I often write answers on Quora, where I am the most viewed writer for investing, wealth and personal finance, with over 241.2 million views in the last few years.
On the answers below, taken from my online Quora answers, I focus on a range of topics including:
- Why do some people not believe in investing in the stock market? I look at some of the misconceptions some people still have.
- What are some of the most effective time management techniques?
- What do “rich people” really buy and how is that changing over time?
- What kind of lifestyle does the top 1% live?
Some of the links and videos referred to might only be available on the original answers.
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 (firstname.lastname@example.org) or use the WhatsApp function below.
Why do some people not believe in investing in the stock market? Why do they think that the stock market is operated by insider trading and not by retail investors?
I was watching an incredible interview a few days ago on “deep fake technology”
You can see an example of deep fake in action here with “Tom Cruise”. It is incredibly realistic.
Of course, this kind of technology has made some people worried and cynical.
One technologist I heard interviewed says he is sometimes asked by clients to detect if a video is fake.
One recent example was from a parent who thought her child really didn’t go to a sleazy party.
He analysed the video and said she did indeed go to the party. The parents weren’t convinced.
They only hired him to confirm their pre-existing bias about their kid.
“People believe what they want” as he rightly said. Not everybody though.
Some people do read the evidence on this kind of thing and realise that there are many myths about the stock market.
Those myths include the idea that
- Investing in stocks is risky. It isn’t if you do it right. The general stock market has been going up for hundreds of years despite the blips in the middle. Individual stocks might go to zero, but the general market doesn’t and has only increased.
- Assets like property usually beat the stock market. They don’t, especially adjusted for fees and taxes which reduce the net returns.
- The stock market is just for the rich. Maybe that used to be the case in generations past, but it hasn’t been like that for years now, and the last 20–30 years has seen massive change and democratisation.
- The stock market might work in places like America with markets like the S&P500, but it doesn’t work “in my country”. This is usually said by people living in developing countries. In this day and age, it is possibly to gain access to the world of investing from your laptop, from almost every country.
- The stock market is rigged in favour of certain interest groups and there is a giant conspiracy going on.
The fifth point is alluding to your question, although I think fewer people believe this compared to the first three myths.
The stock market is controlled by mostly institutional investors, at least in developed countries, and to a lessor extent retail investors.
Insider trading is taken very seriously today. It goes on but usually gets detected eventually and punished.
Insider trading is much more likely to go on in new stock markets in some frontier markets.
I think a bigger reason why people don’t believe in it is the lack of education around it.
In many parts of the world it has been seen as a rich man’s game.
That has, fortunately, been gradually changing for over a decade now as more education is out there and more firms have lower minimum investment thresholds, but old attitudes still linger on.
We also aren’t taught basic financial education at most skills apart from some compound interest tables and very basic concepts.
I do think it is likely that in two or three generations, almost everybody will invest, even if it is very small amounts.
What do rich people buy?
Before answering your question directly, I will make a point which is seldom mentioned these days.
I actually think there are less things to buy these days than before if you have money.
I know that goes against the grain of thinking, but hear me out.
Think about the world 30 years ago. Imagine you had an extremely high-income person who wasn’t careful about managing their money.
They might want a cinema room:
Maybe a games room as well:
These days people are more likely to prefer an iPhone, iPad or watching Netflix to those activities , regardless of their financial position.
Not everybody of course – there is still a demand for those kinds of rooms – but more people than before.
Let’s put this another way. Imagine you were traveling for work and used AirBnb. Would you pick a luxury house with no WIFI and 4G, or a clean studio with super quick WIFI?
Almost everybody, including “big spenders”, would pick the later option.
Amazon and various online shops also mean that it is easier than ever before to buy things cheaply online.
The pandemic has also meant that fewer people are traveling, at least for now.
Environmental concerns mean more wealthy people are giving up their cars altogether or buying smaller ones.
Luxury cars often just break down more easily and cause more hassles in any case – you need to worry about it getting scratched and so on but you don’t care about a 10-year-old car.
So, perhaps rather than having less things to buy there are less things to buy which make logical sense.
This is only increasing a long-term trend which gets to the heart of your question – “rich” people often don’t spend as much as the public think.
They are less likely to buy luxury watches than people who are earning less.
They are less likely to own a car to begin with, and certainly less likely to buy a luxury car as per the link below the article.
