TOP QUORA ANSWERS FOR THE WEEK – JUNE 29 – JULY 5 – PART 2

This post will run down our top Quora answers for the week. 

Is it possible to become a millionaire without owning a business?

Of course.

Here are some incredible statistics:

  1. 14% of the world’s millionaires are estimated to be teachers
  2. Managers, not senior managers but middle-income middle managers, are more likely to be millionaires than any other group in the US and several developed countries. Yes there are more managers than bankers, sports stars et al but it is still an incredible statistic
  3. Over 60% of most professional sports stars are broke within 5 years of retirement
  4. Over 95% of new firms go out of business without 5–10 years of opening up
  5. The lions share of inherited third generation wealthy and lottery winners also go bust
  6. Most millionaires are middle or upper-middle income professional as shown in this book’s studies:

The point is, income is only one component of the equation. As somebody said below, invest 20% or more of your income from a young age, and you will be fine, if you do it correctly.

Having a business can be great. It isn’t the only route to wealth though.

What is a sign that someone is probably very rich? Originally Answered: What are true signs of wealth?

  1. Good health
  2. Wisdom
  3. Not needing to show off with flash cars and other material things.
  4. Not needing to work IF, and only if, you decide you have had enough.
  5. Knowledge

Those are all obvious for many people. What is less obvious is this …….trust.

On average, wealthy people are more likely to be trusting of others.

To get wealthy you often need to co-operate with, and trust, others:

That means not thinking the stock market is a conspiracy run by jews or other groups.

That means taking calculated risks. That doesn’t mean blind trust but relative trust compared to the average person in society.

I have noticed this time and time again in my line of work and in life in general.

People who have never had wealth are often paranoid about scams, being taken advantage of and “losing” something even though they have less.

Wealthy people are more likely to give people the benefit of the doubt, ask questions to get more information and be more open .

When I started my own company I googled for company incorporation services.

I have never met them and never want to meet them in-person. When I needed staff, I used a recruiter from miles away.

People in my network who had the lowest net worth, were surprised by that approach and warned me to “be careful”.

People I know who are wealthier, assuming they are self-made, understand the approach very well.

Wealthy people are much more likely to take calculated risks and be less cynical.

Having a middle-ground is key. Being either naive or cynical isn’t good.

Why can’t you save your way to wealth?

This guy isn’t going anywhere soon I guess:

The average South Africa investor has actually lost out in USD terms even if they have earned 8% as a fixed deposit in Rand, as an example of the point I was making before.

Even the US which increased rates a few years ago, has moved them back down:

Of course saving money will bring you more wealth than spending 100% of it.

However, money in the bank has never came close to beating investments long-term.

Stocks might be volatile, but if you hold them long-term, you will beat most (if not all) of other investments:

Cash only makes sense in two situations. One, it makes sense to have an emergency fund in case your laptop or fridge breaks.

Second, if you are a private business owner, that cash might be there so you can “bounce” on opportunities.

Apart from that, there is no need to hold loads of cash, and it can even be dangerous in many countries.

There have been countless currency crashes in history.

What are some tips to help one accumulate wealth over several decades?

Bill Gates and Buffett both agree about the number 1 reason for success:

Focus. Focus is absolutely key for success. It isn’t a guarantee. Some people are focused on the whole things for example, or get very unlucky.

However, focus coupled with persistent and perseverance (grit) is key.

Natural talent only gets people so far. Look at sport. This man has become the first footballer to earn 1 billion, and is considered inside the top 5–10 players ever:

And yet, in terms of natural talent, there are plenty just as talented as him, who never made professional level according to this former youth team manager.

This man was probably more talented than him but ended up broke and went downhill at a young age:

Small in business. I have met people with average levels of talents who beat people with much more talent.

So I think the keys are:

  1. Hard + smart work. Working smart also includes levering time (investing compounding and the time of others) and money.
  2. Persistence.
  3. Surrounding yourself with the best people and aboding the toxic ones
  4. Living below your means
  5. Taking calculated risks
  6. Being willing to make the tough decisions.
  7. Controlling your emotions
  8. Focusing on execution and not ideas.

