I often write on Quora.com, where I am the most viewed writer on financial matters, with over 255.5 million views in recent years.
In the answers below I focused on the following topics:
- What financial advice is obvious but worth repeating? In addition to obvious “rules” such as live below your means, what other things shouldn’t we forget?
- Does getting an MBA help you start a business? I look at the pros and cons of going to business school even though I come down strongly on one side of the argument.
- Are healthcare ETFs the best to buy? I speak about the pros and cons of healthcare, including new growth areas such as health technology rather than the traditional (and conservative) firms.
- What professions can make people a millionaire by 30? I have often pointed out on previous answers that there are many middle-class and middle-aged millionaires, such as teachers. However, if you want a more aggressive strategy, which jobs or industries potentially allow you to achieve this aim early?
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The first is that getting the basics right is the most important of all. Simplicity beats complexity.
People assume you need to have a really high IQ, specialist skills or loads of contacts to “make it”. That isn’t true.
Apart from that I would say
- Spend less than you make and invest the surplus well.
- Focus on your income, spending and investment habits and not just one of those.
- Don’t put all your eggs in one basket
- Volatility isn’t usually risk. Cash is non-volatile but risky in many ways
- Being long-term is the safest way to get higher returns with lower risk.
- Nobody can predict the future for sure. The past is a decent, but extremely imperfect, guide to the future. Just because something has never happened before doesn’t mean it never will.
- Don’t try to time the stock markets
- Common sense isn’t that common
- Don’t panic during stock market crashes.
- This time probably isn’t different. That is said after every crash and was predictably said during the 2020 one as well.
- Consistency is key. Doing things for a long time works due to things like compounding.
- You shouldn’t speculate
- Even though it isn’t obvious (and in fact seems counter-intuitive) that GDP, pandemics and elections aren’t correlated with stock markets, it is best not to assume correlations which often don’t exist.
- The media exists to sensationalize. Don’t look to them for advice, more for entertainment if you need any,
- Just as past returns aren’t a guarantee of future ones, past predictions aren’t a certainty of future right ones. Just because somebody predicted COVID-19 or the 2008–2009 crash, doesn’t mean they will get the next one right.
- Know what you are doing it ise an advisor. Advised clients, and people who really know what they are doing, get better returns than the average DIY investor.
- If something is worth holding forever, then it is probably a good investment.
- Being diversified is good, but don’t go over the top.
- Don’t just blindly follow what your culture believes about money, as there are many myths out there about certain assets
- Risk and return are usually linked…..at least short term. Longer-term, it is more questionable whether the link exists as you can ride out any volatile moments.
- Being careful about whom you get married too, and indeed associate with more broadly, should be obvious, as your network and actions contribute to your mental and financial wellbeing.
- It is difficult to get wealthy investing quickly. It isn’t that difficult to get there over decades, even if you have an average income.
- Emotional control is often the most important thing as per this quote:
And final perhaps, doing some non-obvious things as well can also make sense, once you have got the basics right!
I quit business school, studied something else and then went into business………..so perhaps I am biased.
Anyway, most of the successful firms in this world were created by non-MBAs and for that matter, non-business school types.
The world is moving at such a fast pace, moreover, that the things you learn in business school become redundant quickly.
Elon Musk also speaks about some of the issues with MBAs here:
Buffett and Munger also criticized business school below:
That isn’t to say it can’t be useful.
For example, you gain:
- A network. The other teachers, students etc. Regardless of whether you learn is useful or not, this aspect could benefit you. You will forget some of the things you learned, but not the people.
- An understanding of the basics. The very basic subjects are important in business like accounting. If you have already started a firm, and want to do your second venture, then an executive MBA could be a good idea. If your fellow students are also mature, have had success and want to learn, then the conversations could be very valuable.
- More if you go in with the right expectations. It should be common sense that in business sometimes breaking the rules (industry norms) can be profitable, and people are likely to get into bubbles where they engage in an echo chamber. If you can be open-minded about what you are learning, but also don’t take it as a given, then it can be great. Yet, common sense isn’t very common.
The same is true with many professional qualifications as well. Often the questions and exams have been made by administrators and regulators.
A lot of what is learned isn’t useful in the real world but the people you meet can be useful.
As a final comment, I would say that mavericks, like people who have studied art or philosophy as a mature student who then go into banking, can often make some of the best business owners.
Often they think differently which is not what many business school types do.
It is also quite ironic that business risks leading up to 2008 was overseen by some of the most highly educated business school types.
