This article will list some of my top Quora answers for the week.

Why is Warren Buffett not investing in Tesla?

Source: Quora

I don’t know, but I can take a guess. The main reasons I think he won’t invest in it are:

  1. He doesn’t invest in businesses he doesn’t understand
  2. He focuses on value and not stocks that have gone up by hundreds of percentage points or more
  3. Tesla still isn’t making money! That is quite a key point. Therefore, people are buying it based on future potential earnings and profitability. A bit like somebody who overpays on a house hoping that its 2030 value will catch up with the inflated 2020 price. That speculation might pay off long-term or might not. But it is still a speculation.
  4. There are a lot of risks with Tesla.
  5. In the car industry there isn’t much of a first mover advantage as Aaron says. So even if Tesla becomes profitable, another firm could take over from them. It is much more difficult for somebody to compete with Gilette or Coca Cola. If you look at a lot of the firms that he has invested in, they all have that “moat” around them:

You can see Charlie Munger, his business partner, explain why he would never buy Tesla:

A rational investor can only make a decision based on the information that is available to him or her at the time of making that decision.

Nobody has a crystal ball so that is the only rational thing you can do.

Who will benefit from a coronavirus pandemic?

Source: Quora

It isn’t so much the pandemic as the aftereffects of lockdown. Lock down has pressed the fast forward button.

We were already going towards an online world anyway. Netflix subscriptions were increasingly dramatically in 2019 after all.

More and more business was going remote, gradually, from 2000 until 2019, and especially for the five years before the virus.

That trend will just accelerate now. Apart from a few dinosaurs who never change, who will be reassured by a fancy office, flash suit and used car salesman pitch these days!

The old ways of doing business, where you are invited to attend a face-to-face meeting, give out a business card and build trust due to your flash office, will get even harder to do.

Again these things were going on before the virus. I just googled when I wanted something in 2018 or 2019, but there were still people doing things in old-fashioned ways.

This trend will be bad for many traditional business and people who used to gain advantages from face-to-face communication, such as those that are good talkers, good looking etc.

It is a fact that good looking people earn, on average, more. In another 20 years, I suspect that gap will change.

Likewise, historically, extroverts have gained more than introverts.

That was already changing before the virus and will likely continue that trend.

Who has the bigger advantage in 2020? The “life and sole of the party” who can get 10 people to like them in person, or the person who can write a world class article from their computer which ranks number 1 on Google or at least on the top page…?

The answer is obvious. So those good at thought leadership, including introverts who can quietly get across their expertise, will gain, as will online companies who get their strategy right.

The only thing which might regress is manufacturing. Whilst services will probably get more and more global, there might be a push to localise supply chains for manufacturing due to the virus.

Finally, just like 2008, long-term the lockdown will probably help investors over savers.

Markets might be volatile, but just like 2008, QE and 0% interest rates are likely to push markets higher.

Historically markets in the US gave 6.5% after inflation, albeit not ever year due to the volatility, and cash in the bank was inflation +1% or inflation +2%.

That gap will probably keep rising just like it did from 2008–2020.

As an aside I think a far bigger trend than video calls will be completely humanness interactions.

When I am buying a product or service, I would far prefer doing everything by email, WhatsApp calls etc.

A video call is my second least preferred form of communication after face-to-face.

As the saying goes, everybody loves to buy, but few people like to be sold if it done in a very personal way.

That’s one reason online was getting bigger even before the virus and firms like Facebook have kept getting bigger.

An Ad on Facebook or google might be annoying, but you can skip past it if you don’t like it, and only engage when you want the service.

In comparison, in person and to a lessor extent on video, is more uncomfortable.

Is it true that U.S. citizens who live abroad still have to file a tax return to the IRS?

Source: Quora

This man fell foul of US tax laws as he was born in America – as the BBC reported – Boris Johnson settles US tax bill

If even top ranking, and wealthy politicians can get caught out unexpectedly as they didn’t know the rules, then so can everybody else.

Filing is true. It isn’t filing alone. Many people still need to pay taxes above a certain level, which I believe it is $105,000 now.