These might be US statistics but being from the UK I have seen similar statistics about the UK.
Increasingly, the stats show people who are wealthy are more likely to buy:
- Assets that appreciate in value. Investments of various kinds
- Experiences rather than things
- Be careful with what they buy and think more about the environment than previous generations.
So, quite different to the media narrative.
What are the most effective and proven time management techniques?
I was listening to two of the richest people ever speak about this recently – Bill Gates and Warren Buffett.
Gates was speaking about what he has learned from Buffett and mentioned his rather low tech way of managing time.
You can see the video below:
Now what is fascinating is that I have personally met countless people who just use pen/paper and dairies.
Many very successful people also “think hard” rather than just work hard and smart.
You might realise how many good ideas come to your mind when you are completely relaxes.
That could be in the shower, whilst running or travelling to a new destination.
So, keeping things simple and saying no for many requests on your time can be important.
Beyond that I would say
- Use technology to your advantage. It is true that technology can waste your time, but it can be used to automate your finances and much less. Studies have shown that if you invest one day after you are paid, you will invest up to 3x more than if you wait until the last day of the month.
- Vastly reduce procrastination. This famous quote (below) speaks about how wishing takes as much take as planning. I would add another one – “thinking about something” takes up much more time than actually making a decision for most people. The most effective operators tend to make quick decisions, even if it means starting small. You are much more likely to start small today than you are to start big in a year. That applies to getting fit, investing, learning a new language or anything else you want to do. Just start without being 100% convinced about something. Simple example. Let’s say you want to learn a language. Just book a lesson. What’s the worst that will happen? You don’t like the teacher and feel it is a bit of wasted money. The point is, everybody seems to care about techniques when getting into habits can be more effective.
3. Give up unhealthy vices, and unhealthy/toxic people. These things can drag down your mood, motivation and much less. In this case, people don’t need to care as much about techniques as they will eventually become more motivated to begin with.
4. Leverage other people’s time as an owner and indeed leverage time itself – for example it doesn’t take any more effort to start investing at 25 compared to 55, but you can make up to 100x more due to compounding returns over time.
5. Work out whether you are more productive working at home, in the office or with a hybrid model and keep to a routine.
Finally, I would say actually spend a few weeks “auditing “ how you spend your time.
People who say “I have no time” are often amazed at how much gets wasted once they calculate it.
What kind of lifestyle does the top 1% of the world live?
This might shock you, but you only need to have an income of $35,000 after tax to be inside the global 1%.
Realistically, therefore, you need to adjust for purchasing power parity (PPP), or cost of living.
In other words, in an expensive country you might need to earn $70,000–$100,000 net to be inside the 1% adjusted for inflation, and $20,000 in a very cheap country.
Studies show that there are two kinds of very high-income people:
- Those who are just high-income and don’t build their net worth. They are more interested in the life they are leading now.
- Those who are high-income, spend much less than what they earn, and build up their net worth. They are more interested in the life they will lead tomorrow. In other words, security and building up a second income.
In the main, people who build up substantial wealth are actually less likely to live a luxurious lifestyle.
One study found that, in developed countries at least, somebody who earns $35,000 a year is more likely to buy certain kinds of luxury goods compared to somebody earning $150,000 or more.
In reality then, the lifestyle you lead if you are inside the top 1% will depend on your values.
For some, it means being very frugal to build up wealth, and sometimes achieve a goal like early retirement.
For others, it means living in luxury. The second group is merely not as common as many people assume.
As a final point, remember that the top 1% isn’t the same as the top 0.01%. In the UK, you are inside the top 1% if you earn 100,000–110,000 after tax (so about $140,000-$150,000).
On many measurements, you are inside the top 0.1% if you earn about 400,000 after tax, or 650,000 before tax.
Yet the public assumes you need to be making millions to make the cut. It is only the top 0.01% or so that are making that kind of money even in many developed countries.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 241.2 million answers views on Quora.com and a widely sold book on Amazon
In the answers below, taken from my online Quora answers, I speak about:
- How to buy US stocks from the Caribbean? I speak about the basic process.
- Could Joe Biden’s huge stimulus program result in a stock market boom?
- What’s the best way of earning, and saving, money at university?
- What would the world look like for the average person if stock markets didn’t exist, and are stock markets a bad thing for the average Brit, American or indeed world citizen?
- Is taking out student loans always a bad thing?
To read more click on the link below: