I often write on Quora.com, where I am the most viewed writer on financial matters, with over 319.3 million views in recent years.
In the answers below I focused on the following topics and issues:
- How can South African expats, and locals, invest in stocks in a productive way?
- If being wealthy was that easy, why is everyone not wealthy?
- Why are many business owners broke?
- What is the difference between being frugal and a miser? I speak about the importance of prudence and being astute.
- What is the most expensive thing I would ever spend my life saving on? Would I elect to spend it on things which save me money or time?
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As a South African how can I invest in stocks?
Source: Quora
Before answering your question, I would first make this point – I wouldn’t focus on Rand-based returns.
This is the recent history of the Rand against the USD:
Now South African stocks are investing globally. That means that if the Rand falls, you should be cushioned, as plenty of these firms are making sales in USD, Euros, or Pounds.
With that being said, the local stock market is less diversified compared to say the US stock market.
It seems that there is an Apple and Starbucks store on almost every street corner in the world these days!
This means that regardless of whether you are a South African expat living internationally, or a local, it is important to have global diversification.
Putting all your eggs in the local stock market’s basket doesn’t make sense, concerning it is higher risk than some International markets, and it hasn’t outperformed the S&P500 long-term.
In terms of how to do it, it is easy.
You just need
- To find a DIY investing platform or advisor who can accept you.
- Give your proof of ID like a passport
- Provide your proof of address dated in the last three months. Examples of this include utility bills and bank statements
- Once the account is approved, fund it and trade.
It is an easy process unless you have very specific needs, such as you are a high-net-worth individual or an expat who is moving around.
In that case, some specialized help is usually for the best.
The more difficult thing is how to invest productively. That is an issue for another question.
All I would say is one of the most underrated Buffett quotes is (I am paraphrasing):
“Markets (the Dow in the US) went from 66 at the turn of the century (1900) to 11,000 at the end of the century (1999–2000). How did people lose money during such a period? They tried to dance in and out of markets”.
In the same way that we are more likely to get in shape if we use a personal trainer, sometimes investing requires some emotional help.
If being wealthy was that easy, why is everyone not wealthy?
Source: Quora
Well, precisely. I would extend the question as well.
If getting wealthy was that easy, and most people want to be wealthy, then why isn’t everyone wealthy?
Because that is the thing. Deep down, most people want to be wealthy.
Actions speak louder than words. Few people, regardless of their political beliefs, would give away a huge inheritance to charity.
One book I heard about a few years ago was from an anonymous South Korean wealthy person.
He pointed out that the biggest hypocrisy is that it is often those people who criticize “the rich”, or “the wealthy”, who want to get wealthy themselves.
Anyway, to answer your question, the issue is getting wealthy, for most people, is either:
- Very difficult full stop
- Simple but not easy
For the first group of people, it is obvious. If you grow up in a poor country to poor parents, it is more difficult to have social mobility.
In most developed or reasonably developed countries, getting wealthy is simple.
You don’t need a high income. You don’t need to be super smart.
You don’t even need to be super lucky and win the lottery. All you need to do is invest in a productive way long-term.
In countries with a per capita income of over $40,000 a year, statistics have shown that teachers constitute 14%-15% of millionaires, and other mid-income salary earners about 55% of the total.
We all probably know them. The kind of people who started buying stocks or real estate in the 1960s, 1970s or 1980s, and held “forever”.
This table from Business Insider tells its own story:
Yet that doesn’t mean that getting wealthy is so easy just because the “formula” is simple, and tried and tested.
There are many things that can get in the way of this, including bad luck but also emotions.
Humans are emotional beings. So, many people panic sell when stocks are down.
Countless others struggle to delay gratification. How many times have we heard people say “what’s the point in being wealthy at fifty? I will be old by then!”.
Then they get to fifty, or older, and regret it. They typically feel great and understand that the ideas they had in their youth were foolish.
That isn’t to mention that the majority of people who even have money handed to them become broke.
How many rich third-generation lottery winners, or inherited wealth are there?
Very few. As per an old, and wise, Chinese proverb, wealth seldom lasts three generations.
Sometimes it doesn’t last one generation, with over 60% of former athletes going broke within a few years of retirement despite earning millions.
So, even people who get wealthy, struggle to keep it, typically due to a lack of planning, financial education, and emotions.
Are most entrepreneurs broke?
Source: Quora
Yes and there are two main reasons.
Firstly, most businesses fail. This means that most entrepreneurs fail full stop.