What are the greatest secrets of growing wealth on an average income?

Perhaps the greatest secret is that there are no secrets! 130 trillion.

That is the number of web pages indexed by Google.

Now sure, many of those websites aren’t related to finance or investing.

Regardless, the issue isn’t information or secrets.

There is a surplus of the following things:

  1. Ideas. Everybody has million dollar ideas
  2. Information. Online and offline
  3. Opinions. Most people have opinions

There is scarcity in these areas

  1. Execution. Consistently executing good ideas and not just having them.
  2. Bravery. Taking the hard decisions. Things like not just following what our societies or industries expect from us.
  3. A growth mindset. And not a fixed one

So to answer your question, the key isn’t secrets, but more in implementation.

On a middle-income, the tried and tested ways to grow wealth are:

  • Invest monthly. Compound. Invest during rain and shine. Don’t time markets. Switch off the media trying to persuade you to be greedy or fearful. You don’t need to invest a lot if you start early enough:

Also, there is a difference between easy and simple to execute. The quote below from Buffett can also apply to business and wealth growth in general:

So the key isn’t usually in secrets or special knowledge, but by implementing and by being willing to do things others aren’t wiling to do.

Most people aren’t willing to work 12–14 hours a day, break industry or social norms, work abroad for better opportunities or invest from the age of 21 rather than just live for today.

There is money in doing things that other people aren’t wiling to do.

There isn’t much money in following what others are doing for the most part.

What’s the difference between the FTSE 100 and FTSE 250?

The FTSE100 is more international. The FTSE 250 is focused more on domestic companies.

The FTSE 100 recently has become more of a dividend index, where investors have been rewarded for reinvesting dividends:

In comparison, the FTSE250 has done much better, but has lower dividends:

So for a UK investor, a FTSE All Shares index makes sense, as it includes the FTSE100, 250, 350 and small caps.

It has performed well over time, even if the US Markets have done better on average.

Diversification lowers your risk.

Why do new investors lose money in the stock market?

The two biggest reasons by far are:

  1. Lack of knowledge. Investing by yourself (DIY) with no advisor support despite this lack of knowledge.
  2. Lack of emotional control.

Many people without investing knowledge either think it is risky or a get rich quick scheme.

They often do silly things like investing in companies that they “like”, like the sports team they follow or whatever.

The second reason is emotions. Remember this event:

Or 12 years later, this event in March:

Many people just can’t deal with these kinds of events, or get too excited when the markets are up.

Or let’s put this another way. Why do long-term investors never seem to lose money in the stock market?

Well, because markets have always historically risen long-term in most major markets.

So that gives you the answer to the question. Those that lose money often exit too soon.

I remember a great quote from Buffett. He said “stocks started the decade at 66 (1900) and ended them at 11,000 (1999). How did people lose money during such a period? They tried to dance in and out of markets”.

Stay the course.

Why hasn’t nearly everybody bought stocks in Google, Tesla, Facebook etc? These are giant companies that seem to be constantly making money. Is it not a sure thing that owning shares in these companies is a guarantee to make money when you sell?

Nothing is guaranteed in life apart from death and taxes. Also Tesla isn’t making money yet.

This article explains it well – Tesla’s still losing money despite a record quarter for deliveries

So many investors are “betting” that they will finally become profitable.

So it is a speculation based on promise, and future earnings, rather than present earnings.

That speculation might work out, or it might fail. Nobody knows for sure.

In terms of “giant companies” many have gone to the wall before, including Lehman and some of these 90s tech firms;

At one stage, Blockbuster was a huge name in the UK. A household name of the 1990s:

What is true is that if you buy the entire market (S&P500, Dow Jones, Nasdaq etc) nobody has ever lost money if they buy and hold for decades:

Add 40% bonds and the results are:

That doesn’t mean that it can never happen in the future. Merely that it is safer to own the whole market (stocks and bonds).

If most millionaires don’t own fancy cars, houses, or clothes, then what’s the point in working so hard just to have money sitting in the bank?

Firstly, most wealthy don’t just have cash in the bank. Most wealthy people have money in investments , their businesses or the cash is there to bounce on business opportunities.

