I often write on Quora.com, where I am the most viewed writer on financial matters, with over 283.5 million views in recent years.
In the answers below I focused on the following topics and issues:
- What are some of the simplest rules for investing success, apart from the obvious ones like starting at a young age?
- What are some of the most effective ways of getting out of poverty? I look at countless aspects such as avoiding vices and debt.
- Do I worry about post-pandemic inflation, given that the stimulus this time has came on top of an economy which is recovering more quickly than in 2008? I explain why I am not overly worried about huge inflation.
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- Live below your means and invest the surplus wisely
- Start the investing process early due to compounded investing returns. Even if you didn’t start early, you aren’t ever going to be younger than you are today.
- Don’t speculate, be an investor instead. If you really want to speculate, do it with 10% of your portfolio at most.
- Don’t get too excited by market rises, or too worried by market falls.
- Time in the market beats timing the market.
- Stick to an investment plan. Don’t always change it up, assuming it is the right long-term plan for your needs.
- Speak to your partner about money, because money is one of the biggest causes of divorce, and divorce is one of the biggest causes of money problems!
- Make investing as easy as possible. The best way to do this is by setting up a direct debit to your investment account one day after you are paid.
- Focus on execution, not knowledge. There are many knowledgeable people who don’t invest as much as they should
- Don’t be put off by recent stock market returns. Nobody would have invested in the Nasdaq in 2009 or 2010, if they were worried by recent performance.
- Be diversified but don’t overdo it. There is no reason to be in certain asset classes.
- Keep emotions out of investing as much as possible.
- Learn from people who are similar to yourself (similar job, situation etc) who have made investing work for them.
- Don’t worry about things which aren’t relevant like which currency you invest in if you are an expat. If you invest in say an ETF, you aren’t investing in the currency, but the asset itself, so it is irrelevant if you invest in the S&P500GBP or the S&P500 USD.
- If you want to do your own investments, do enough reading so you know what you are doing.
- Take advice where you need to. Know the limits of your knowledge.
- Don’t let peer pressure stop you from investing, or for that matter, force you into high-risk areas. Plenty of people got into fashionable areas like technology in the late 1990s for this reason.
- Buy and hold as much as possible, rather than buy and trade. It is usually safer, cheaper and involves fewer taxes in many countries.
- Hope for the best but plan for the worst. If you invest and you see 0% growth for ten years like investors faced in the 2000–2010 time period, don’t panic! It isn’t even the worst either. If you invest and markets are stagnant for a decade, you are buying at cheaper prices. You are “collecting” investment units. Like an artist who collects paint works, the more you collect with lower prices will positively affect your returns.
- Reinvest dividends. It makes a big difference.
Inflation Deflation Debate Rages On: 2010 Economic Collapse
12/22/2009 Peter Schiff On Fast Money: Hyperinflation In 2010?
Oil Prices Headed for $200 a Barrel Economic Monitor 2014
As the three videos above show, these things come and go. I could have literally posted hundreds of videos, of a fear mongering variety, from the last few decades.
it isn’t only minor celebrities who get these things wrong as well.
George Soros predicted that the 1997–1998 East Asian Financial Crisis, now seen as a relatively minor one compared to 2008 and 2020, would result in a Great Depression.
The point is, nobody can predict these things, but fear sells. Whatever bleeds, leads.
Therefore, I would take these predictions with a pinch of salt, especially the fear mongering ones.
The same people who made such outrageous predictions in 2008 are saying “I am right this time because QE is bigger this time around”!
However, I do think the inflation threat this time is at least more credible than in 2008–2009.
That is because:
- The monetary and especially fiscal stimulus is higher this time
- Believe it or not, the economic recovery is quicker this time, so people have more money in their hands. The latest stimulus was stimulating an economy which is already doing very well in many countries.
- People aren’t paying off debts unlike in 2008–2009, and are therefore ready to spend more.
- The banks aren’t in a bad place so are lending more to businesses and consumers.
- There is a lot of pent up demand for things like travel, once more countries open up.
However, a much bigger threat is inflation rising a bit, and now 1970s style price increases.
So, would I worry about inflation hitting say 5% per year. regularly and your money being in the bank, rather than invested? Yes, a bit.
But would I worry about 25% per year inflation? No. Just invest in productive assets, which will do well if inflation increases.
Many people see the increase in asset prices as a sign of future inflation.
