I often write on Quora.com, where I am the most viewed writer on financial matters, with over 260.4 million views in recent years.
In the answers below I focused on the following topics and issues
- Looking back, what are some financial decisions you wish you had made differently? What is some advice you’d give to teens who are getting their first job and want to establish financial stability?
- Why do many people want to buy real estate even though buying stocks is easier, more accessible and gives better returns in many cases?
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Looking back, what are some financial decisions you wish you had made differently? What is some advice you’d give to teens who are getting their first job and want to establish financial stability?
Even though most of my friends and associates think I have mainly made good financial decisions, there are plenty of things I would now do differently if I was 18 again.
- I wouldn’t have speculated. I did this for a few years at university. Fortunately, it was only play money and I learned from those mistakes, even though I briefly got carried away with the high returns which weren’t sustainable.
- I would have doubled down on my choices. And doubled down on my instinct. In 2014, I started working partially remotely, and fully from 2018. I saw the online trend getting bigger. Most people say I did well to do it before Covid-19. Clearly, I should have done it even earlier. Likewise, I travelled a lot when I was young and emigrated. If I was 18, or 21 again, I would have doubled down on this. Same thing with private business. When I came into finance people preached that “business is best done face-to-face”. I knew things were changing, and my instinct taught me that. I changed my model years ago, but I should have changed it earlier.
In terms of advice for teens I would keep it simple
- Spend less than you earn and invest the surplus wisely.
- Invest one day after you are paid into ETFs and other good long-term investments
- Buy and hold for decades
- Just get the process started. 80% of investing success is just turning up as per the quote below. If you get started with the investing process, even if you do it imperfectly, that is better than waiting for perfection. When people wait until something – like until I am earning more or until I know more – they often procrastinate.
5. Be long-term orientated
6. Take loads of calculated risks (compound probability and the numbers game) but be careful about a few risks which could wipe you out. Most people don’t care about small risks. That is usually sensible but not if the small risk can wipe you out. In comparison, most people worry about even investing 10% of their money. This is irrational. It isn’t worth worrying about risks which are unlikely and won’t wipe you out even if they go wrong.
7. Be true to who you are. Be different. If you try to follow industry and social norms, you are competing with loads of others. If you are different, controversy or eccentric, some people will hate you. That doesn’t matter. Others will gravitate towards you. Those in the middle of the road get run over.
8. Don’t care about what other people think about you or your financial decisions. Most people don’t care about you anyway. Don’t allow social pressure inform your financial choices. For instance, there is a lot of pressure to buy property in some cultures, or to get married by a certain age. Don’t allow those things to affect you.
9. Read a lot after you have left university. The more you learn, and implement, the more you will earn.
10. Focus on execution. Not ideas. Ideas don’t pay the bills.
11. Only worry about things you can control. It is pointless to worry about others things.
12. Care about time just as much as money. The money will follow that.
13. In private business, focus on solving other people’s problems. If you can do that, and know how to market it, you have a business.
14. Get good at a job for 5 or 10 years and then start a business. Not the other way around.
15. Think globally. There are billions of people in the world. You can move overseas and save taxes, or sell to people globally from your home country. Same with investing. Don’t just focus on the firms in your home market.
16. Work on focus and persistence as they are two huge aspects of financial success. Many people can work hard. Few can do it over a decade if they keep failing.
17. Work hard but also work smart, especially in the digital age.
18. Work on your income, spending and investment habits and not just one of the three. Many people earn more and expect to be financial secure. Most 22-year-olds would expect to be financial secure earning say 100k at 45. Then they aren’t. Why? Lifestyle inflation. Just spending more as you earn more
19. Stay away from vices as much as possible but have fun. Moderation is key.
20. Be careful who you associate yourself with but be trusting without being naive. Most people’s financial situation goes downhill due to toxic people like ex-partners, business associates and “friends”. Most people worry about strangers, but actually it is usually people close to you who can affect you more. With strangers or people we barely know, we tend to keep things professional.
21. Get into good habits like taking personal responsibility and not blaming others or the economy if things are going wrong. Take responsibility for the good, and bad, times.
22. Try many things. Experiment. This is especially important for private business owners, but also try it with jobs. You can’t know what works if you don’t try many things.
23. Don’t get complement in the good times or too down in the bad times. Success makes people relax. That is dangerous.
24. Don’t allow the media to scare you away from investing. So many people get petrified due to events like Covid-19, Trump’s election, Brexit etc. The evidence is clear. Nobody can time the market. Just invest and forget.