So if you are a Brit or Canadian living in Dubai or Saudi Arabia making $200,000 a year, you don’t usually have to pay taxes back home or indeed locally as they don’t levy income taxes.

For Americans, alongside citizens of Eritrea and North Korea, you do need to pay taxes above a certain threshold.

That is because the US has a Citizenship based taxation system, and not one based on territory or residency.

More importantly, there are now more restrictions on what kinds of assets Americans can invest in.

So you can get many unexpected tax bills on assets, including homes abroad.

This was explained in this webinar below.

It isn’t as scary as it sounds though, it just means that most Americans living overseas need to know what they are doing with their taxes and assets, or need to hire an accountant and others to help them with it.

The important thing is getting educated and receiving advice where appropriate.

How much cash do the ultra-rich keep in their wallets?

Source: Quora

Not much, and some have zero in some countries now. China is a good example of that.

Even many middle-class people no longer use cash:

Sweden is fast becoming a cashless society:

However, the wealthy aren’t a monolithic group, and plenty do carry cash as well.

Mark Cuban recommends that people, including the wealthy, carry some cash as it is a good negotiating tool and stops you spending so much money.

Personally, I do think there are advantages of carrying cash. In some countries, some services are still cash based.

When I was back in the UK recently, 90% of products and service can be purchased by card – more in London.

And yet in taxis outside of London (no Uber in small towns) and in fish and chip shops, I needed cash.

Likewise, it is more painful to spend cash. Even if you are wealthy, giving over $1,000 or pounds in cash for a phone feel painful.

So carrying cash is a good way to spend less money, with zero budgeting.

Some studies have shown that most people spend 5% less without even trying for this reason.

It subconsciously affects your behaviour in the same way that automating investing makes you invest more than needing to send by bank transfer.

That beats the negatives associated with cash such as the dirtiness and so on.

However, there is also a big difference between the wealthy and “ultra wealthy”.

It is quite different being worth $10m to 50 billion and that changes behaviours and incentives.

If a study was done I highly suspect that demographics and society people live in has a bigger barring on this.

I have met ultra wealthy people from societies where cash is widely used, such as Nigeria, who have used cash more than even broke young Chinese and Swedish people.

Wealthy people are just people as well. They are also influenced by what is familiar.

Is the stock market a place where the average Joe will never get rich, but only encounter frustration?

Source: Quora

The average Joe will only get frustrated by the stock market if they don’t know what they are doing.

Typically that happens when they sign up for do it yourself accounts through the likes of eToro, Interactive Brokers and Saxo Bank.

Nothing wrong with those companies, but the key words are do it yourself (DIY).

You wouldn’t DIY your house if you didn’t know the basics at the very least.

It could end up as a disaster:

So realistically people need to either:

  1. Take the time to educate themselves
  2. Find somebody who can help them see the woods from the trees. Outsource the process to an expert.

The biggest causes for frustration are

  1. Lack of patience. Many investors read about things like the S&P500 averaging 10% if you reinvest the dividends, and the fact that the Nasdaq has done about 11% over the last 30 years, not adjusted for dividends. That’s true but you need to deal with a lot of volatility and periods of stagnation.
  2. No control over emotions. Using the aforementioned example, the Nasdaq might have done well over 30 years, but has an awful time after 2000, falling as much as 75% from the peak. Now sure it recovered, but many people don’t have the emotional control to deal with this ride.
  3. Wanting the wrong result. Many people get frustrated if their portfolios aren’t doing well, but a net buyer of units (younger people and even some people in middle-age) should want markets to go down or stagnant. Net sellers (older people) should want markets to go up
  4. Watching the media too much. It is amazing how many people claim they have invested with the likes of Vanguard, and watched the likes of Jack Bogle (Vanguard’s founder) on Youtube alongside Buffett, ye decide to time the market. An example of this was 2 years ago. I met a British guy in Korea. He told me he invested in Vanguard after reading Jack Bogle’s book, but, quote, “stopped investing after Trump got elected!”. At least he didn’t panic sell, but the point is, such actions go completely against Bogle’s advice.
  5. Following on from point 2, Vanguard’s own research shows that net inflows were highest in 1999, and net outflows were in 2008 due to panic sellers. Look at March. Many people panic sold again! Even those investors that DIY invest in Vanguard’s own indexes get an average of 2% per year less than the same indexes they are invested in. Why? They either try to time markets or put in more during the good times, and stop investing during the bad times.

