I often write on Quora.com, where I am the most viewed writer on financial matters, with over 677.8 million views in recent years.
In the answers below I focused on the following topics and issues:
- Why do top level athletes go broke after their career?
- What are the benefits of family wealth management for wealthy families?
- What’s a good investment for 2023?
- Is being RICH overrated?
- How should one go about investing in their early 30s, just starting out?
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Why do top level athletes go broke after their career?
Many people watched the David Beckham documentary on Netflix.
One thing that I find interesting is how he reacted to earning his first 50,000 Pounds.
He said he spent that 50,000 Pounds straight away on flash cars.
Many of his teammates said he was regularly broke by the weekend!
Now clearly, things worked out for Beckham in the end, unlike Mike Tyson, who went broke after earning 500million+.
Probably, he eventually got more serious about managing money, earned much more than he expected, and had good advisors.
For others,they become broke because they:
- Get used to earning loads of money and just spending it
- Earn less in retirement after 35, unlike the likes of Beckham and Michael Jordan
- Can’t say no to hangers-on
- Their relationship with money isn’t right. This especially tends to be the case if they have never had much money growing up.
The last point is often crucial and doesn’t just apply to sports stars.
Studies in the US show that over 90% of those earning over six figures are broke.
Most of those people used to live on a fraction of that amount as students and even young professionals.
Many people have gotten into the habit of spending everything that comes in, and that habit is difficult to break even if you start earning big bucks.
What are the benefits of family wealth management for wealthy families?
You might have heard about this man.
Former UK Prime Minister Boris Johnson.
He was born in the United States.
He paid a considerable tax to the US government after he sold his house.
After that happened, he renounced his US citizenship.
If he would have adequately planned, he could have avoided it.
So, apart from the obvious things that wealth management firms can do, we must remember that many wealthy families must deal with multi-jurisdictional issues.
By that, I mean having assets and businesses in multiple countries.
Plenty of wealthy people also have second or third passports and residencies or live outside their home country as an expat.
Just as is the case with lawyers and accountants, the vast majority of wealth management solutions are focused on just one country.
Sorting out problems caused by multi-jurisdiction is one of the issues that specialized wealth management firms can help with.
For example, if you live overseas as a British expat, you face complicated inheritance tax issues and often can’t gain access to ISAs and other local financial solutions.
Beyond that, wealth management can also:
- Help with downside-protection
- Give you access to investments you usually can’t get access to yourself
- Help with getting assets passed down to your kids efficiently
- Deal with insurance and trusts
- Save you time, hassle and worry. Peace of mind.
- Liaise with tax advisors and other professionals to come up with solutions.
So, often, it isn’t about beating the market but solving various problems.
What’s a good investment for 2023?
A good investment depends on:
- What you want to achieve
- How much risk you want to take
- How much risk should you take, given your age? Being risk-averse at 20 or 30 often doesn’t make sense. It usually does at 60.
- The relative performance compared to other assets
Something has changed in 2023.
That change is that interest rates are now higher.
(Source: World Economic Forum)
The above means many more relatively safer investments are paying 6%-9% per year than in previous years.
This includes household names offering A-rated bonds.
Even companies like Coca-Cola and Halliburton are offering relatively high-interest rates.
What has never changed, however, is that the stock markets are likely a better long-term bet.
Therefore, long-term investors shouldn’t neglect the returns.
That is especially the case because rates will decrease one day on A-rated instruments.
It could happen as soon as next year, especially if there is a recession or lower growth in 2024.
So, income-hungry investors should either lock-in rates now or seek alternatives.
Is being RICH overrated?
It depends on what you mean by rich.
This is over-rated:
Impressing people, you don’t even like shallow things on social media.
Being rich in income but having low wealth is also overrated because being wealthy is about what you don’t need to do in the morning – not what you have to do.
What is never over-rated is:
- Being able to do the things you want to do
- Having more choices
- Being able to say no more often
- You don’t need to care about most people’s thoughts, as your livelihood doesn’t depend on it.
- Being able to speak your mind and not fearing the consequences
Next time you go to the airport, observe the kinds of people who go into the first-class lounge.
Half look scruffy, at least in certain countries.
There is a reason for that.
How should one go about investing in their early 30s, just starting out?
Somebody in their 20s and 30s has a long time to invest.
That means that it makes sense to:
- Invest in growth assets
Stocks typically beat bonds over the long term but are more volatile.
This graph from the mustachian post shows a very long-term trend.
You can barely see the stock declines on this long-term graph.
The same is true with some private assets, such as private equity and your own business, even though the risks are much higher, so you must know what you are doing.
If you can stomach the volatility, you can gain by investing more in these assets in your 30s.
The key things are:
- Not trying to time the perfect moment to enter the stock market
- Investing periodically (every month or every few months) to reduce the risks
- Not panicking if markets go down or crash.
2. Investing more
If you invest more in your 20s and 30s, you will likely be able to stop investing fresh money in your 40s or 50s.
Due to compounded returns, every Dollar or Pound you put in earlier is worth more.
Einstein says it best (Source: India Times)
Keeping things simple and just starting will beat coming up with the perfect plan and time to invest.
If you wait for the perfect plan and time, you will always be waiting!
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 694.5 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.