I often write answers on Quora, where I am the most viewed writer for investing, wealth and personal finance, with over 224 million views in the last few years.
In the answers below I will focus on countless topics including what is the secret to becoming a high net-worth individual? Or is the word “secret” misleading?
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There are no (absolute) secrets in this day and age. How many books, podcasts and free (and paid) materials are out there?
Billions. Maybe even trillions now. Most of the wealthiest people in the world give a percentage of their advice for free online.
There are some “little known” tricks, secrets for most people, but that only lasts for a certain period of time. Eventually, word gets around the general population.
The biggest trick isn’t knowing loads of information per see, but being an expert at execution.
I have learned something. If you go into a room (physical or virtual) and tell 100 people to do something, only two or three will execute……AND only one or two will actually continue to be persistent if they don’t see quick results.
That gives you, and everybody else, an opportunity. Don’t assume that because “everybody” knows X and Y, there isn’t money in executing those ideas.
Remember this quote from Tim Ferris:
The commonalities I have seen, then, are people who are good at executing in the following ideas:
- Starting the wealth building process at a young age. Being high-income can happen quickly in some cases. Wealth takes longer to build, so patience is key. Leveraging time is therefore key. There are plenty of people out there who are worth millions who have just patiently invested for decades That doesn’t mean that somebody can’t become wealthy at an older age – we are never younger than we are today – it is just more difficult.
- Lifelong learning. The more you learn, the more you will earn, and preserve that wealth if you also focus on converting income to wealth. Again, provided the knowledge is implemented.
- Getting good at things. It sounds obvious, but people who are good at giving value to others, investing, sales marketing, branding and countless other skills have an advantage. The key thing is having skills you can monetise and those that can preserve that wealth. People who are good at just bringing money in, without managing money, are like a sports team with a great attack but a leaky defence.
- Lack of complacency when success comes. Some people don’t put their foot on the accelerator during such periods.
- Not caring too much about what other people think to the extent that it stops you putting yourself out there. Social media has been a great opportunity but too many business owners are afraid of looking stupid.
- Getting in front of opportunities. Opportunities are like a wave. They come and go. It is better to be out in front. How do you get out in front? Well by experimenting, not caring about what is “normal” and going for it. Over a ten-year period playing the numbers game will help you. Almost everybody I know who has succeeded a lot has also failed a lot. You don’t need to have “the first mover advantage”, but being one of the first movers is better than being late to the party.
- Focus on leverage. So, leveraging time as per the compounding returns point I made earlier is one example. Other examples could be leveraging other people as a business owner, or leveraging other people’s ideas via investing in their company – that is what long-term ETF investing is all about. Just selling time for money and saving the money isn’t as efficient as putting money to work.
- Taking calculated risks. When people are complacent they take too many risks. Most people are at the other end of the extreme – fear of losing even if the chances are small and even if they have little to begin with. Part of this comes from education. I can remember when I was 18, I was more afraid of losing small amounts of money than I am now even though I was always a risk taker in some ways. The reason is simple – society, schools and parents often tell younger people to be “better safe than sorry”, yet we really don’t regret taking chances a decade or two later.
Then there is also personality traits like persistence, impatience in some ways but willing to play the long-term (a strange mix of patience and impatience) and determination.
A lack of excuses also helps. This month I have met two people who, unfortunately, have seen somebody very close to them get covid – at least one of their parents.
One of the guys has had the best month ever in business. The other can’t focus until the situation resolves itself.
I saw the same thing last year. Countless people blamed being quarantined in hotels and a 1000 other excuses for not getting things done.
Other people perform no matter what.
Humans are a curious beast. Barely 8–11 months ago countless people were panic selling .
2–3 months ago many people were panicking about the US election and a second lockdown.
Now as you rightly say, more people are becoming optimistic about markets.
I have came to realise that there are always four groups of people in investing
- Those people who don’t want to invest. This could be because they don’t have any money, don’t understand investing, aren’t interested for whatever reason in learning or don’t have anybody to trust to help them. This group of people either just keeps money in the bank, invests in property instead or they can’t afford to do either of those things for at least a period of time.
- Those that are feeling fearful because they read an article saying the stock market will crash in a few months. There are always merchants of gloom in the media. The only thing that changes is the headlines are altered after each event like Covid, lockdown, 9/11, 2008 etc.
- Those that are feeling greedy because of X, Y and Z reasons. There are always being in the media feeding into over-optimism…..just those voices are fewer than the merchants of gloom because fear sells. It is probably the strongest human emotion of them all. Therefore having a clickbate article saying “stocks to fall by 90%!” will get more clicks even if it is BS.
