7 pieces of advice for young investors

By Larissa Fernand |  11-08-20 | 

I discovered billionaire Mark Cuban on watching Shark Tank, the entrepreneur-themed reality show. While it was interesting to see the business pitches, the draw was the “sharks” themselves, with Cuban bringing the most swagger to the show.

Here, I want to specifically mention Cuban’s practical financial advice to young people.

Before you disregard his counsel under the guise of “what does a billionaire know about working class folks?”, let me convince you otherwise. Mark Cuban was not born rich. He grew up in a working-class family in Pittsburgh. His father installed upholstery in cars and his mom worked a rotation of odd jobs. His words resonate with individuals who have not inherited a fortune.

Here are some snippets that I have collated from numerous media sources over the years.

  1. It helps to have the motivation of a ‘Why’.

Have discipline in how you spend your money.

Have the discipline of saving.

You can get it if you know why you are doing it.

I lived a frugal life when I was young. I had five roommates in an apartment with 3 beds; I slept on the couch or the floor. I worked as a bartender and gave dance classes. I lived off of macaroni and cheese, and mustard and ketchup sandwiches. I drove a cheap car.

The first time in my adult life that I was able to have more than $1,000 in the bank, I went out and bought six of the fluffiest, plushest bath towels I could find, to replace the frayed ones I had.

But my frugality was a conscious decision. I was determined to save money. I wanted enough money to be able to travel, have fun, and party like a rock star. That was my motivation to save.

Find a way to save money. Live as inexpensively as you possibly can. Invest it in a low-cost mutual fund. It will pay off rich dividends. You can start to build your net worth. I think that’s possible for everybody.

  1. The greatest rate of return you will earn is on your own personal spending.

Being a smart shopper is the first step to getting rich.

Take advantage of sales. Take advantage of discounts when you buy in bulk.

You will get a better return on your money by being a smart shopper and taking advantage of  cash, quantity or other types of discounts than you will in the stock market.  Saving 15% on $1,000 worth of items you have to purchase, is a better return on your money than making 15% in a year on a $1,000 investment because you don’t pay taxes on it. Not only that, but your personal rate of inflation stays lower.

Whatever you can save, save it. As much as you possibly can. Then put it in the bank.

  1. There is a cost to debt.

The hardest lesson I learned was getting my credit cards ripped up. I would charge something and think I would be able to pay it off and then not be able to. I can’t tell you how many credit cards I had ripped up.

Live within your means.

Using a credit card is completely okay if you pay it off at the end of the month. Paying off your credit cards after 30 days or not even using credit cards is the smartest investment you can make or not make. Just recognize that the 18% or 20% or 30% you’re paying in credit card debt is going to cost you a lot more than you could ever earn anywhere else.

Apply this to other loans too. If you have a loan with a 7% interest rate and you pay it off, there’s an immediate return there.

Don’t be a slave to the bank. If you take a loan, you are no longer the boss. Your customers are no longer the bosses. Your banker is the boss. And if you hit any adversity, the priority becomes taking care of your banker.

  1. Have an emergency fund.

Try to save up six months of income and keep it available.

If you get fired or you have to move or something goes wrong, you're going to need at least six months income.

  1. Put risky investments in their place.

Everyone takes risks. It is needed. When it comes to investing, remember this.

No investment can offer returns with zero risk. If you don’t fully understand the risks of an investment you are contemplating, it’s ok to do nothing.  Just put your money in the bank.

Even if you do comprehend the risks, don’t go overboard. Don’t let risky investments dominate your portfolio. So if you want to be adventurous and dabble in Bitcoin or Ethereum, just ensure that it does not exceed 10% of your portfolio. And you should be comfortable with the realization that you could lose that money.

  1. There is no get rich quick scheme. This is a get rich path.

There is a path to follow. There are ways to get there. But there is no template that works every time for everyone. Getting there also requires being ready when opportunity presents itself.

Change and uncertainty create opportunity. It is up to you to latch on.

There are no shortcuts. NONE.

Ignore schemes that guarantee returns. Always remember that if a deal is a great deal, they aren’t going to share it with you. I don’t broadcast my great deals. I keep them all to myself. If the person selling the deal was so smart, they would be rich beyond rich rather than trolling the streets looking to turn you into a sucker.

  1. Investing is not only about money.

Never stop learning. Never stop grinding.

Invest in yourself. Invest in educating yourself.

Develop your skill. Your ability. Your insights.

That’s what’s going to get you ahead.

Once you have found out what you love to do, there is only one goal: How can you be the best in the world at it? It doesn’t matter if you are a filing clerk, an athlete, an accountant or a bartender. All that matters is that you do whatever you can to be the best.

The one thing in life you can control is your effort. If you are willing to put in the effort. If you are willing to deal with the challenges through your effort and brain power, anything is possible.   

Mark Cuban is the co-founder of 2029 Entertainment, a film production company. The owner of Dallas Mavericks, an American professional basketball team. Author of How to Win at the Sport of Business. And owns a portfolio of companies, that you can see here. He blogs too.

Investment Involves Risk of Loss

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