I often write on Quora.com, where I am the most viewed writer on financial matters, with over 280.3 million views in recent years.
In the answers below I focused on the following topics and issues:
- Why isn’t Warren Buffett into real estate investments? What does this mean for the average investor?
- If you aren’t succeeding at 31, is all lost? I explain why people tend to peak at different times and why you shouldn’t compare yourself to others.
- What habit/habits have given me amazing success?
- What are some unconventional business and investing tips?
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Why isn’t Warren Buffett into real estate investments?
Hate is maybe strong, but in the video above he explains a bit more about real estate.
The key points are:
- Berkshire Hathaway doesn’t have a competitive advantage over professional real estate investors in the industry
- It is tax inefficient for them to buy real estate, due to the complexities of the US tax code, which allow many individual investors to gain tax advantages from the asset.
- Real estate is usually priced fairly reasonably. There are exceptions to this. Sometimes it is clearly under or overvalued. In general, that isn’t the case. Therefore, you can only really “win” with real estate if you get lucky (and that is a speculation) or with yield and leverage.
- His business partner used to be in property, but he also doesn’t think the company has a competitive advantage in that space.
He has been known to buy some real estate, though, and especially REITs, which is a more cost and tax-efficient way in many countries to buy property.
Now for individual investors, Buffett has said on many occasions that he thinks stock indexes are usually superior, however land and real estate can play a part in a wider portfolio.
The biggest mistakes most investors make with property is getting obsessed with capital growth.
Hoping that the person coming after you will pay more for the same asset, which in of itself isn’t a productive asset in most cases unlike a business, is speculation.
I have seen so many investors lose money focusing on capital growth alone, if the real estate market has tumbled.
We are also living in an era of open information. If it was so obvious that Shanghai, London or Tokyo house prices were going to go up, then everybody would get in and join the party!
In comparison, a yield is something that gives you cashflow at least.
At 31, I feel bad. Most of the people I used to be with now have grand lives. They have great jobs and some even live abroad. Everytime I wish I can have what they have, I’m reminded college proved I’m dumb and I don’t even have savings. Any advice?
I have been lucky enough, even when I was in my late teens and 20s, to have friends and associates from almost all ages.
One thing I observed early on is that some people peak early, and some peak late.
Over-performance is seldom maintained. A few manage it, but not many.
Think about your favourite sport. Even at the elite level, few players or managers maintain over performance over ten or especially fifteen years.
Those who do are reversed. In most industries, careers are longer than professional sports athletes and managers.
In this context, you see even more extremes. That “hot shot” 30 year old who has made Vice President, can become the middle aged, broke and divorced man.
I personal know a guy who hit rock bottom in his late 40s, having been a hot shot in his 30s and early 40s.
I know some other people who have peaked late. So, I wouldn’t compare yourself to others.
Many famous start ups were started by people who are older.
Look at somebody like the KFC founder – he didn’t succeed until his 60s:
That doesn’t mean you should just sit back and do nothing. Read more, execute more, be more focused, learn from successful people, get rid of toxic ones etc.
Especially learn about how money works and the tricks to build up wealth on an average income.
But all is not lost in your 30s.
What habit has given you amazing success?
Most people want to be successful. Believe it or not, as well, most people want success in similar areas such as:
- Success with people, or at least key people in their lives
Your success in terms of areas like health isn’t competitive – if I become healthier, it doesn’t stop you becoming healthier either.
When it comes to wealth, there are some areas which aren’t a zero-sum game at all.
For instance, if I invest in the S&P500 index fund for decades (a wise choice) and you do too, then everybody is likely to win.
Business, on the other hand, is different. It isn’t completely a zero-sum game, of course.
As the economy grows, there is more money flowing around, but you are still competing with others.
In either case, I have found these habits to be the most useful.
- Focus on what is boring
- Start with the low-hanging fruit. What is easy but boring?
- I will give you an example. Investing for decades into investments like the S&P500 is easy but boring. Therefore, few people do it.
- Focus on execution of ideas, including boring ones, and not ideas in themselves.
- This habit is much more comfortable than the other habits mentioned below. It is less risky as well.
- If you do this from a young people, you can get rich slowly with minimum risk.
2. Take calculated risks
- Many people are willing to work hard
- Fewer people are willing to work hard and smart
- Even fewer people are willing to work hard and smart for a long period of time. Most people give up if they fail for a few years.
