Many readers have asked me to put some of my Quora answers on my website after my rundown on my most viewed answers of all time.
Therefore, this article will list some of my most popular Quora answers from last week:
The only things we know is:
- To expect the unexpected when it comes to markets
- That the general trend will be higher over the decades. Just type into Google “record closes for the Dow Jones, S&P500 and Nasdaq” and you will see a pattern emerge……and that isn’t adjusted for reinvesting dividends either
- Despite number 2, markets will regularly go down and even crash. Over a 40–50 year investing career, you might see 10 or more big falls. So markets take the scenic route to record highs sometimes . Just look at recent big daily declines in the last 15–20 years
4. People who can’t deal with 20%, 30% or 50% declines will panic sell and lose.
5. Those that understand that stock market declines are actually good for the long-term investor will keep investing, not time markets and take advantage of any falls
6. Any net buyer of units (younger people and even some middle-aged people) should want markets to go down but shouldn’t keep money in cash waiting for those falls. Any net seller of units (those about to retire or those in retirement) should want markets to go up and up. Having said that, they should have assets in bonds as well for diversification.
7. Nobody can consistently time markets. I know countless “finance pros”. I don’t know one who has consistently timed the stock market. To paraphrase Vanguard Founder Jack Bogle, “i don’t know anybody who has timed stock markets long-term. I don’t even know anybody who knows anybody who has timed the markets”.
8. You won’t beat the market by listening to sensationalist media outlets as those pundits themselves aren’t beating the market by taking their own advice as per numerous studies done on CNBC and Bloomberg pundits, as per one of the links below
So in conclusion, don’t worry about it. It doesn’t matter for the long-term investor if markets are up or down sharply in the next few months or years.
You should continue to invest in either situation.
I don’t think he is overly boring. Now sure, he isn’t from the Elon Musk or Trump school of PR.
He has build the biggest firm in the world on some measures, by biding his time and being a great strategist.
Bezos and Amazon in general focused on the long-term. The stock price has only gone up a lot in the last 7 years or so:
People forget some basic facts:
- Life can be boring
- If you are willing to do the boring things better than others, you can succeed, because others won’t be willing to do it.
- Boring can be profitable for the reason given previously. Boring jobs can pay more as people don’t want to do it. Boring investment strategies can be profitable as Soros says below:
4. Boring can generate more profits and jobs than excitement.
5. Excitement only generates more profits if there is a method behind the madness.
The idea that doing what you love, making everything exciting in the process, is the bee all and end all is a huge mistake.
Everybody wants the bill. Few want the diet. The same in business, investing or life.
It has certainly been a relatively fast recovery, especially in the case of the Nasdaq.
Many people are probably celebrating, albeit in a less open way to this!
I don’t know anybody who predicted this recovery in addition to predicting the virus, lockdown and crash of March.
But to answer your question, no, not really. I am not especially thrilled. I would be thrilled if i was about to retire next month, and therefore my units are worth more in time to gradually sell out over a period of years.
If you are more than 5 years away from retirement, you pray that markets are down for a period of years or stagnant.
When markets rise again to all-time highs as they always have done in the US and most other key markets, your money will be worth more.
Let’s put this in another. Many people are saying to me that “i wish i had bought in in March”.
Imagine if markets had stayed at March levels for 5–10 years and then rose a lot in 2030–2032.
What a buying opportunity that would have represented! 10 years of declining or stagnating markets. A great opportunity for the long-term investor who is a net buyer.
The problem is, in March, many people didn’t go “all in” even if they had loads of cash and decided to have a wait and see approach.
Others panic sold even though a loss and decline are too different things, in the same way that an increase and gain is different.
This is not me suggesting that rising markets are a bad thing. Far from it. It can give people faith and keep them invested.
I am merely pointing out that people shouldn’t be afraid of falling markets, even a long period of stagnation, and especially volatility.
These moments represents a great opportunity. So if markets “do a March again” and crash this year, next year or in 10 years, that is nothing to fear, assuming you stay the course.
The only thing to fear is fear itself. In other words, how you will react. Often the biggest risk in investing is yourself and your own emotions.
As a final point, a v-shaped stock market recovery doesn’t always mean a v-shaped economic recovery and vice versa.
Nobody can predict either thing.
Here is legendary investor Peter Lunch speaking about the markets in the mid 1990s when the Dow was at around 4,000:
Notice how little things change. People still want to predict these things.
If we look at recent times, we can see how what was predicted by most people turned out false.
