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- Why do rich people keep most of their wealth in assets instead of cash?<\/li>\n\n\n\n
- What is an easy way to get a 32% return?<\/li>\n\n\n\n
- Why do some experts believe that China’s market performance will pick up in the coming months?<\/li>\n\n\n\n
- Which businesses have the least chances to fail?<\/li>\n\n\n\n
- What makes you the most mad about today\u2019s economy?<\/li>\n\n\n\n
- What aspect of modern life is most overrated?<\/li>\n<\/ul>\n\n\n\n
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<\/a><\/p>\n\n\n\n
Why do rich people keep most of their wealth in assets instead of cash?<\/strong><\/h2>\n\n\n\n
There are numerous reasons:<\/p>\n\n\n\n
1.Assets create cashflow<\/strong><\/p>\n\n\n\n
If you invest in assets, you will either make more cash straight away (through a fixed return or dividends) or you will be able to accumulate and then make more cash long-term.<\/p>\n\n\n\n
So, it isn\u2019t \u201cassets vs. cash\u201d. It is more a case of assets creating more cash long-term.<\/p>\n\n\n\n
2. Prior experience<\/strong><\/p>\n\n\n\n
Most wealthy people have made money from putting cash to work, for example by starting a business.<\/p>\n\n\n\n
Most highly-paid salary workers also only got to that position by investing in things like education, which together with experience, helped them get promotions.<\/p>\n\n\n\n
So, it logically follows that cash should be put to work.<\/p>\n\n\n\n
3. Risk<\/strong><\/p>\n\n\n\n
Cash has more risk than assets, at least if you do it correctly, which means:<\/p>\n\n\n\n
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- Being long-term<\/li>\n\n\n\n
- Having diversification.<\/li>\n<\/ul>\n\n\n\n
It is true that having 100% of your assets in one stock or bond isn\u2019t safe.<\/p>\n\n\n\n
Yet holding assets in different baskets for the very long term is.<\/p>\n\n\n\n
Inflation is a huge risk.<\/p>\n\n\n\n
I saw this on Twitter recently:<\/p>\n\n\n\n
<\/figure>\n\n\n\n
This doesn\u2019t even factor in the fact that the banks defaulted in places like Lebanon.<\/p>\n\n\n\n
Over the last hundred years, most countries have seen at least one period of high inflation or bank failures which governments couldn\u2019t insure against.<\/p>\n\n\n\n
Which businesses have the least chances to fail?<\/strong><\/h2>\n\n\n\n
Any business that few others want to do.<\/p>\n\n\n\n
An example is laundromats and launderettes<\/p>\n\n\n\n
<\/figure>\n\n\n\n
This kind of business is:<\/strong><\/p>\n\n\n\n
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- Essential for some people, such as businesses<\/li>\n\n\n\n
- Not that difficult to set up<\/li>\n\n\n\n
- Not overly complicated or regulated<\/li>\n\n\n\n
- Not glamorous so few want to do it<\/li>\n\n\n\n
- Quite resilient to recessions.<\/li>\n\n\n\n
- Not easily affected by new technologies<\/li>\n\n\n\n
- Not very capital-intensive.<\/li>\n<\/ul>\n\n\n\n
Some studies show that they have a success rate of over 90%.<\/p>\n\n\n\n
Of course, though, one of the reasons for such a high success rate could be that very pragmatic people set up such businesses to begin with.<\/p>\n\n\n\n
The same can be seen in trash businesses. They have a low failure rate.<\/p>\n\n\n\n
Of course, if you have experience in any industry, that is also a great way to start a business that is less likely to fail.<\/p>\n\n\n\n
It is more difficult to fail if you have contacts, experience and clients you can move across.<\/p>\n\n\n\n
What is an easy way to get a 32% return?<\/strong><\/h2>\n\n\n\n
32% per year or over several years?<\/p>\n\n\n\n
Every year is almost close to impossible.<\/p>\n\n\n\n
If you start with just $100,000 and get 32% per year for 40 years, you will have $ 30 billion\u2026.from a 100k investment!<\/p>\n\n\n\n
If you also add 20k a year in those 40 years, you would have 47 billion!<\/p>\n\n\n\n
The S&P500 has been one of the best investments historically.<\/p>\n\n\n\n
Yet as per the S&P 500 global stats, it has seldom made 32% over a year.<\/p>\n\n\n\n
<\/figure>\n\n\n\n
Getting 32% over several years is much easier.<\/p>\n\n\n\n
A compounded average rate of return of 8%-10% per year will be a total return of thousands of percentage if you do it for decades.<\/p>\n\n\n\n
There are many cases where multi-million dollar or Pound fortunes have been made gradually over decades, by investing relatively small amounts of money.<\/p>\n\n\n\n
That is why Einstein referred to compounded interest as the world’s eighth wonder (source AZ Quotes)<\/p>\n\n\n\n
<\/figure>\n\n\n\n
An alternative is private investments.<\/p>\n\n\n\n
For instance, if you start your own business, you can make 32% per year on investments, but not forever.,<\/p>\n\n\n\n
And it is riskier and indeed not easy.<\/p>\n\n\n\n
<\/a><\/p>\n\n\n\n
Why do some experts believe that China’s market performance will pick up in the coming months?<\/strong><\/h2>\n\n\n\n
There are a few reasons why China\u2019s stock market could do well.<\/p>\n\n\n\n
Firstly, the Chinese economy is struggling. Almost for sure, the figures are much worse than the government’s official stats, as Larry Summers and others have mentioned.<\/p>\n\n\n\n
In a one-party state, never trust the statistics! We saw that during Covid-19, as well as the recent announcement that the government would stop collecting data on youth unemployment.<\/p>\n\n\n\n
The upside of this is that the government might need to stimulate the economy.<\/p>\n\n\n\n
What is more, China\u2019s real estate sector is struggling.<\/p>\n\n\n\n
As per the below stats from Statista, the bubble is bursting:<\/p>\n\n\n\n
<\/figure>\n\n\n\n
Therefore, we see more Chinese people:<\/strong><\/p>\n\n\n\n
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- Saving. In both USD and RMB<\/li>\n\n\n\n
- Looking for second residencies and passports overseas (for wealthier Chinese)<\/li>\n\n\n\n
- And some will look at parking a percentage of money in the international and even local stock markets. The Chinese stock markets look cheap compared to Chinese real estate right now.<\/li>\n<\/ul>\n\n\n\n
None of this means that the Chinese stock markets are low risk compared to their American and European counterparts.<\/p>\n\n\n\n
However, the economy isn\u2019t the stock market and vice versa.<\/p>\n\n\n\n
Look at Japan. The Nikkei has soared, and performed better than most stock markets since 2008\u20132009, after an awful period before that.<\/p>\n\n\n\n
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