Second, some wealthy people do own these things, but you are right that many do not.

The reasons are simple:

  1. Spending a lot doesn’t make you happy in most cases
  2. Good times come and go. So if you invest during the good times, you can have money in the bad times.
  3. More choices. If you make 100k this month and spend 100k, you aren’t any wealthier. You are no close to just retiring if you stop liking your business. If you build up wealth you can create new cashflows in time. This gives you options.
  4. Balance is key. Being too cheap isn’t always good, but being too flash isn’t either.
  5. Overspending, if you post online, is often a sign of insecurity. People who do that need to prove to others that they have made it.
  6. A lot of luxury is just marketing and branding techniques. Most people can’t tell the difference in blind tasting.

Another reason is legacy. Most people want their kids to get something.

Others want charities to get something. This secretary was a “secret millionaire” for years.

She left 6m-8m to a charity in NYC – 96-Year-Old Secretary Quietly Amasses Fortune, Then Donates $8.2 Million

All she did was invest for decades. Nothing fancy. Nothing exciting.

You might say it is a “waste”. However, she has left a great legacy.

Plus the money was there if she got unlucky. She was fortunate in that she liked her job and didn’t lose her health in her 60s, 70s and even 80s.

Many people aren’t so lucky and we can never know when we will lose our health.

“Living for today” sounds great but often leaves people feeling empty, insecure and without any legacy to leave charities or their kids.

Why do 78% of Americans live paycheck to paycheck?

This isn’t an American-only thing. I am from the UK and it is similar:

Culture does play a huge role here. In the 1950s, the average wage, even adjusted for inflation was much lower than today.

However, people’s expectations were very different. The majority of people didn’t own electronics, go on holidays, have cable TV, eat or drink outside or even have cars in many developed countries.

When I lived in China, Indonesia and Cambodia, I found most local people would save, even if their income was low, middle or high.

I also found that most people from these cultures who live in the US, UK or any other Western country, would save and invest a well.

Close to 100% of the Chinese and Indian immigrants I have met in the UK and US have saved some money after a few years.

Yet they face the same pressure as locals, arguably higher costs, as sometimes they need to pay for visas and other things.

So whilst the rise of the gig economy, the rising costs of basics like rent at least in big cities and other factors all contribute to this, the culture of not delaying gratification is a huge reason for this trend you have identified.

Statistics show that the average middle-earner is more likely to buy Rolexes and certain luxury goods than people who are high earners.

I think a final reason is the cultural obsession with property in many countries.

Countless people assume “you can’t lose with property’ so stretch themselves to get the very best.

So even some high-income people are living month by month and are “house poor”:

Do rich people ever buy things on sale?Originally Answered: Do rich people ever buy things on sale?

It isn’t true of all wealthy people. Certainly not the “new rich” who aren’t used to it:

But you are right, if you look at a wide range of people, a big sample, wealthier people are less likely to buy luxury things consistently.

For example, in most developed countries, somebody on 35k is more likely to buy certain types of luxury products than those earning more than 150k.

The main reasons are:

  1. To get wealthy in the first place, you need to live below your means. That doesn’t mean being extreme. But you need to delay gratification to get wealthy in the first place. People who lack self control with spending also are usually impulsive in business and other situations
  2. A lot of luxury goods is just branding and marketing. Many people can’t tell the difference between a fake and the real thing.

3. Spending more than 20k a year? That makes sense. Above 60k though, your quality of life doesn’t change much in most cities in the world with a few exceptions like London and some big US cities

4. Spending above the 60k mark will give you a short-term boast, but spending money on experiences, helping others and security (investing) is a better way to spend than on more things if you already have enough things in the first place!

5. To become successful, you often need a thick skin. People will say you can’t succeed. So many successful people don’t care about trends and fashion in business and for that matter in areas like luxury.

6. It is better to be on the other side of the trade. Do you own a luxury brand? Then great. That’s smart. Being the consumer? Not so smart for the reasons given above.

