,000 a month, that makes it much harder for newbies to compete.
Conversely, if your success is due to hard work and anything which can be replicable, then it is easier to copy.
There is no substitute for a business owner to work hard early on, but after that point, it is key to focus on competitive advantage and increasing barriers to entry.
How do I avoid fraudulent investment?
Did you hear about Usain Bolt’s recent story?
It reminded me about Madoff’s scheme in some ways.
What was the issue with Bolt?
Well, he placed his trust in people, in relationships.
I have seen this on several occasions. People trust their friends, family or institutions because of emotional things like being able to meet them in person.
I am not an untrusting person myself, and place a high degree of trust in people all the time, as a business owner.
Yet the reality is this – processes over people.
If the processes are right, you can avoid frauds, even with bad people.
Let me give you a simple example. Alleged victims like Bolt, and those who fell foul of Madoff, allowed the person to hold the money directly.
Therefore, the person could be corrupt or fraudulent as that person had direct access to the money.
In comparison, if the money is held in a third-party institution (bank, brokerage account, life assurance/insurance company etc), it is impossible for that to happen.
That is because the company or individual merely has the ability to advise you, and make trades on your behalf.
They don’t have access to your money. It isn’t like they can take money out of the account or add money to it.
I always use third party investment solutions, and so do 99.9% of legitimate providers, because there is no need to personally hold the money.
That isn’t to mention things like death, disability and injury.
Even if a person is completely trustworthy, things happen in life that nobody can control.
At least if you own the account and have an advisor, you are unaffected if those unfortunate events like death happen.
Why are doctors not usually millionaires?
This man explains it well:
Most doctors in developed countries eventually earn high-incomes (more on that later).
However they, like lawyers and other professions, experience a lot of stress.
So, they tend to overspend and just upgrade their lifestyle as they earn more.
Lifestyle inflation is natural and not always a bad thing, but it becomes a detriment to your wealth if you upgrade your lifestyle at the same pace as your salary.
If you earn 500k after taxes but spend 500k, then you aren’t any better off than when you were a student at medical school.
At least you aren’t better off from a wealth point of view. At best, you indirectly are, due to putting some of that 500k into a house/mortgage.
As the speaker explains on that video, the only way to break that cycle is to start investing into businesses (your own and other people’s – stocks) and other assets that can grow when you are sleeping.
Getting rich from selling time seldom works.
Even if you start your own business, it seldom makes sense to charge an hourly rate
Another factor is that doctors tend to gradually get paid more as they get older.
It isn’t like the consulting, corporate law, banking and sports and entertainment professions who often get paid better in their late 20s and 30s.
It is normal for people to make a lot of money from being a trader, management consultants or corporate lawyer and then quit for a slower life later on.
At least if you do it this way, you have “front loaded” benefits.
Most doctors have “back loaded benefits”, as the early years aren’t that well paid.
So, most become millionaires later in life, or never.
What will be the price of gold in 2030?
If people knew that in advance of time, everybody would know whether to buy or sell.
What we do know is
1. Long-term, gold prices go nowhere. Adjusted for inflation, gold has never recovered from the mid 1980s. If you look at the ultra long-term, gold simply holds its value.
Even most advocates of gold acknowledge this. It is just a lump of metal which increases in supply by 1%-2% per year.
How much it increases by isn’t linked to innovation. Buffett explains why gold doesn’t make sense here:
2. As a result of the first point, you can only do well with gold if you buy low and sell high, which is difficult
Below is the inflation adjusted gold price.
If we look at the present price of gold, it is approaching close to a record.
It was at $2,600 in the mid 1980s adjusted for today’s prices. Now it is at over $2,000. The closest it got to that previous inflation-adjusted record was $2,300 in 2011.
That implies that even if gold goes on a great run in the next decade and matches that previous high, it would have increased 30% in seven years until 2030.
That is less than 3% per year above whatever the future rate of inflation is.
So, if inflation falls to 2% again, you could maybe expect 5% per year, in the most rosy outcome.
More likely is that the price of gold in ten or twenty years is about the same as now, or lower, adjusted for inflation.
That is because we are already at about the ninety percentile in terms of gold’s real-terms price.
Or put in another way, gold has only been this expensive, in today’s money, on about 10% of occasions in recent history.
Conversely, silver prices are much cheaper.
Is it wise to buy a house where your payments are twice as much your rent? Bay Area, California properties have good appreciation but is the opportunity cost of forking out almost all of your paycheck worth it?
If the payments are twice your rent, you are unlikely to be better off buying.
That is because:
- Hoping for never ending appreciation is a speculation.
- Long-term, real estate can only compete with markets if you leverage and have a good dividend yield.
- The opportunity cost as you mention
Speaking about the last point, many people don’t factor this in, together with inflation, taxes, time and maintenance cost.
Simple example
- Let’s say you want to buy a $1m house. The bank wants 25%, so 250,000. In some countries you can get a house with 5%-10% down, but 20%-30% is normal in many places
- You will probably have to add at least 20,000 to that 250,000, if you include taxes and other costs, if not 50,000.
- So, now you have put down 270,000–300,000 + a lot of time + the ongoing costs of real estate aren’t low.
- In the above scenario, even if the property goes up by 5% per year but the stock markets do 9%-10% per year (which is slightly below the s@p500 historical return since 1945 including dividends), you have lost out big time over 30–40 years. Could be over $1m.
- If you are a business owner who has a fast growing operation, you could be losing out more, as that 270k could be used elsewhere.
So, rent isn’t dead money if you also focus on time and opportunity cost.
If i would have bought a property in my late 20s, it would have indirectly cost me a fortune.
Let’s put it another way. Why, in many countries, do landlords offer discounts if you pay quarterly or yearly?
Sometimes these discounts are huge! Well, the time value of money.
If you pay yearly, they can use that money to buy other assets.
Of course, there are personal reasons to buy, that go beyond financial considerations.
However, professional real estate investors tend to focus on yields and leverage over capital growth.
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Adam è un autore riconosciuto a livello internazionale in materia finanziaria con oltre 830 milioni di visualizzazioni di risposte su Quora, un libro molto venduto su Amazon e un contributo su Forbes.
