I often write on Quora.com, where I am the most viewed writer on financial matters, with over 337.1 million views in recent years.
In the answers below I focused on the following topics and issues:
- What are the mistakes to avoid while buying a house?
- Are stocks outside the US cheap right now?
- Is running your own business stressful?
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Source for all answers – Adam Fayed’s Quora page.
What are the mistakes to avoid while buying a house?
Well, firstly, actually go on some online buy vs rent calculator. A lot of the things we have been told, such as renting is dead money, is an over-simplification, especially for people moving around.
Assuming you do this and ascertain that buying is cheaper in your individual circumstance, then avoid these mistakes:
- Spending as much as possible on a home. A house is an asset if it is a rental property. A primary residence can be a liability in some ways. Moreover, if you put in as much as you can possibly save, this means you can’t invest elsewhere. As property isn’t the best-performing investment over time, this is an indirect loss.
- Not doing due diligence on the materials and so on.
- The second point becomes more important if you buy abroad, where often you don’t know the language or legal system. In this case do extra due diligence. Property isn’t liquid like a stock. If you buy and can’t sell that is a huge issue.
- Buying for status and to show off on social media.
- Focusing on capital appreciation and paying off your mortgage as quickly as possible. One of the advantages of property is the ability to use leverage. You don’t want to over-leverage, but you should take advantage of using it sensibly. Even if you are lucky enough to buy in cash, or at least put down 50%, you often shouldn’t. It is tying up your money which could be used elsewhere, and you won’t leverage as much. Likewise, if you are buying a rental home, the yield is more important than capital appreciation, as it isn’t based on speculation – at least to the same extent.
- Don’t focus on stories when buying. If it was obvious that location X was going to be the next London or Singapore, then everybody would buy there.
And finally, I will end with a big one. Failing to factor in time to the return on investment (ROI), or comparing it to other opportunities.
If you invest in direct property and beat the S&P500 or a global real estate investment trusts (REITs) index by 0.5%-1% per year consistently, then that is good, provided you haven’t spent too much time doing so.
If you are spending five hours a week doing this, when the other investments aren’t as time-intensive, then it isn’t a good investment adjusted for time, when you factor in the alternative.
This is why people should also consider using a trustworthy agent, if they save you time, and can make the process smoother.
Everyone says I should invest in stocks, but I’m nervous about the current markets in 2021. Should I be?
You might be surprised to hear this, but stocks are actually cheap if you look at the international markets.
The CAPE ratio measures real earnings per share over a 10-year period. The higher the CAPE ratio = the more overvalued the market looks.
Here is the CAPE for the FTSE100 in the UK – the largest hundred firms on the UK stock market.
Here is MSCI Emerging Markets:
Here is the Japanese stock market – one of the bigger countries in MSCI World:
So, valuations outside the US aren’t high by historical standards despite 0% interest rates and QE.
In the US, valuations are higher, especially on the NASDAQ, but we are in unique times.
Investors also see US markets as being safer, at least long-term, versus most in the world, so the lower risk is factored in.
The point is, if you invest globally, you aren’t buying in at historical highs from a valuation standpoint.
Besides, if you are long-term, which you should be, you shouldn’t care if you buy in and markets crash.
It isn’t like anybody lost money investing one day before 2000, 2008 or 2020, if they held on.
If you invest money and markets fall, and it takes a few months or years to recover, it won’t cost you anything.
In fact, once you have fresh money, the lower valuations will help you. One of the reasons market timing doesn’t work is that most people have a salary or business earnings anyway, and therefore invest monthly or at least periodically.
That means you will benefit if markets are stagnant for a time.
Is it true that owning a business is really stressful?
It depends. This man certainly doesn’t think it needs to be:
It is possible to automate and work a few hours……often due to previous hard work.
Most of the successful business owners I know who have gone down this path used to work very hard.
The automation came later, after years of tweaking processes.
Few, however, do this in reality for a simple reason. Most people who start their own businesses are driven.
Think about it. If somebody wasn’t driven, why not just get a good-paying job, become a sole proprietor or go down the self-employed/freelance route?
If it was only about making more money than from the day job, that is possible to do going down these routes, with fewer risks.
Therefore, most people who actually set up a business and employ others, tend to be driven.
By nature, then, these people will likely push themselves harder, even if success has already been achieved.
So, it can be stressful, but so can jobs or going freelance. Everything can have stress.
They are just different. A successful business owner, who has cash flow sorted out, doesn’t worry about being fired, or paying their bills on time.
They might worry about compliance, legal risks, or tens of other problems that can come up.
In comparison, many salaried employees worry about job security and other issues, but can sometimes mentally switch off over the weekend and on holidays.
So, the potential for stress is unavoidable, no matter which route you take. You just need to pick which ones you want.
If you want as little stress as possible but still work for yourself, it is better to go freelance or just be a sole proprietor.
This way your upside is usually capped to a greater extent, but you will have fewer things to worry about.
A self-employed plumber who is established can go away for a two-week summer holiday and not worry, or even think, about business.
Somebody who has a team is less likely to be able to do that unless they have outsourced and delegated really well.
The most stressful time is when you are establishing a business because you are working harder than most people and don’t even usually have the security of an established business.
That comes later.
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Adam is an internationally recognised author on financial matters, with over 622.8 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.