Why don’t you desire to live in a million-dollar home?

I often write answers on Quora, where I am the most viewed writer for investing, wealth and personal finance, with over 231 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:

  • I was asked “why don’t you desire to live in a million-dollar home?. I explained in detail why I don’t.
  • Do wealthier people really live longer and healthier lives, or is it a myth?
  • With GameStop dominating the news, will retail investors influence the stock market in 2021, or are institutional investors still king?
  • Is it really possible to be so rich that you can never go broke again?

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Why don’t you desire to live in a million-dollar home?

Firstly, I know plenty of people in million and even multi-million dollar homes.

The majority are:

  • High-income, low wealth
  • Even if they are not low wealth, they are living pay cheque to pay cheque like most other people, because most of their assets are in illiquid vehicles like property and businesses.
  • Not necessarily happier about living in a house which is bigger than their needs. The hedonistic treadmill means that you probably won’t feel happier with loads of stuff:
  • Losing money, and time, due to the issues a bigger house presents. More rooms = more problems that can take up your time.
  • Partly living where they do to show off to random people, often on social media
  • Even if they don’t fit into these categories, they often bought the house for less than $1m years, or even decades, ago. In these cases the house is usually paid off, and they plan to die in the house. Therefore, it is irrelevant whether the house is worth 1m, 2m or $500,000. It is still only one house. Their kids will inherit it – one house. Unless they downsize it, or the kids do, it won’t make much difference. It isn’t the same thing as having $1m in liquid assets like ETFs, stocks, bonds and even case. In the same way, if the property market crashes, it doesn’t really matter if you are using it just as a home. So if I bought a home (not an investment) for less than a $1m, I wouldn’t really care if the value goes above $1m if I didn’t plan to eventually sell it! A rental property is different to a primary residence.

Let’s not forget as well that the majority of the evidence out there shows that spending money on creating security for your family, and experiences, buys more happiness than on things like bigger houses and expensive cars.

Perhaps that is one reason why some of the wealthiest people out there are quite stingy about how they actually spend money on certain things.

If even some billionaires don’t live in millionaire dollar houses, then people shouldn’t assume that a big house is a sign that you “have made it”.

In addition to that, these days more people can work remotely, a and even globally, than ever before.

So, if living in a big house is really the ideal for a person, they can simply relocate.

How come rich people don’t live longer?

On average, people with higher income and wealth do live longer.

We also see that Monaco has the highest life expectancy, followed by other high per capita places like Hong Kong, Macao etc.

The reasons are easy enough to understand

  1. People with means can prioritise their health with health, exercise etc.
  2. It is easier to buy insurance if you have the income to do so.
  3. If you have means, you can decide whether to keep living a more stressful lifestyle if start to “buy time” and become semi-retired at a younger age
  4. Preventative healthcare, and indeed advanced techniques for fixing health, can also extend lifespans.
  5. Any wealthy person with any sense starts to care more about health, family and time after age 45 or so. It makes sense to care a lot about money if you don’t have much. Money isn’t everything BUT it is if you don’t have any! If you already have a lot, in comparison, and you have already put the “wealth machine” into action, you don’t need to make money the biggest priority.
  6. Activities that are good for mental health, like giving back to society through charity, are easier if you have means.
  7. I am sure that it would be great to think that wealthy people don’t live longer, healthier lives, but the stats are quite clear.
  8. Most wealthier people eventually make the right choices. I was speaking to a friend who has been running a successful online business for years. He loved it but was feeling a bit stressed in recent years. Therefore, he decided to hire more people and invest in technology, to free up time for his family, exercise and hobbies. He now feels happier than ever, and he is wealthier than ever due to rising asset prices, and even though his income has taken a bit of a hit, he still earns enough to live happier and invest some money. If you think about it though, he made a sensible choice.

It reminds me of all those Marxists who reassure themselves with ideas like “wealthy people lose their health to get wealthy, and then use their wealth to fix their health”.

It is an example of wishful thinking, in the same way some people would love to assume that wealthier people are usually unhappier and have worse mental health.

In reality, if we look at large data sets, those things aren’t true.

They are merely true for a certain percentage of wealthy individuals who make the wrong choices.

What is common though is people to feel unhappy if wealth is suddenly acquired.

The percentage of lottery winners and young sports and entertainment stars who feel depressed seems high.

Yet I think it is only natural that it is difficult for people to adjust to such a sudden change in financial circumstances.

I have seen similar things with people who inherit a huge amount of money.

The sensible ones tend to not focus on how to spend it, and instead make minimal changes to their lives, and enjoy the security that wealth can bring.

But most people can find the new found wealth overwhelming. In comparison, most people who gradually become wealthier in business find it easier.

So, it all depends on the individual, but wealth does give people the opportunity to make sensible decisions which is more likely to lead to better health (mental and physical).

Whether or not people take that opportunity to make sensible choices is up to them.

Conversely, having economic insecurity forever often takes away those choices.

It is pretty difficult to prioritise your physical and mental health if you are always struggling.

Is it possible for someone to be so rich that they can never go broke again?

It is possible for somebody to become so rich that they will never go broke again if there are no black swan events or extremely stupid decisions made.

Yet, in reality, there is no amount of money which can save somebody from stupidity or something which is completed unprecedented.

That is especially the case if people don’t prepare for possible unexpected events.

Let’s not forget that

  1. The list of former multi-millionaires is huge. Some sports stars like Mike Tyson have gone broke after earning $500m+, with 78% of former NFL players said to go broke within just 5 years of retirement.
  2. Plenty of lottery winners have gone the same way
  3. There is an old Chinese expression that wealth seldom lasts three generations or more.
  4. Every time there is an event like a world war, Covid or any number of events, a certain amount of wealthy people go broke.

I think the coronavirus and associated lockdowns give a clue as to why these things happen.

Imagine you are worth $500m but almost all your wealth is tied up in a theatre company:

Suddenly you could be struggling due to the completely unexpected lockdowns.

Sensible wealthy people do prepare for unexpected events such as wars, changing consumer tastes, pandemics etc.

The best ways to prepare are diversification when it comes to investment and the geographical regions you keep the money in.

Yet eventually complacency can set in, if not in the first generation, certainty by the third.

So, every time there is an unexpected event, whether Covid or politically in places like Venezuela, you will notice a certain percentage of wealthy people get wiped out.

The sensible ones were proactive even in the good times, and shifted a percentage of wealth overseas.

Some of the only people who have actually succeeded in creating generational wealth that lasts hundreds of years has been royal families in Europe.

Yet most of those families have wealth held in trusts, and illiquid assets such as land, which means that the newer members can’t just spend it all, and divorces can’t ruin wealth so easily.

Partly I think it is human nature to assume that the past will repeat itself.

In the same way that “poverty mindsets” can be passed down the generations, most children of wealthy households assume that it is inevitable that they will keep hold of the wealth.

Will retail investors take control of the stock market in 2021?

I doubt it, at least in developed markets like the S&P500.

The vast majority of the capital markets are controlled by institutional investors.

Up to 80%-90% of the S&P500 is controlled by banks and hedge funds.

Of course, there are many more individual investors than institutional investors.

In some countries, over 50% of the public own stocks, which can be 100million people or more in just one country.

The US is an example of this.

The number of Americans owning stocks has consistently been above 50% of the population:

There are also hundreds of millions of people who own stocks in Europe, China, India and now more across Africa and Latin America.

Yet the majority of these accounts are small – $1,000, $2,000, $10,000.

Bigger investors are more likely to seek financial advice from institutions, whilst almost everybody indirectly has a pension pot controlled by such institutions.

In the small cap market, and emerging markets, you don’t see institutional investors dominating as much.

As much as I see more people becoming interested in investing, I doubt individual investors will overtake institutional ones anytime soon.

Maybe that is a good thing in some ways. Individual investors are more prone to irrationality.

The number of extreme market events, like crashes and tripling of markets, would go through the roof if most of the market was dominated by smaller individual investors.

We have seen that in China. The majority of the Chinese market during the 1990s and 2000s was dominated by smaller players.

You saw many more irrationally moves for that very reason. In comparison, institutional investors aren’t dealing with their own money.

That can result in more sensible, and long-term, decision making.

With that being said, I do see more stories like GameStop coming up over the next few years.

One reason for that is people are becoming more sceptical about traditional authority.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 231.2 million answers views on Quora.com and a widely sold book on Amazon

Further Reading 

In the article below, taken from my online Quora answers, I spoke about:

  • Are REITS good investments in 2021?
  • Is short selling illegal, immoral and/or unproductive? What does the GameStop story tell us?
  • Would any government, such as the US government, want to crash the stock market? I explain why no government wants a stock market crash.
  • Do big companies really evade taxes, or is that a myth?

To read more click below

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