- Even fewer people are willing to work hard, smart, not give up after years of failure and take calculated risks.
3. Play the numbers game
- Taking calculated risks is great, but doing it consistently and with persistence is better.
- You only have to be right once, or be lucky once, in business.
4. Do what is abnormal/don’t care what people think
- Very few people will work hard, smart, long if they fail, take calculated risks and play the numbers game.
- Even fewer will do all the above AND break industry norms.
- Most people will get too stung by criticism if they keep failing and doing things that nobody else, or few, are trying
All the other “typical” habits like reading a lot also apply.
What is your unconventional investment advice?
What is your unconventional investment advice?
Firstly, a lot of conventional advice is very valid, such as:
- Focus on investing from a young age due to compounded growth
- Watch out for your spending habits as it indirectly affects total returns in USD, Pound or whatever currency you are investing in, even if it doesn’t impact percentage returns. The more you have to invest to begin with + the longer you invest = a better chance of superior returns.
- Invest in yourself
Here are some unconventional tips for investments and business which can indirectly result in more money to invest
- Firstly, in business, be a bit unconventional. Doing normal things will result in normal results. Extraordinary results will be more likely if unconventional techniques are attempted. Whilst this won’t impact investment returns in terms of percentages, it will increase the chances of increases in income which can be reinvested.
- I will give you one example of many for the last point. Many people just berate “dodgy” firms in their industry. They don’t want to be associated with them. This is a mistake because ethical firms can learn from dodgy firms, the dodgiest firms are actually very clued on because they want to make money. They were, therefore, often the first ones in when Facebook Ads weren’t big, or when LinkedIn was going from a CV website to social media. That isn’t to justify that they are dodgy, but is merely pointing out that the unconventional approach which is sometimes to copy the techniques of dodgy firms can work. Eventually, everybody copied Facebook Ads, so now they don’t work so well. The time to get in was when only eccentrics and dodgy people were doing it!
Often there is a cycle:
- Stage 1. A technique is abnormal. Only eccentrics and dodgy people therefore get in early. Few legit firms got in. For example, Facebook ads in 2008. If you get in now as a credible firm, you have an advantage.
- Stage 2. The techniques become mainstream. “Everybody” seems to be using it, including the legit ones. Some of the dodgy providers get banned. The legit firms that got in early make most of the money, and it is still possible to make some money as a newcomer.
- Stage 3. The technique becomes saturated. The social media company puts up the price, and it is hard for newcomers to make any money.
Therefore, if you see a bunch of seemingly dodgy or eccentric firms gravitate towards a new social media platform, that could be a good sign for a legitimate company to get in there, before other legit firms do and the social media company will eventually ban the dodgy ones anyway.
- You don’t need to own any bonds before 50 if you don’t want to. They still have their place, though, especially for older investors.
- You don’t need an emergency pot of money in all circumstances. Yes, it can help, but many people never start investing because they wait for that emergency pot. Then it comes and they take a holiday. Just get the investment account started with small amounts of money to begin with.
- Once you are wealthy, don’t be afraid of “unregulated” investments. Yes, they shouldn’t be anybody’s first investment. But there is a reason many wealthy people become interested in “Dragon’s Den/Shark Tank style’ private placements. They are one of the few investments which can beat indexes, albeit with more risk.
Here are some tips which arguably aren’t unconventional but don’t get repeated enough
- Take as many calculated risks as possible when you are young enough to fail. We can always take calculated risks, but it gets harder if you are 35 and have kids.
- Actually compare renting vs buying, rather than assuming that rent is just throwing money away. This is especially the case for expats who are moving around.
- Focus on yield and leverage if you do buy property, and not capital appreciation ……but don’t get greedy and over-leverage yourself.
Often there is a cycle:
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 280.3 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:
- What is the biggest issues with trading apps like Robinhood and E-trade, and are they a good option for non-Americans? I look at how these firms make their money, which impacts on incentives.
- Is it better to create a business or invest in other businesses? I look at the question systematically from a risk point of view in particular.
- Buying a house can take decades to pay off. Is there any logic to spending decades paying off a house, and is buying a property always a great investment?
- Is investing in big tech stocks like Amazon, Facebook and Google the way to go? I introduce the idea of “performance chasing” and why it is a bad idea for investors.
To read more click on the link below.