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What is the best option to spend my money on?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 349.4 million views in recent years.

In the answers below I focused on the following topics and issues:

  • What is the best option to spend my money on?
  • If the internet is growing faster in the US versus China, then why is Google stock going up faster than Baidu?
  • Why can two people, given the same opportunity, create very different outcomes?

If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below.

Source for all answers – Adam Fayed’s Quora page.

What is the best option to spend my money on?

It depends on where you live and many other things, but here are some commonalities:

  1. Buy assets

For all of the faults of Kiyosaki’s Rich Dad Poor Dad book, the way he speaks about cash flow makes sense, especially in high-tax countries:

main qimg 1bbc94077968987dede4d161f6866391 lq

Think about some of the wealthiest people you know, not the highest-income, but the wealthiest.

I would be willing to bet you that at least half of them are middle-aged, and they gradually invested their earned income (or business income) into assets that pay off.

The point is, this option isn’t just for “the rich”. You can actually spend more long-term by delaying gratification.

Let’s give a simple example. Imagine somebody in your family got a 100k inheritance, or bonus, in 1990, or simply had it in savings.

If they would simply have invested it in a vanilla way, for example tracking the US or global stock markets, it would now be worth about $2.6m, assuming dividends were reinvested. Adjusted for inflation that is $1.4m.

2. Tax deductible costs

Overspending seldom makes sense. Often the people who do it are insecure and are showing off on social media and to friends.

However, in higher-tax countries, it makes sense to deduct as much as possible. If you can deduct reasonable amounts for laptops, travel expenses, etc, then you would be foolish not to take advantage of that.

3. Investing in yourself

Most of the people who have got to the stage where they have a business or wealth have invested in themselves.

This can be formal education, or informal.

4. Things which go up in price

Art, a holiday room, watches, and many other assets have plenty of negatives associated with them.

They are illiquid assets that are hard to value. Finding a buyer can sometimes be difficult.

They have seldom been the very best investments over long periods of time. However, at least they have a resale value and tend to go up in price over time.

In comparison, some assets likes cars can lose a lot of value quickly, unless they become “vintage”

If Internet is growing faster in China than in the U.S., why is Google’s stock doing so much better than Baidu’s stock?

Firstly, Google is not an American company in terms of revenue:

main qimg 371d72f09714af5f0244b71b8facd346

Less than 45% of the revenue is coming from the US.

We also need to consider the following:

  • Internet users doesn’t always mean there is more profits in it for the companies. Look at China’s current “common prosperity agenda”. You also have the issue of more competition and so on.
  • Even if more users did always mean more revenues, that doesn’t always mean higher profits.
  • Even if more users did mean more revenues and profits, that doesn’t mean the stock price will go higher. That is why firms have different CAPE and P/E ratios. Some stocks look more undervalued relative too others

Finally, we have to consider another fact.

Markets aren’t always efficient, but they aren’t stupid either.

This means that if Chinese stocks look more undervalued compared to US ones (which I think they do look cheaper), then the market has came to the conclusion that they are also riskier.

It is hard to escape that fact – Chinese-listed stocks and even Chinese firms listed in the US, are more risky because of:

  • Political interference from Beijing, to a greater extent than in most other countries. China can delist firms, or even shut down whole industries overnight. In the US, there is more of a process. In the technology space, this political risk is bigger.
  • A different cultures towards buying stocks. In China, buy-and-hold hasn’t taken effect
  • Fewer institutional investors. Banks, hedge funds and others tend to become a bigger part of developed markets. I do see this changing in China though.
  • Right now, the zero-covid approach, slowing growth and debt can’t help. This is not the biggest issue compared to the points raised above. It just reinforces the first risk.

Don’t get me wrong, that also means that Chinese stocks will outperform one of these years.

It doesn’t mean they aren’t riskier though.

Give two people a bag of cement and water, why does one build the stairs to success, and the other build obstacles?

Consider this.

A disproportionate number of entrepreneurs have dysleticia. Some studies show as many as 35% of the world’s successful entrepreneurs do.

Richard Branson said it helped him:

Kevin O’Leary calls it a superpower

At the same time, a disproportionate number of dyslectics are also in prison.

It is all about mindset.

main qimg 36bb19450d80f2412e3953bddda28d10 lq

We can see the same thing when it comes to many other domains, such as low-education attainment.

Plenty of people overcome those early difficulties, even if we adjust for survivorship bias and extreme cases like Branson or college dropouts such as Bill Gates. Others don’t.

We have seen the importance of mentality in the digital age. Plenty of people complain as they wanted the same life their parents had.

Get a stable job, save and get a decent pension. Plenty of others saw the opportunities created by the internet.

Those include:

  • Easier access to investments for regular people. It is now easier to say invest $100 a month productively to take account of compounded returns versus decades ago
  • Much easier to start your own business and target clients globally. Before it cost a fortune
  • The ability to work anywhere in the world more easily. Now, more people are leaving the city for the countryside, due to the work-from-home trend.

It goes back to the glass half full, or half empty, analogy. The difference isn’t necessarily always about optimistic versus pessimistic personality types.

The bigger difference is often between people who are able to adapt and take action, regardless of whether they like the change or not.

Remember, the more things change, the more they stay the same. Life has probably always been like this.

In the Mandarin, the word crisis composed of two characters – one representing danger and the other, opportunity.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 735.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.


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