25. Network up when meeting new people. Who do you admire? Who do you want to be like? Meet those people. That could be online or offline. Learn from them but don’t think they know everything.
Why would someone invest in real estate today when stocks seem much accessible and better?
There are good and bad reasons to invest in real estate over stocks.
Let’s start with the good reasons
- Some people are professional real estate investors. Property is like starting your own business in some ways. You have revenues, expenditures and many moving parts like managing leverage. If you are a professional in the space you can make a lot of money in it. This is maybe 1% of the population at best.
- You buy REITS. As you say, stocks and ETFs are easier to buy and more accessible. Yet it still makes sense to buy REITS and bonds, depending on your age. With REITS, you can own a percentage of the world’s real estate for 0.1% per year fees. This is more a mainstream play.
- Diversification. If somebody becomes very wealthy, there is an argument that people should diversity and preserve what they have. This is perhaps 5%-10% of the population.
- Cash flow. Stock markets do go up over time. What’s more, 35%-65% of the returns of the stock market are linked to dividend reinvestment. However, you can’t realistically make 10% safely from stock market dividends without taking a lot of risk or being a professional investor who has access to sophisticated products. Stocks are a growth engine. If you play it smart, it makes sense to accumulate for years and then take a safe 4% out of the portfolio per year (check out the 4% rule of retirement). With real estate, if you really need income, it is occasionally possible to make very high rental yields. Not in many markets net of taxes and costs, but it can occasionally happen, especially if you buy after a crash.
- It is just a home and not an investment
- You have found a reliable real estate agency who can take away the hassles of investing for you. One of the biggest negatives about property is the huge time costs that you pay for managing it. If this can be taken away, it changes the indirect ROI.
- It is possible for you to use other’s people’s money to pay off your mortgage as a buy-to-let landlord. This has became harder in many countries. The UK, for example, used to make it easy for landlords to make a lot in the 1990s and 2000s. Not anymore. Many “DIY real estate investors” are selling up due to the tax changes.
The bad reasons to invest in real estate are
- It is culturally familiar. Everybody else seems to be doing it, so why shouldn’t I? This tends to happen a lot in countries where home ownership is like a religion.
- It is being bought on misconceptions like property usually beats stocks, which it actually doesn’t.
- People are focusing on speculation and property values skyrocketing, rather than what the asset actually produces (yield) and leveraging gains safely.
- Leverage is being taken to the extreme, risking everything.
- Fear of missing out. The wrong house ladder implies that housing will always become more expensive.Over the long-term, that isn’t always right. In the UK, houses were close to stagnate from 1900–1960. They have fallen in real terms (but not nominal terms) between 2008–2021, with even wages growing more quickly. So, most of the house price gains were in the 1970s, and especially 1980s, 19990s and 2000s before 2008. Those periods come and go. It isn’t always the case that property goes up more quickly than houses and wages. The media reports that property is at records today but it isn’t true adjusted for inflation. The Nationwide Survey of UK housing prices showed the average property cost about 183,000 in 2007–2008. Now it costs 239,000. Up 31% in 13 years. That is a compounded return of 2.3% per year, which is slightly below inflation even adjusted for the recent price surges.
- The volatility of stocks concerns you. It is true that property is less volatile than stocks but that isn’t a good reason to own it. Volatility doesn’t affect the log-term investor. Look at any long-term graph of the Dow or S&P500. The dips look tiny over a long period of time. The investor who watched their stocks crash in 1987 when the S&P500 was at about 300, doesn’t care now it is above 4,000.
I agree with your general sentiment though. Provided people can deal with the volatility and are long-term, liquid investments should be the first point of call.
What’s more, some of the bad reasons to invest in real estate are why most people get in to begin with.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 260.4 million answers views on Quora.com and a widely sold book on Amazon
In the article below, taken from my online Quora answers, I spoke about the following issues and subjects:
- What often repeated investment advice is actually a load of bull? I look at some of the biggest misconceptions out there, including some held by investment professionals themselves.
- Which types of people are most likely to become self-made millionaires? Business owners, the inherited wealthy or those who invest? I speak about some of the commonalities I have observed.
- How do Japanese and Americans invest or save considering zero percentage interest rates? I explain a key cultural difference between the two countries I have observed, but also say why I think Japanese attitudes to saving might soon change.
To read more click on the link below.