Yet wealthier people have always preferred to put money to work.
The low interest-rates have just exacerbated that situation.
In an ideal world, you would:
1.Don’t have kids – at least until you are financially secure. If you are poor and have kids, you will have fewer opportunities to move around for jobs.
Of course, in some countries, governments do pay welfare to people who have kids, so it depends, but in any country, having kids too young when in poverty “locks in” a poverty circle which is hard to get out of.
2. Live below your means. Even if somebody can’t afford to save, it is good to not get into consumer debt, and try to save just a little bit for emergencies.
Often it is culturally. Many immigrants in the West manage to save regardless of their income.
3. Play the long game
I noticed something at 16, 18 and 20, and more so now I look back with more wisdom.
People who are born into poverty often struggle to play the long-game, often subconsciously.
I remember when I was 16–17, there were some students who got part-time jobs.
Often they worked as long as possible in these part-time jobs, and skipped university to earn more.
Sometimes they would get excellent salaries for their age, but a decade or a decade and a half later, they are often not doing that well.
That doesn’t mean everybody has to go to university, but the point is, decisions should be made with the medium-long term in mind.
A quick buck today isn’t always the best option, if it means sacrificing the future.
That is especially the case when people are very young. Making an extra $50 a week from working more might be less useful, long-term, compared to working a bit less at that part-time job and reading more.
The same is true in investing. As per Warren Buffett’s business partner’s quote below, great investing is usually long-term.
I know some pretty wealthy people who have never made that much money.
So, how did they do it? Often they just started investing tiny amounts, like pocket money, from their late teens, and then increased it as they got a job.
Plenty of wealthy people “get rich slow”, on incomes which aren’t huge.
4. Avoid vices
Alcohol, smoking, gambling and any other vices can be dangerous if taken out of moderation.
If somebody is already struggling, these things are less likely to stay in moderation.
It is one thing to have a glass of wine a week. It is another to get drunk every night whilst being unemployed.
5. Focus on your network
Why do some young people end up in gangs? They get in with the wrong crowd.
Conversely, many people who have left poverty behind got in with the right crowds, and had positive influences in their life.
For example, somebody gets spotted as a potentially excellent footballer, and a team takes them under their wings.
Or, a friend of a family member who owns their own business, helps out. These small changes in influence make a huge difference.
Often times, completely changing the scenery can make a difference.
People struggle to leave toxic friends, and even family members, behind.
If people go to university, get a job in another city or even emigrate, they can often start fresh.
I have seen it several times living overseas, where people feel they have a fresh start living in a new country.
People tend to get more influenced by seeing other people, with past stories just like their own, who succeed.
For other people, finding good resources online can be an excellent alternative as well.
6. Learn new things
Not all learning has to be academic. Some can be, but other things could be learning a trade, personal finance tips, how to communicate and market yourself which will help you get jobs and interview better etc.
Learning a new skill which helps your income + another one which helps you manage money once you get that new income is a winning combination.
Most people who increase their income end up spending it all. That is one reason why even many lottery winners end up broke, or up to 80% of former American Footballers do as well.
The point is, lack of income isn’t the only thing keeping people in poverty.
Somebody can have all the money in the world and end up broke if they are addicted to vices and don’t know how to deal with money.
Look at somebody like Mike Tyson. In his book, he admitted he ended up broke despite earning over $500m!
This article tells the story.
As he says “Tyson and his wife, Kiki, were once nearly broke. They went to their local supermarket in Henderson and, after all his squandered hundreds of millions, he was worried that they didn’t have enough money to pay for their small cart of groceries. “I kept telling Kiki: ‘Put that back’
So, changing habits is the most difficult thing.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 283.5 million answers views on Quora.com and a widely sold book on Amazon
In the article below, taken directly from my online Quora answers, I spoke about the following issues and subjects:
- Why are people in their 20s and 30s renting instead of buying houses? Is it purely for financial reasons, or perhaps the world has fundamentally changed?
- What do you lose, and gain, financially when you work at home? Is working from home only a positive thing?
- Does being modest and frugal simplify your life? I argue that frugality can make your life much easier.
- Is there such a thing as “the best” European country for an expat couple in retirement? I assess the options, including some typical expat destinations in Southern Europe, alongside some up-and-coming places.
- What are some ways to make money online apart from subscription models? What stops most people from earning a reasonable amount online?
To read more click on the link below.