I often write on Quora.com, where I am the most viewed writer on financial matters, with over 284.8 million views in recent years.
In the answers below I focused on the following topics and issues:
- Why are millennials and Gen Z actively investing in the stock market through the web and app than the previous generation? Or is it a myth?
- What does nobody tell you about starting your own business?
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There are a number of reasons for this:
1.The web and apps like this didn’t exist for previous generations.
The internet started in the mid 1990s. The kinds of stock market apps which exist today are much younger. Plenty of middle aged and older people are also considering online investing now, and Google looking for advisors.
I do everything online now, and have done for years, even though I started in the old fashioned why.
My average client age isn’t far below middle aged, and I have clients in their 70s as well.
The only difference I notice is this. Many younger people are happy to invest with zero human interactive.
That does change for some people, as some investors trade by themselves and then learn they want some advice.
But the point is they are usually happy to start investing by themselves.
A lot of middle-aged investors understand the limits of their own knowledge and/or at least want more human interactive, even if the brokerage or advisory firm is online.
In any case, if these apps were widely available in say the 1970s, I am sure eventually they would have became popular amongst the baby boomers.
2. Many of the apps are more accessible. A human advisor usually has minimums.
Some of the apps don’t have minimums. So, they are ideal for people looking to get started with investing.
Over 50% of Robinhood investors now say they want advice, but the apps themselves are a good starting point. 80% of investing success is just getting started, so I don’t think it is a negative thing if more young people open investing accounts.
Yes they will make mistakes, and many will then go towards more traditional solutions perhaps, but a start is a start. 90% of people in some countries don’t invest at all apart from their pension.
Anything which increases that number can only be good.
3. Interest rates are 0%
At least in most countries. Everybody, and not just young people, are looking for alternatives.
Putting money into a bank account isn’t low risk. There is a 100% chance of losing to inflation.
That compounds. Losing 2%-3% a year might not be “a big deal” if it lasts for say 2 years, but over 13 years (2008–2021 when interest rates have been 0% in many countries), that is an indirect 30%-35% loss!
4. There is more educational resources out there
There is still a lot of misconceptions going around about the stock market.
Yet the percentage of people who know basic facts like the stock market has always gone up long term, recovers from crashes and nobody can time the perfect moment to enter, has skyrocketed.
So, even some risk adverse people are putting their money into the stock market long-term, through structures like ETFs, as they know it isn’t as risky as people told them.
The biggest ones are this:
- You don’t need to create the next Facebook. You don’t need “great” creative ideas all the time. You just need to focus on executing ideas, rather than just having them. Ideally you need to get a job in the domain first. If you get a job in the industry, you can:
- Build up the skills needed to start your own business
- Save up a bit of capital
- Sometimes get your first clients if it doesn’t go against the NDA (my first clients in my business came from my old company as we had a withdrawal agreement)
- Understand the pain points of customers. If you can solve your clients problems with a new firm, that is great. When I began my own business, for example, 99% of companies weren’t going online quick enough and were meeting people face-to-face. I knew we were moving into an online world. This is practical important for expats who are moving around a lot anyway.
- Which industry norms exist, which can be broken, that typically only help the firm or industry and not the customer? So, I gave one example of clients not always wanting to meet face-to-face, as it costs them time and sometimes money, but that is one example of many.
The vast majority of successful businesses I know are started by a founder who got a job in the domain first.
Most are in their late 20s, 30s, 40s or 50s. Many don’t have “great ideas”, they just know how to execute and have relevant experience.
This quote from the British billionaire Sir Alan Sugar is good advice:
2. Take loads of calculated risks
How many people do you know who would be willing to work hard to make loads of money? Loads. Maybe the majority.
How many people do you know who would be willing to work hard for a decade if it wasn’t working out? Fewer.
How many people are willing to work hard and smart for a long time, if it isn’t monetising quickly? Much fewer. Working smart takes people out of their comfort zone, as it forces you to do things in a different way.
How many people are willing to work hard, smart and take calculated risks consistently?
Even fewer still. Most people are too risk adverse. A few take silly risks.
I will give you a simple example. Let’s say there are two moderately successful British businesses, with worldwide clients.
They both make say 150k a year in net profits. Now, one of the businesses works smart and takes a risk, by offshoring themselves and the company to a low-tax country.
