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The Best Investment Advice You Will Ever Get If You Have Under $100k

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August 27, 2010 – Comments (8) | RELATED TICKERS: BRK-B

From Mark Cuban at Blog Maverick

Point #1 can't be stressed enough.

The Best Investment Advice You Will Ever Get

I’m going to simplify what I consider to be the best investment advice I have ever been given and share it with you.  Here you go:

1. If you have any credit card or other type of consumer debt on which you pay 5pct or more interest, pay it off.  Compound interest is your enemy.  The chances of you earning more on your money than you are paying in consumer interest rates are slim. Pay it off.

2.  Cash is King. Now that Madoff is in jail, 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. In times of massive uncertainty like we are facing today, doing nothing is a valid and IMHO preferable investment strategy. Just put your money in the bank.

3. Cash Creates Transactional Returns.   What does this mean ? It means that you should analyze what you spend money on over the course of a year. 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 15pct on the $1k dollars worth of items you know you will absolutely spend money on is a better return on your money than making 15pct in a year on a $1k investment  because you don’t pay taxes on it.

If you have under 100k dollars in liquid assets,  your net worth will be higher in one year if you follow this advice  than if you follow ANY other investment advice any broker or banker will give you this year.

 

8 Comments – Post Your Own

#1) On August 27, 2010 at 10:49 AM, vriguy (79.05) wrote:

It is good advice even for those with more than 100K

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#2) On August 27, 2010 at 11:00 AM, EnigmaDude (84.94) wrote:

Mark Cuban does not have to worry about saving for retirement.  He also did not get stinkin rich by paying off his credit cards.  I don't think that Mark Cuban is qualified to give "investment advice" for people with less than $100k net worth when he has never learned that lesson himself.

Personally, I don't agree that putting cash "in the bank" is a good idea when the interest to be earned on that cash is less than inflation - esp if there are better options for those investments.  But yes, one must understand the risks - duh.

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#3) On August 27, 2010 at 1:53 PM, SkepticalOx (99.45) wrote:

EnigmaDude

Mark Cuban came from a working class family, and was a self-made entrepreneur, so it's not like he's never been there. It's also a hell of a lot easier for most people to save 15% on things they have to purchase vs. making 15% a year annually.

He might not have become a billionaire from spending smartly and paying off debt, but these pieces of advice are pretty smart. Most people won't make  a bundle investing in the stock market/commodities/real estate.  

 

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#4) On August 27, 2010 at 1:55 PM, SkepticalOx (99.45) wrote:

Sorry, it should have said "He might not have become a billionaire from spending smartly and paying off debt alone." 

I think Buffett, who's famous for being frugal, would wholeheartedly agree with Cuban's advice.

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#5) On August 27, 2010 at 3:54 PM, Momentum21 (76.04) wrote:

I agree...even if we have our debt paid down and have more than $100k we all fall easily into get rich quick schemes. If I focused as much energy on maximizing my income and slow and steady progress I am sure I would be better off...

But there is no better knowledge then learning the hard way through experience I guess!

Cuban's advice is really all you need to know.  

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#6) On August 27, 2010 at 5:52 PM, ryanalexanderson (< 20) wrote:

Preferred shares of blue chips with a solid dividend beat cash. I think the world is going to hell in a hand basket, but people are going to buy Kraft food for awhile, even if it's just mac and cheese.

And if they're not - I'd skip cash in favour of gold and silver. Cash isn't without its own risk, if the Fed does something crazy. Crazier, I mean.

 Note that a Kraft or P&G is also somewhat more protected against such crazy events. 

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#7) On August 30, 2010 at 4:35 PM, outoffocus (23.25) wrote:

1. If you have any credit card or other type of consumer debt on which you pay 5pct or more interest, pay it off.  Compound interest is your enemy.  The chances of you earning more on your money than you are paying in consumer interest rates are slim. Pay it off.

Its nice to hear someone else echo my sentiment on debt.

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#8) On August 31, 2010 at 5:58 PM, llgrout (29.96) wrote:

Good advice which I already adhere to.

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