What was expected of the US stock market in 2008? Few thought there would be a crisis. It happened.
In 2009? Most people thought stocks would keep going down. They didn’t.
2010–2016 – most people thought the US Markets would have a bad year. They didn’t have a very bad year.
2016? Most people were convinced markets would go down if Trump won, at least for 2–3 months. They didn’t.
2017? Surely markets would fall on Trump? They didn’t
2018. Markets fell for the first time in 10 years, even though the US recorded it’s best GDP result for a while. They ended the year sharply down after hitting record highs earlier in the year.
2019 – Almost everybody thought it would be a tough year for US stock markets. The result? +30% give or take a few percentage points depending on whether you are looking at the Nasdaq, Dow Jones or S&P500.
2020 – nobody predicted the coronavirus and lockdown on December 31, at least in the investing world that I know of. Still yet, nobody predicted markets would hit a record high in February when the virus was getting worse, and the Nasdaq would hit another record high this month. Still fewer predicted the meltdown in March and subsequent recovery.
It should be obvious by now that there are two things to expect from markets; the unexpected but higher overall trend long trend.
Just easier to ride the rollercoaster than to plan to get off in the middle. It is much more profitable that way statistically speaking.
One thing I have also noticed, time and time again, is those people that do occasionally get market timing right, won’t get in if markets fall.
I had many associates who said “I will get in when the S&P500 next falls by 20%”.
They fell by more than that in March but they assumed markets would fall again!
So not only doesn’t market timing work, but even if you get lucky by waiting in cash, you probably won’t benefit.
The reason is simple. Somebody who is so petrified of falling or volatile markets, isn’t going to invest when there is 24/7 news coverage about a market meltdown.
They will play wait and see and regret it later, or better still, realise they should have just invested without trying to time events.
Follow your passion right? Well actually nobody cares about your passion or my passion.
They care about if you can solve their problems and pain points.
If you create a gym, focused on hot yoga, in an area which is full of old people who don’t have their health, you won’t succeed:
You aren’t solving their problems or focusing on what they are passionate about.
So the business can only succeed if it is online or you find a way to market it to those that are passionate about it, or you are solving their problems.
Nobody cares about your ideas or passions. Ideas are pointless.
Everybody has ideas and passion. Well executed ideas, based on your passion or even if it isn’t related to your passion, is more important.
Another mistake people make is not looking for big hits. Home runs:
If you are selling burgers for $1 a time on the street, with no online presence, you can’t hit home runs.
If you are selling $1 burgers at 30 locations you can, or if you stream yourself live on Youtube.
If you do that, you have a potential audience of billions globally.
The good thing abut business is you only need to be right once to make it.
Like those one hit wonders in music that keep making royalties for decades due to one big song.
Cuban says it here:
If you are a business owner and fail on Twitter, Facebook and all other social media but absolutely hit a home run on Youtube, with 2 million subscribers and a good monetisation strategy, that is much better than being OK at all platforms.]
Beyond that the covid crisis shows that private business owners shouldn’t put all their eggs in one basket.
Having private investments is also important.
It depends on things like:
- How secure is your income. If it isn’t that secure, I wouldn’t do it
- Is it a home only? If it is only a home, and not an investment, then consider it. A huge mistake people make is assuming their primary residency is an investment
- Where is it located? Some big cities have seen huge falls in house prices. If you are buying outside your home market, i would also be careful, especially in developing markets. I have lost count of the number of expats who have regretted buying overseas
- How long-term you are. If you are just using it as a home, and plan to live in it for 20–30 years, the pandemic shouldn’t matter. If you are planning to move every few years, it might affect things, and in that case you shouldn’t be buying anyway. It is better to rent in that case
- If you assume renting is dead money – if you are buying due to assuming that renting is dead money, this is always a bad reason to buy. It is simply not true to suggest renting is dead money as per the article below. In fact, renting in certain situations, can be cheaper. I even know some professional real estate investors that rent their own house, but have a “property empire”, for this very reason. A primary residency and rental property is very different .
- If you are influenced by peer pressure – if you want to buy, there might be good reasons for that. Peer pressure isn’t one of them. Many people buy property at 30 or 35 for this reason – “everybody else is doing it”
- If you were renting low but buying high – one of the reasons why renting can be cheaper is that people tend to be frugal with renting but go to extremes with buying, and spending a lot on renovating the house
There are good reasons to buy property but often people focus on the wrong things.
Unless somebody has an incentive to show off, it doesn’t make sense to do so. In most countries, showing off can be dangerous and lead to inconveniences such as more attention from competitors.
So excessive showing off is a sign that somebody is either:
- Has a rational incentive to show off. For example, some cynical social media “gurus” have an incentive to show off. The reason is simple. Their audience is often young and impressionable, or have never had wealth. So making a video in the back of a luxury car, gives them more social proof in the eyes of this market. For example, Dan Lok wasn’t known to be successful before he became a social media star. Now, despite getting rich from giving out advice rather than taking his own advice, he appears in videos looking like this:
- Or these people are very new to wealth. So very young or has recently acquired it
So most of the people you see who are showing off are either rich income but low wealth, or are fakes.
I have lost count of the number of people i have met that struggle to keep up with car or luxury house repayments.
Any wide ranging surveys of wealthy people has shown that most aren’t flash. Many aren’t even high-income.
Teachers, accountants and managers dominate the ranks of the wealthy. People who merely got rich slowly over a period of time.
14% of the world’s millionaires are said to be teachers and accountants and managers are the number 1 professionals for millionaire status in many countries.
Often they have just invested early, had middle or upper-middle incomes and have been sensible.
For example a teacher who started investing in their 20s, got promoted into management in their 40s and 50s.
You don’t need to be high-income to get rich slowly investing, if you are patient enough.
Not everybody is like that but they represent a huge percentage of the wealthy in most high-income countries.
It is only when you get to people with very high net worths, that you see more businesspeople.
The main ones are:
- You only need one big hit. One home run. As a private business owner, you only need to be right at least once in your entire career to do well. Almost like a one hit wonder in music. Of course, you ideally want to be right more than once in a big way.
2.You can get wealth – on a middle-income
3. You can get very wealthy – on a upper-middle or high income, especially if it is scalable, in addition to decent spending and investment habits. In fact, probably at least one person in your network is worth 5m-10m if you live in a developed country. The kind of person who is 555–60, an engineer or manager, and has invested from a young age.
4. You don’t need to reinvent the wheel – but breaking industry, cultural and social norms can help you succeed
5. Success is different things for different people – you need to define what you want
6. Simplicity beats complexity – simple moves can be very effective. Simple example. Let’s say you are relatively high income. Changing your residency could save you a fortunate in taxes and sometimes cost of living.
7. Be careful who you surround yourself with – it is much harder to become successful if you get divorced 3–4 times and make the wrong friends.
8. Be open. Number 7 notwithstanding, you still need to be open to others. Don’t be naive and don’t be untrusting. Have a middle ground. Most people are more trustworthy than you might think but that doesn’t mean you shouldn’t be careful about who you associate with. You are often influenced by the people you surround yourself with. So if you surround yourself with pessimistic people, you are more likely to become like them
9. Focus. Focus on 2–3 key things
10. Persistence. Beats patience. Sometimes you do need to be impatient for success whilst playing the long game.
Also don’t take yourself too seriously. Today’s scandal is tomorrow’s fish and chip paper.
Unless you are Coca Cola, Warren Buffett or another huge name, you don’t even have a reputation.
When you are 20 you care about what everybody thinks, when you are 40 you stop caring and when you are 60 you realise nobody cares in the first place as goes the expression.
Don’t assume social media has changed that fact.
How often have you heard these excuses:
- “Someday” I will do it
- “life got in the way”
- I don’t have time
- I don’t have enough money
- Once I get a promotion I will invest
- Once I move cities I will invest
- I will speak to my wife and husband before investing
You hear all these excuses and conditionals, but once you dig down into people’s lives, it is about priorities.
Most people would make it a priority to go on a date with a model if they were single.
Most people make partying a priority in their 20s. Most people make traveling a priority.
And that’s great! Balance can be a key to life and I also made those things a priority at some stages of my life.
However, you also need to make wealth building a priority. You will never be younger than you are now and you will never face the perfect time to invest.
This quote says it all:
So just get started on the investing journey even if you start small when you are young.
Half of life is turning up and doing it early enough to compound when it comes to investing is key.
Many people act as if they are immortal and life will never change.
I have lost count of the number of 50 odd year old teachers in Japan, as one example of many I could use, that used to earn as much as $100 an hour in the 1980s during the bubble.
They thought life would be like this forever, just like the people in oil&gas in the Middle East in the 1970s and 1980s.
Times changed and many of those people didn’t fix the roof when the sun was shining.
Beyond that, don’t spend all your money saving for a deposit on a house, keep learning after university and have a good balance between being frugal and enjoying yourself.
If you do those 2–3 things, you will beat most people.