So the bottom line is, DIY isn’t bad if you know what you are doing and can control emotions.

There is no reason to be frustrated as well, if you understand at least the basics about markets.

So if you bought up in a society where everybody uses cash, and you get very wealthy after 50, you might not suddenly change your habits.

What are some of the costliest mistakes that companies and businesses have ever made?

Source: Quora

A few years ago I was speaking to a friend who lives in Cambodia.

The cafe we were sitting in overlooks a temple:

He was relatively new to the Asia-Pacific and commented that “I really admire Buddhism”.

Somehow the conversation came around to him comparing Buddhists unfavourably to those “hard selling” Christian missionaries that comes from overseas, typically the United States.

And yet what are the results? Many people admire Buddhism but when was the last time you heard about somebody converting?

Not often. In comparison, Christian missionaries, rightly or wrongly, have succeeded in converting hundreds of millions of people around the world in the last 100 years.

Yet their tactics aren’t that popular, even amongst Christians and many others.

There are some important business lessons here, even though for some it seems unrelated.

For new businesses that aren’t established, most people think it is about the great idea.

If you have a great idea, and your first customers love it, they will tell everybody else.

Then magically by word of mouth you will get popular, and work on a referral basis.

That is wishful thinking. We aren’t in the economy of the 1950s. We live in a competitive world.

So being known, even if you are unpopular amongst many, beats being unknown.

Who wins? The person who is known by 200 people in their local community and 100% of people like them?

Or a social media influencer who is known amongst millions of people, and yet opinion is divided. The answer is obvious.

So for new businesses, they need to get their name out there. That is even more important than having a good product or service.

Ideally you need both – be known and have an excellent product or service.

But if your product is just OK, but you are well known, you will beat an unknown person, brand or business with an excellent product.

Now for those few brands that are known by almost everybody globally the situation is different.

One of the costliest mistakes ever made was when Coca Cola changed to “New Coke” in the 1980s. But that is different. Most businesses aren’t Cola Cola.

You shouldn’t change a winning formula, but to get to that winning formula, you might need more assertive tactics early on.

Can you retire comfortably with 2 million dollars?

Source: Quora

In most places in the world you can, if:

  1. You know how to handle money. In cash and with 0% interest rates, it will get eaten up by inflation. You need to put the money to work!
  2. You don’t live in an ultra expensive place. Using the conservative 4% rule, $2m is $80,000 per year and you can increase that in line with inflation. You can live well in most places on 80k. There are a few places where you can’t, especially if healthcare isn’t free as an older person
  3. You don’t take silly risks with money. This is on the opposite end of the extreme to number 1 and keeping money in cash. Doing things like keeping most of it in 3–4 properties, with nothing liquid, always increases risks if something like coronavirus happens again.
  4. You do something silly with your money. Let’s say you have read about the 4% rule of retirement but then 2008 comes along, or March 2020 happens again. You panic sell. Of course in that situation, it gets harder to fully recover.

So the bottom line is, if your lifestyle can “fit into” a 80k budget, then you can do it.

What does make sense though is to budget for the worst case, including medical insurance and other basics going up.

If your budget comes to 78k it is tight. Always budget for needing much more in retirement than you thought you did.

Many surveys suggest that you need 70% of your pre-retirement income after you stop working.

That is because your committing, housing and child-related costs have usually gone down.

However, for many people that figure is a minimum. I have lost count of the number of people that thought retirement would be like this:

After a few years they want it to be like this:

That’s when there is a discrepancy between plans and reality.

In a tight economic time, what can middle class people do to stay middle class?

