I often answer the questions of clients, readers and subscribers on Quora, where I am the most viewed writer globally on investing, YouTube and countless other social media outlets.
In the answers shared today I focused on:
- Is investing in oil sensible? How about oil stocks?
- Is Buffett getting poorer or just getting overtaken by other billionaires?
- How much does it really cost for an expat to live in Beijing or Shanghai?
- Are there any advantages to growing up poor?
I can remember when I was barely legally allowed to invest. In other words when I was 18.
I was excited as it felt “adult” to be able to invest. I consumed a lot of media as I didn’t know any better at that time.
What was one of the biggest investing trends at that time? Oil. “Peak oil” was all the rage:
The theory was simple. The world demand would go up due to higher populations and GDP per capita.
Yet the supply would go down. What happened a few years later?
Oil hit a high of about $146 – about $180 or more in today’s money.
Most people, including experts in the media, assumed it would go to $200 or even $250 a barrel.
The economic crisis of 2008–2009 brought down the price to $20-$40 a barrel.
In 2010–2011, the price briefly went above $100 a barrel, and some people were talking about $200+ again.
In the subsequent years the price of oil has been going down, but not in a straight line.
Now all the talk is about gradually less demand for oil as we use renewable energies.
Many people are speculating that we will never see $100 a barrel again.
I can’t predict the future, but what I do know is:
1. Long-term, oil and commodities don’t rise in real terms. If you look at a 200 year graph, they barely match inflation.
2. They do have their good periods but timing the oil market is almost impossible. Will there be peaks and spikes in the oil price in the next five, ten or twenty years? Sure, but timing the right moment to get in is tough.
3. Oil, just like gold, doesn’t pay a dividend. Therefore, somebody buying it just wants to speculate that the person coming after them will pay more for it than they have paid.
4. It is true that some oil shares pay dividends, yet they have underperformed long-term as well.
5.I haven’t met somebody who has beaten the stock market long-term investing in oil ETFs. I have met plenty who briefly do it though.
6. If you invest in the UK FTSE, the S&P500 or MSCI World you are gaining indirect access to oil.
7. The world needs oil now and will do for a while. Yet the days of being completely dependent on oil will soon be over, and an increasing number of our energy demands can be met with alternatives.
8. It is unclear how long it will take traveling to recover after the end of the pandemic.
In general then, an oil fund is better than an ETF which tracks the price of oil, because the fund will track all oil companies and pay a dividend.
In general, I would just avoid investing in oil. The indirect exposure through indexes is fine.
There is a simple answer to this …….no! He has consistently been worth between $50billion-$100 billion over the last ten years.
What is true though is that as he is giving more money to charity, Berkshire Hathaway’s stock doesn’t outperform the market and more tech stocks like Tesla hit record highs, he is being overtaken in the rich list:
I doubt he cares much at the age of 90. If he did, he would have made the decision to give away 100% of all his money to charity after death, rather than give some money whilst he is alive.
As a final point, we have to remember that these “rich lists” are a bit misleading.
If Tesla’s stock rises 10% today, or falls 10%, it will just result in Musk’s paper wealth fluctuating.
Income and wealth aren’t the same thing. It is a bit like if you own a 500k house and have 500k invested in the market, and they go up 10% this year.
In this situation, it won’t make you feel much richer and it isn’t income in any case.
Eventually it might result in more income if you sell the positions in retirement.
It depends on the following variables:
- Do you live in a first, second or third tier city
- Are you a local or expat.
- What are your tastes. If you are an expat can you localise your tastes or not.
- Do you want to own or rent cars and houses.
- What’s your income. This affects taxes.
Firstly, the special economic zones of Macao and Hong Kong are expensive regardless of these variables listed above.
Then when it comes to Mainland China, Shanghai, Beijing and other first tier cities are relatively expensive, however they are cheap for some things.
They are cheap for renting if you live on the outskirts. Public transport, most goods in supermarkets, online shopping, taxis, buses and trains to visit other cities are also cheap.
What is very expensive is buying a car, purchasing rather than renting a house and international school fees if you are an expat or a local that wants to educate kids in that way.
Expat services like foreign bars and restaurants can be relatively expensive but not always extortionate.
Then there are the second and third tier cities. Some of these can be very cheap, especially for rent and basics, although buying cars, expat services and even purchasing houses can be expensive.
If you live in a second or third tier city, you are young and single and you don’t spend money on expat services, you can live off $1,000 a month or less if you localise yourself.