7. Many went through a period of over-spending and stopped after a few years. The reason is simple; it doesn’t do anything for your soul

8. It is human nature to want something you can’t get. Exclusivity is why many luxury goods are popular. But if you can already afford it, that becomes less interesting, especially if you have sampled it once or twice. Simple example. When you were 18 you dreamed about being in a luxury 5 star suite. You do it. Numerous times. It gets old and less interesting, and mysterious.

Having said all of that, having choice is a good thing. Even if you never use that option to upgrade your flight if there is an annoying passenger, it doesn’t hurt to have the ability to do it.


Who are the top 10 world richest footballers?

It depends if you mean self-made or not. Faiq Bolkiah, from Brunei, is allegedly worth 20 billion:

He inherited most of that obviously. Apart from that, it is Ronaldo and Messi are at the top of the ten best paid, and wealthiest, players

These figures are a bit outdated so you can double them. People often forget that most footballers, even professionals, don’t earn much.

I have interviewed two former professional footballers. Both weren’t earning much as they didn’t play in the Premier League or other top leagues.

So it seems similar to acting. The 80/20 rule on steroids. The top 1% of the players earn maybe 80% of the income.

It seems similar in nearly all sports, entertainment and creative industries as well.

After retirement too, only those with personal brands (like David Beckham) actually make much.

Hence why many players go bankrupt after retirement.

Why are markets not reacting positively to any of the measures President Trump has proposed to address the crisis?

Well the markets don’t always behave rationally. They aren’t stupid either, but that doesn’t mean people act rationally in severe situations.

You ask this question in March. There was blind panic similar to 2008.

One month earlier, yes just one month earlier, markets had hit record highs despite the virus getting worse in China, Iran and South Korea.

Then they fell hard in March, with the Dow going from 29k to 18k at the worst of it:

Since then many major markets have largely recovered, with the Nasdaq in particular doing well:

The Dow and S&P500 are below their February peak, but are still higher than they were in November or December.

During the worst of the crisis, nothing Trump could have said or done, would have halted the slide.

It was a mistake for him to claim credit for rising markets, and also unfair for his opponents to criticise him when markets fall.

The president and politicians in general can only do so much in these situations of blind panic.

The fear during the very worst of every crisis is that “this time is different” and “things will never be the same again”.

Of course that is always proved untrue long-term and even usually medium-term.

Look at 9/11. People said traveling would never recover. In fact, inbound global tourism was one of the biggest growth industries in the 2010s.

I imagine passenger numbers will be much higher in 2030 as well.

What made your financial condition significantly improve?

  1. Focus. Focusing on just 1–2 things.
  2. Getting good at 1–2 specific things.
  3. Living below my means
  4. Not increasing spending dramatically as I started earning more
  5. Not trying to time stock markets. Just putting in every month through rain and shine
  6. Persistence and perseverance. More key than patience. Playing the long game (patience) can be important but in certain specific situations, being impatient for success is good if you are also persistent
  7. Reading a lot
  8. Breaking as many industry and societal norms as possible. You will get normal results if you take normal actions.
  9. Changing my residency to lower my tax bills where appropriate
  10. Not giving in to peer pressure
  11. Treating others as I want to be treated myself as much as is humanly possible.
  12. Trying out different things and not being afraid of failure
  13. Adapting to changing times
  14. Focusing on scale where possible and not just working harder. So working hard and smart with persistence
  15. Looking at my income, spending habits and investment returns and not just focusing on scaling income
  16. Not being complacent
  17. Trying to push myself beyond comfort levels and not being satisfied
  18. Co-operation with other people that can add value to life
  19. Getting hid of toxic people

20. Taking personal responsibility

21. Not thinking I know everything and being willing to change my mind

22. Understanding that every person I met might know something I don’t

23. Knowing that wealth is a marathon and not a sprint

24. Not being corporate

25. Understanding what motivates people.

Also even though he has his critics and I certainly don’t agree with everything he has to say, Grant Cardone makes a great point in this book:

Namely, if your goals are too small, too “realistic”, you won’t be motivated to achieve them.

Sometimes big goals are intimidating when you are just starting out.

As soon as you get some success, if you 5x, 10x or 20x your goals it can work if you are willing to be focused, persistent etc.

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