Source: Quora

It depends, because every time there is a tight economy, the situation is a bit different.

Realistically, people need to invest more during the good times for themselves, including when they are doing well but the economy is doing badly.

This will protect you when, and if, the bad times hit. Apart from that it is important to:

  1. Adapt. Look at this crisis. For years many people didn’t want to adapt to the online world. Now many are being forced to. Again though it is always better to be proactive rather than reactive.
  2. Learn new skills, and read more. This is also a good habit to do in all times, but can be more necessary than ever in the bad times.
  3. Live below your means and invest the surplus wisely
  4. Learn to negotiate hard. This can stop you losing out on money, opportunities including pay rises etc.
  5. Avoid extremes. Don’t get sucked into get rich quick schemes but also don’t make the mistake that so many people made in 2008 and March of this year – “let’s wait and see”. I have never met a person who has regretted long-term investing. I have met countless that regret not trying as hard as possible to invest during the bad times.
  6. Budget hard if your pay has been cut or be prepared to work more
  7. Don’t decrease marketing budgets if you are a business owner. Many firms cut their budgets during a downturn. If you can afford to press the accelerator during moments like these, then you should. Take advantage of other players not being on the pitch. Be hopeful when others are fearful in business and investing.
  8. Be willing to make the big decisions including changing your industries, job or employer if needed but don’t panic and make quick decisions.
  9. Spend more time with people who are wealthier, and less time with people who are struggling middle-class. The reason is simple. We become who we associate with over-time. Those that spend more time with successful and optimistic people eventually are more likely to change their circumstances.
  10. Focus on the long-term/long haul.

So in many ways, there is no need to change your behaviour that much during the bad times, if your actions and behaviours were also good in the good times.

People are more likely to get into trouble if they have been spending as they go along, only for a black swan event like Coronavirus or 9/11 to affect plans.

The unexpected is to be expected.

What should I invest in if I know a recession is coming? Ie The looming recession due to Covid19 inpact

Source: Quora

There are numerous problems with trying to trade the market based on a recession:

  1. Nobody really knows how long or deep a recession will be. They seldom behave as expected and usually are more severe, or less deep, than expected on day one.
  2. We can’t assume that historical performance will be replicated because things change. Look at stocks. In the 1950s when most stocks in the US and other developed countries was owned by the average person, and only 10%-20% by institutional investors like hedge funds and banks, the economy and the stock market could sometimes be connected. When the average American, or Brit, was feeling the pinch, they often needed to liquidate stocks. These days, most stocks are owned by institutions. Only about 10%-20% are owned by individuals and most of those people are wealthier. Even though over 50% of people own stocks, richer people own about 90% of stocks as they buy more. So markets can easily go up in bad economic times if richer people and institutions are buying.
  3. When researchers have looked at long-term correlations, they have found little or no correlation between stocks and GDP or recessions – in fact stocks have often gone up during recessions and usually go up strongly thereafter. That doesn’t mean it will always happen though.

4. Nobody can time markets – no just stock markets but also the gold markets, bond markets and other markets long-term.

Which asset has consistently gone up when stocks have gone down? Short-term government bonds.

In 2008 and during the worst of March, short-term government bonds went up, when medium and long-term bonds went down slightly alongside commodities and gold.

Therefore, the best thing is to do what you would normally do:

  • Have a mixed portfolio of stocks and bonds. If you are younger, 10% in bonds is fine. If you are near retirement, then 30%-50% is better
  • If stocks fall, or outperform bonds, rebalance. For example, in late 2019 after a 10 year bull run, that was a good idea to sell some stocks to rebalance to bonds. Likewise, March would have been a good time to rebalance back to stocks.
  • Keep investing monthly into both stocks and bonds so you are buying at average prices.
  • Be globally diversified

If you do all of those things, you will actually benefit from falling or rising markets over the long-term.

If markets fall, you are buying at cheaper prices for years, when they rise again, you will make even more than if markets are almost constantly rising like they were in the 1990s or 2009–2017.

Such a strategy also saves people a lot of hassle and worry.

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