- Those who invest no matter what for decades. They know the score – nobody can time the best moment to enter the stock market, markets tend to rise long-term etc, so it is therefore pointless to overanalyse too much.
The fourth group of people always, long-term at least, do better than the first three groups of people.
That never changes. What does change is some people do shift because the “levels”.
There are times when even people who are usually not interested in investing become curious and interested, so they move out of the first “tier” into one of the next ones.
That usually happens during bull markets like the 1990s and more recently.
Likewise, some people who easily feel greedy, can do a 360 degree turn and become fearful.
Either way, it is good to be “suddenly” interested in investing provided the person isn’t approaching it in a get-rich-quick way and is willing to play the long game.
The only concerning thing happening in the market now is these huge increases in valuations for firms such as Tesla.
After years of moves towards ETFs we have seen a rise in investors stock picking like they did in the 1990s.
These “easy wins” gives some young investors the mistaken view that they can easily beat the S&P500 long-term.
I highly suspect that in ten years time the major markets will be much higher than they are now, but some individual stocks that are overvalued will be hit hard.
We saw the same in the last twenty years. The Nasdaq has recovered many times over from the 2000 and 2008 crashes, as has the S&P500, MSCI World etc.
Many individual names never did.
They aren’t. At least not for everything and for everybody.
If you use local websites and services, things can still be cheap.
For example websites like 56视频首页 for renting. If you live in the outskirts of the cities it is pretty cheap for renting and services more generally.
What is very expensive is:
- Buying houses
- Buying many types of cars
- Most expat services as it is still considered quite “elite”. That is changing, but it is the case that if you want to drink German imported beer or French cheese, you will pay much more than you would in many other parts of Asia, whilst the local versions in the supermarkets are super cheap.
- Taxes if you are earning a lot or even a reasonable amount. The UAE, Singapore, Hong Kong and even somewhere like Monaco is cheaper to live in (adjusted for tax costs) if you factor this in this factor.
- International school fees
- Some types of excellent healthcare, like international clinics and hospitals.
So basically, if you are a young expats (say a student or in your 20s) you can live quite cheaply.
This is especially the case for people who have a Chinese spouse who can gain access to these local prices.
If you are a high-earning expat, or somebody who wants to buy property and cars locally, and send kids to International school, it gets very expensive.
It depends then on what stage of life you are in, and what kind of services you want.
The main reasons for the higher prices for some things is a combination of a high population, government policies and supply and demand.
You couldn’t get away with charging $16 a pint in most places in the West or $10 for an average block of cheese- especially most European cities.
You can in some parts of China. There is a huge population, a percentage of whom are willing to pay those prices for whatever reason.
Second, third and fourth tier cities can be very cheap but oftentimes people need to learn Chinese to a reasonable level to live well there.
We are taught there is no such thing as a free lunch, but is it true?
Consider these facts:
- Publicly-listed stocks are transparent. Everybody can see the information including sales, revenues, profits etc. Anybody can Google this. This is true for the small caps as well as the Amazon’s and Apple’s of this world
- Even most hard-working people have a “lazy bone” – everybody wants to be more efficient even if they are hard-working
- There are literally tens of thousands of institutional investors, sometimes using complex algorithms and computers to help them spot opportunities.
Considering these facts, there is no easy and risk-free way to get rich quickly from investing.
That doesn’t mean that a small percentage of people don’t get rich investing though due to luck or another factor.
There are relatively low-risk ways of gradually getting rich from investing, however.
The tried and tested way is:
- To start investing as young as possible. Even small amounts
- To buy the whole market like the S&P500 rather than individual stocks
- Increase how much you invest as you get older and also reinvest inheritances, bonuses and other unexpected money
- Also reinvest dividends.
- Never try to time the stock market. Just invest every month or whenever you can afford to do so. That also means not panicking when the market falls or getting too excited when it rises.
- Keep individual stocks and speculations down to 10% if you can’t resist it.
- Avoid the next big fad – emerging markets in 2006, oil in 2007 and so on.
Almost everybody I know who has become sustainable rich from investing has followed a similar path to the one outlined.
A quick look online at various stock market calculators, which also factor in inflation and dividend reinvestment, also shows that this has mathematically worked for people.
If our fathers or grandfather’s had invested from say 1950 or 1960, the amount needed to become a multi-millionaire isn’t huge.
Even somebody who started in the late 80s didn’t need to invest that much. Leveraging time is a powerful tool to increase returns AND lower risks.
Leveraging time is a near free lunch – not completely though as patience is required.
Few are interested in “boring” methods though, even if they work.
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Adam is an internationally recognised author on financial matters, with over 224 million answers views on Quora.com and a widely sold book on Amazon.