Mark Cuban is one of the world’s most visible billionaires, whether that’s through his presence as the part-owner of the NBA’s Dallas Mavericks, as a TV personality on the show “Shark Tank” or as a social media gadfly. He’s also a self-made tycoon, having sold his company to Yahoo at the height of the dot-com bubble and pocketing billions in the process. So, when Cuban speaks about building wealth, it’s a good idea to see if you can learn from his wisdom and experience.
(For more personalized advice on building wealth, you may want to consult with a financial advisor, who can help you develop a strategy based on your individual needs and risk tolerance.)
Here are some of Mark Cuban’s top tips for investing and building wealth as he’s shared on his blog, on social media and in media interviews.
“If you have any credit card or other type of consumer debt on which you pay [5 percent] or more interest, pay it off,” said Cuban on his blog.
It’s hard to overstate how important it is to stay out of high-cost debt such as credit card debt. Given their high interest rates, credit cards can quickly compound your debts if you’re not careful, moving you away from wealth. Plus, debt limits what you can do with your life, meaning you’ll keep finding your life choices limited by having to meet your payment obligations. Once you have more breathing room, you can start building wealth instead of having it trickle away.
One easy first step is to use a no-cost or low-cost balance-transfer credit card and pay down your high-cost debt even faster.
Cuban is a big proponent of understanding your customer and believes it is vital to succeeding in the business world.
“If you know how to put the person you are dealing with in a position to succeed, you can be successful,” he said on his blog. “In order to do this, you must be able to quickly understand the needs and demands of that person and those of the company(s) they work for or with.”
“It is a never ending process of learning about what companies need. What people in those companies need and how they work. If you don’t understand what it takes to make the people and companies you work with better, you don’t understand how to be successful,” said Cuban.
Are you looking to build wealth in the stock market? Cuban advises investors to stick with low-cost index funds, much like investing legend Warren Buffett.
“Saving money and putting some into a low-cost mutual fund — like an SPX fund — and living as inexpensively as you possibly can, will pay off dividends,” said Cuban in an interview with Money. “If you can find a way to invest inexpensively in the market, you can start to build your net worth.”
Some of the best low-cost index funds are based on the S&P 500 index, a collection of hundreds of America’s top stocks. This index has returned about 10 percent annually on average over time, making it an attractive investment even if you don’t know much about investing. The best index funds offer attractive returns and charge very low expenses.
Working with one of the best brokers for stock trading can also help keep your costs down.
Technology offers an edge to those who are looking to build wealth because of its novelty.
“The beautiful thing about technology is that it changes every day…. On the day that it is released, you are as knowledgeable about that technology as anyone else in the world. From there it’s just about effort to keep learning,” said Cuban on his blog.
“If you are one of the few people that know the new technologies, you are in a unique position to put yourself in the shoes of your customer(s) and determine if the new technology can be of benefit,” said Cuban. “New technologies enable change and where there is change there is opportunity. It’s up to you to figure out what that opportunity is.”
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While it’s important to invest to grow your wealth, it’s also important to limit your risk so that every investment is not a long shot.
“If you’re a true adventurer and you really want to throw the Hail Mary, you might take 10 percent and put it in Bitcoin or Ethereum; but, if you do that, you’ve got to pretend you’ve already lost your money,” said Cuban in an interview with Vanity Fair.
So, while you can take the long-shot risk such as buying Bitcoin that may pay off big, you have to limit the overall risk to your portfolio so that you can live another day if it doesn’t work out. If you pretend like you’ve lost this money, you’ll budget the rest of your financial life so that you don’t need it.
Some people see investments in art, handbags, sports cards and much more. But these assets don’t produce cash flow, so you can’t ever be sure that you can get out of what you put in.
“It’s like collecting art, it’s like collecting baseball cards, it’s like collecting shoes — something’s worth what somebody else would pay for it,” said Cuban in an interview with Vanity Fair.
These non-cash-producing assets may continue to rise in price for a while, but what is one generation’s treasure often ends up being another’s trash. And if no one wants what you’re selling, it’s trash. In contrast, stocks have a long history of growing wealth for investors. They produce cash flow and offer a way for investors to buy and sell a fractional interest in the firm.
“If you don’t fully understand the risks of an investment you are contemplating, it’s ok to do nothing,” said Cuban on his blog.
It’s OK not to invest in something, even if the rest of the world seems to be doing it. Investments are typically high-risk propositions, so it’s vital to understand the potential upsides and downsides of any investment. While traders may be rushing to high-risk investments such as cryptocurrency or options, you have to know how they work before you make any move. If you don’t understand the risks of any investment, you won’t understand how much you could lose.
If you’re starting with a small bankroll, you can roll up more money by focusing on your spending and making smart purchasing decisions.
“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,” Cuban said on his blog.
Making smart shopping decisions such as buying only what you really need allows you to amass more money faster, and that return is completely untaxed. Then, when you have a bankroll that’s earning money for you, you can splurge on your wants and not just your needs.
“The cheaper you can live, the greater your options. Remember that,” he said.
“Save up six months’ income. If you don’t like your job, or you get fired, or you have to move, you’re gonna need at least six months’ income,” said Cuban in an interview with Vanity Fair.
In the same interview, he laid out some common scenarios in which you might need that cash stuffed in an emergency fund. But an emergency fund offers you lots of other options. One of the biggest is that with the safety of cash, you can stay invested in long-term, high-return assets such as stock funds, and you won’t be forced to sell out at a low point if you need cash. Cash offers safety, and if you’re just starting to build wealth, you need a lot of safety so that you can take some risks.
Plus, no one ever wishes that they hadn’t saved too much later on. You’ll be glad to have the cash later if you need it.
If you’re looking for guidance on maximizing your investments and building wealth, you may want to consider hiring a financial advisor. However, studying the words of successful investors can also help you learn how to build wealth for yourself. Plus, it can act as a shortcut and help you avoid some of the easy mistakes — such as high-cost debt — that trip up other investors in their pursuit of riches.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