Often it is because risk isn’t taught properly at business schools.
I wouldn’t say it is the best ETF/sector to buy. Long-term, healthcare hasn’t been the best sector.
It is merely robust because people, unfortunately, get sick, and even non-essential vanity procedures are conducted of course.
I do foresee healthcare, direct to consumer companies and technology to outperform in the next decade.
I can’t guarantee it of course, and there are many unknown variables, whilst valuations are already high for technology.
Yet the pandemic changed the world for good……existing trends have just became bigger:
Some of those trends are
- More online use and penetration
- People being more concerned with their health. This could be cleaner foods, vegan, vegetarianism or whatever else people consider to be healthy. The point is, people are thinking about it more.
- An increase in companies going direct to consumer
- Fewer business trips. I don’t think business travel will ever fully recover as a percentage of the population even though it might if the global population is one day 11 billion in nominal terms. Tourism for leisure might fully recover though. That will cause issues for airlines as more people are willing to spend $950 on the economy seat for leisure, and fewer $5,000 on the business class experience
- An increase in people working from home
- Worried about ethics and the environment. ESG investing was already tapping into this.
- People being more open-minded about the way business is done full stop.
- Use personal interaction in business. This has been happening for years. For example, few people these days want to meet a used-car salesperson face-to-face when purchasing a vehicle.
So, healthcare could benefit from these trends, as will technology.
Yet it has to be remembered that traditional healthcare is often quite a defensive/conservative position.
People assume these firms will do well even in recessions. If you define healthcare more broadly, it is the healthy food and health-tech firms that are growing the most.
Technology merged with healthcare is likely to grow more than traditional firms.
It isn’t therefore the best ETF to buy, but a broadly diversified ETF will have access to healthcare.
Your profession in isolation won’t make you a millionaire. There have been millionaire cleaners, bus drivers and cooks.
Over 50% of the world’s millionaires are estimated to have middle-income jobs like teaching, accounting etc.
What makes you a millionaire is living below your means and investing the surplus wisely.
What is true, however, is that if you want to become a millionaire in your 20s or even before 35, you probably need to earn a lot, be frugal in most cases and invest the surplus money productively.
This is because younger people can’t take advantage of compounding as much as older folks.
Becoming a millionaire at 60 from investing $500, Euros or Pounds a month is relatively easy, but not at 30 or 35.
The major careers open to people that allow more aggressive savings rates are
- Sports and entertainment. Few make great money. A small percentage earn loads. These days we could increase the scope of “entertainment” to also include YouTubers and many other careers.
- Get paid on performance and not time. This could mean self-employment or working mainly on bonuses or commissions. High-risk, high return if it works out.
- Management consulting at the elite big three – BSG, Bain and McKinsey and make sure you at least get two or three promotions.
- A small percentage of elite investment banks
- Some tech firms, such as Google, who offer big packages for a certain percentage of people with hard skills in IT.
- Going into a career like oil&gas and being willing to do the hardship locations like being sent to Iraq and other war zones.
- A few, elite, law firms. Again, just like banking and consulting, most don’t pay that much. A few offer great packages for graduates and then huge increases once you get qualified at 24–25.
- Of course, if you get lucky and receive unexpected money, say from inheritance or marrying into wealth, but nobody should rely on luck or indeed hope for it in the case of an inheritance!
So, your options are basically:
a). Get lucky.
b). Take more risks than the average person via self-employment/being paid on performance.
c). In some instances, being willing to do things that others won’t, for example those expat hardship locations.
d). Get into those highly competitive elite firms in tech, law, banking and consulting and get a few promotions by 30.
And, even if you do one of the above four, you will also need to be quite frugal and invest well, unless you become a celebrity earning tens of millions.
That is one of the reasons why there are plenty of “highly paid” 28, 30 and 32-year-olds, but fewer wealthy ones. Wealth takes longer to build than Income.
If the question was before 40, 50 or 60, the answer would be very different.
You can see that many calculators of millionaires by age start at 32, 35 or even 40 for this reason like the graph below.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 255.5 million answers views on Quora.com and a widely sold book on Amazon
In the article below I spoke about:
- Is investing in early 20s a good idea? If yes, then what should be the investment strategy for such people?
- What are the biggest reasons for wealthy people to go broke? Divorce, bad spending habits, vices or something else?
- Is commuting to work best or working from home?
- How can you invest in Chinese stocks and when is the right time to do so?
To read more click below