Some private business owners succeed of course. However, success isn’t always sustained, especially if somebody doesn’t actually make the right decisions.
This man is the late John Mcafee:
He created one of the most famous anti-virus software in the world:
At his height, he was worth $100m+.
He died broke. The reasons were:
- Overspending
- Not having liquidity.
Sometimes the two things went hand in hand. Buying loads of expensive houses like he did, means it isn’t easy to sell them, unlike having stocks or cash, when money is tight.
He is just one example of many I could have used.
Another reason why success isn’t always sustained is the lack of future planning.
Overspending and liquidity are part of that, but some people don’t overspend and still become broke.
The main reason is often failing to prepare for unexpected events like Covid.
After 9/11 many previously successful airlines went broke. Same with the banks in 2008–2009.
Hospitality suffered in 2020–2021. Each time, the founders didn’t prepare for an unexpected event.
Oftentimes, they just reinvested back into their own businesses, which means they were wealthy, but not independently wealthy.
Having millions in one company, and a big valuation on paper isn’t the same thing as having as much in private investments.
In the first case, only the company needs to fail for your wealth to go down to zero.
In the second case (a well-diversified portfolio), something needs to happen which never has occurred to become broke.
The whole stock market would need to crash and not recover, for the first time ever.
What is the most expensive thing you will ever spend your life savings on?
Source: Quora
It doesn’t make sense to have “life savings”. Interest rates are 0%.
Rather, it makes sense to have:
- Prudent investments which should be the bulk of total net worth.
- Savings for emergencies. For most people, three or six months worth of expenses is enough here. It does depend on your own personal situation though, like how secure your job is and if you have debts.
And then use fresh cash savings from a job or business for new investments. This leads me to your question.
I would spend more cash on things that save me time and money in the long term.
That is because you can make more money, with fewer hassles.
Some examples
Hiring more people. If they are good. Basically outsourcing more to save time, which indirectly will result in money in the medium-term, if done right.
And/or, spending more on technology, which can in some cases be more effective than people in this day and age:
Or investing in insulation for the home, or anything else worthwhile which will bring down bills and maybe hassles as well.
Those leaky roofs don’t just cost money, they also cost time as well.
Or of course, tried and tested financial investments, which will be there in case of an emergency.
The point, money needs to be put to work, otherwise, inflation will erode it.
If money is put to work in the right way, it can also increase time and efficiency, whilst reducing hassles.
What are some examples of the thin line between living frugally and living like a miser?
Source: Quora
Firstly, a frugal person tends to be astute.
An astute person understands concepts such as:
- In some situations, you don’t get what you pay for. For instance, due to branding from the big firms
- In certain circumstances, you can get things cheaper just by negotiating a bit
- Keeping up with the Jones’ is pointless. A lot of overspending is linked to peer pressure.
- For many, some of our happiest memories were when we were a kid or at university, when we didn’t have much to spend
- Due to compounded investment returns, every penny we invest at a younger age will be worth more later on. Therefore, it is possible to save and invest less, and get more in return, if we start early.
- There is a big connection between debt and unhappiness. So, failing to be frugal enough to be comfortable, might result in unhappiness and even relationship breakdown:
- Lockdown has taught many people what they do, and don’t, need. Many of the things we engage in are habits. Those habits were broken during the pandemic. We missed some things about our previous lives but didn’t miss other things at all.
- For some, you can increase your happiness and financial wellbeing. Look at working from home. Few did it before the pandemic, but it was already gaining traction. That is because you save money, time and hassle, and spend less. It doesn’t work for everybody, but for some it is perfect.
- “Things” get boring compared to experiences. Trying things out can be fun. At least the first time. Then things get old.
In other words, an astute person understands that it is possible to be frugal and not affect quality of life, health, relationships, etc.
In comparison, a miser, by definition, is miserable and unhappy.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 319.3 million answers views on Quora.com and a widely sold book on Amazon
Further Reading
In the article below, taken directly from my online Quora answers, I spoke about the following issues and subjects:
- What are the biggest beginner mistakes in the stock market?
- Is cash trash, as Ray Dalio has suggested? Or is cash king?
- Should you invest for your kids, or let them be more independent? I look at what the evidence suggests.
- Is delaying gratification one of the tried-and-tested routes out of poverty?
- Is now a bad time to invest in the S&P500 index in the US? that, that have showed how money can at least help make us happier and less anxious.
To read more click on the link below