If you live in Shanghai, go to expat bars all the time and put your kids in international school, you could be spending 100k-200k a year in USD terms.
Let’s not forget though that all over China, taxes are high compared to most parts of Asia. You can be paying over 40% of your income on the last part of your money.
This is dramatically more than Singapore and Hong Kong, and also Thailand and Malaysia if you are living on overseas sourced income.
To give you an example, a highly paid expat in Dubai would pay 0% income tax (if they aren’t American) on 500k.
In Singapore they would pay 0% if it is overseas sourced income and about 100k if they are paid inside Singapore.
In China, the taxes would be 150k-200k on that amount. So, if you include taxes and cost of living, China isn’t cheap.
Now sure, not everybody plays by the rules, but that isn’t recommended.
There are also small costs too, such as the cost of getting money out of China.
People assume that growing up poor only has disadvantages, but in fact it has many advantages.
- People who grow up poor, or relatively poor, have more motivated as a generalisation. This is one reason why many of the wealthiest people started poor, and a reason why plenty of inherited wealthy kids and grandkids lose the money eventually. People who grow up poor feel they have more to prove.
- You don’t take things for granted as much as people who came from money. This ensures complacency isn’t as likely as people who have came from something.
- It can make people more grateful once they succeed as they have seen hard times.
- If you grow up poor, then meet middle-class people at university and finally meet wealthier people and those from all backgrounds, you can speak to all kinds of people in business. You are less likely to be in a bubble compared to people who only spend time with people like themselves. This is assuming people actually change their situation of course.
- You might be more likely to take a big risk. If you have gone to a greta university and have a 100k job lined up in Silicon Valley, you are less likely to take calculated risks early on, compared to those that have nothing to lose.
- The frugality habit is installed into people. If you need to work part-time at 16, 17 or 18 to pay for college or university, you start to associate work with consumption. That $5 or Pound coffee doesn’t seem like a great deal if you have had to work 55 minutes to earn it after taxes.
- Lack of inheritance. A study was done on lawyers and accountants who have similar lifetime incomes. Only one group received inheritance. Guess which ones had higher net worth? The ones who didn’t get the inheritance. This could be linked to the sixth point on frugality.
That doesn’t mean there aren’t disadvantages. As this book (below) says, initial disadvantages can compound over time:
In addition to that, people who grow up in poverty are more likely to have had negative influences.
It also depends where you live. If you are living in a place with high social mobility, then growing up poor is less of an issue than in some places.
We also have to remember this depends on parenting though. Some wealthy people are very tough with their kids and that makes a huge difference.
My answers on Quora.com have received over 219 million answer views in the last few years, making me one of the most popular writers on that social media platform.
In the answers below I focused on:
- Why do people fail to realise the need to invest for retirement at a young age, even though most people know, deep down, that they should set something up?
- Who tends to be more motivated? Rich, middle or lower income people?
- Do stocks move the index or do indexes move the stocks? Or is it more complicated than that?
- Do you need to get a degree to become a millionaire?
Here is a preview of one of the answers:
Most people spend two, three or even five times as much time planning their holiday/vacation compared to investing:
There are many reasons for this.
The biggest are:
- People have been taught to assume that life gets worse when you get older. The book below tells the story about how most surveys from younger people assume that life gets worse as we age. What’s the point, therefore, of having all that money, if you will be old, fail etc? Some teenagers and people in their early 20s even think that people in their mid 30s are past it! Many people in their 30s assume those above 60 will lack in energy. Whilst it is true that we are more likely to get healthy problems as we age, times have changed. It is pretty normal now for people to feel healthy in their 60s, 70s, and even above 80. I personally know plenty of older people with more energy than the average 20 year old.
2. Most people find investing boring or complicated, often because of the media, schooling and other reasons. It is a bit like setting up a will. Most people know it is a necessary evil, but few do it quickly.
3. Sometimes people have been let down by big institutions like the banks and then they are “once bitten twice shy”. This was especially the case in the 1980s and 1990s when the services on offer tended to be poor.
4. Some people assume that you need to be rich to start investing, and investing small amounts is pointless, despite the reality of compounded interest rates .
5. Bad spending habits. As time has gone on, marketing from bigger companies has became bigger, and is often linked to fear of missing out on “stuff”.
6. Some people really can’t afford to invest unlike those who fall into category five.
7. A certain percentage of people want to put all their eggs into the basket of their own company or working till they drop because they love what they do. Few consider the possibility of “black swan events” like Covid affecting these plans.
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