Now they might have 30k, 40k, 50k+ extra due to the saved taxes.
If that money is put back into the business, it could expand by 3x-4x, if invested correctly.
Yet most people would think “better be save than sorry” as it is already working.
3. Have a positive attitude to yourself and the system
It is amazing how many people start their own businesses whilst being pessimistic about themselves, or hating the capitalist system.
Being confident but not complacent or arrogant, and having a good attitude to the system itself, also increases the chances of success.
When I think back to university, the people who were most negative about making money now work for the Civil Service, Government or haven’t done that well…….unless they grew out of that stage.
Those who were most positive about themselves and the system were more likely to start successful businesses.
4. You might need to play the numbers game
Even if you do all of the above, you might need to try out many different techniques for one to work.
Even once you are very successful, you might need to try out many different ideas to go to the next level.
5. Ease of business is key
Why has technology became so big? Why are firms like Wise/TransferWise and Revolut taking market share from the traditional banks?
They make doing business easy. Consumers take the path of least resistance.
Yet too few people what this issue front and centre. So many people focus on the quality of the product and service, or “the idea”.
But even the best product in the world won’t sell a lot if it is difficult for the consumer to buy.
I have seen 35% increases in revenue for the same product within months by just changing one thing…….making it easier to buy to begin with by changing the processes to sign up.
If something is too difficult we think…”let’s do this tomorrow”.
Then tomorrow never comes sometimes! A few months ago I needed health insurance.
I went online and had my card ready to pay. I couldn’t pay online.
They wanted to call me. I didn’t want to receive a call so I bought online with a provider that made it easier for me to buy online.
They are provided an inferior provider but I am busy, so picked them.
6. Recurrent income is important
If you only focus on big initial income, you run the risk of building a business on sand.
For example, let’s say you are a real estate business which relies 100% on big initial commissions.
What happens if you stop selling as many houses? You go out of business.
I personally know some people who have got under, who used to make a lot in business, because they were relevant on “transactional” revenue – one time revenue.
The sensible business, therefore, diversifies into recurrent streams of revenue.
For instance, few insurance brokers or companies I know go out of business.
Why? They don’t always make loads of money, but they get money yearly from renewals of the insurance policy.
Likewise, a sensible financial advisory firm at least partial focuses on recurrent fees.
Same if you are providing courses. If somebody wants to pay monthly as opposed to one time, you should welcome it, even though it is less revenue upfront.
7. Guard against black swan risks.
I have said that people should take calculated risks and that is true.
One other thing is people tend to worry about the wrong kinds of risk.
Most people who have 500,000USD worry about losing $50,000, even though it isn’t the end of the world.
Few people worry about that risk that could wipe them out, but is only a 0.01% risk.
Ever wondered why so few businesses in aviation prepared for 9/11, or why so few bars and cafes considered a lockdown a possibility after a virus?
Well, they thought it was so unlikely they didn’t prepare. We can’t prepare for all risks, but we can take steps to mitigate them.
For example, if you are a firm in a “high-risk” industry like gambling or even financial services, you are more likely to have banks revoke your account, due to new regulations which are connected to anti-money laundering.
If they revoke a bank account that doesn’t mean they suspect you, merely the new costs of regulation means they only want big accounts.
Therefore, having loads of accounts and always looking for new ones, even if you haven’t had trouble for years, makes sense.
8. There is no guarantee of success
If you want to get healthy, getting well and exercising helps. A lot. But it is no guarantee. You might have bad DNA for example, or experience very bad luck.
That doesn’t mean, logically speaking, you should give up, just because some heavy smokers live until 100.
The same is true in business, unfortunately. The above dramatically increases your chances but there is no 100% guarantee.
That is one reason why sensible business owners also have private investments to fall back on.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 284.8 million answers views on Quora.com and a widely sold book on Amazon
In the article below, taken directly from my online Quora answers, I spoke about the following issues and subjects:
- How do I invest in the US stock market from Latin America?
- Do you need a bank account as an expat?
- What is herding in investing? How common is this?
- Would I prefer to invest in stocks in Hong Kong, the UK or the United States?
- Should you buy leveraged ETFs?
- Should you reinvest most of your money from the stock market, such as dividends, or take it as income?
- What do most financial advisors get wrong?
To read more click on the link below.