Invest? Buy back stock? No, this is what Mark Cuban would do with $100,000 today
Mark Cuban, the richest of the ‘sharks’ on Shark Tank has built up his fortune as a savvy investor. Here’s his advice on what to do with $100K.
Billionaire Mark Cuban will be leaving Shark Tank after 16 years on the show. With an estimated wealth currently between $5.7 and $7.8 billion, he is the richest of the venture capitalist sharks on ABC’s popular show by a country mile.
He told Forbes in a 2010 interview that his key to success was that he “worked hard and smarter than most people” in his line of business. He also gave some financial advice for those looking to build their own wealth. When asked where he would put $100,000 if he had it, his answer may surprise some.
“Cash is king: Try to create as much transactional value as possible”
Prior to becoming a billionaire Cuban used a strategy of low-risk investment. Even after he had real breathing room to make more risky investments, he still says that to become wealthy it is essential to take smart risks.
But in order to invest, you need to have cash on hand. For the billionaire shark, “cash is king.”
Cuban told Forbes that the first thing he would do with $100,000 is pay off any credit card debt that he has. Then he would “evaluate paying off any other debt.”
Pretty common-sense stuff so far. But the next thing he says he would do might not seem so, he’d put anything left in the bank.
“Then I try to create as much transactional value as possible from that cash,” he said. He went on to explain that he analyzes his annual budgets, looking at “everything and anything.” And he finds out where he can save the most money on the items that he is purchasing frequently.
“The best guaranteed return on investment” anywhere for him is buying replenishable items in bulk, like toothpaste or soup, which can produce savings of 30% to 50%. He then takes those savings and keeps it in the bank and “let it earn nothing.”
Having cash on hand for when opportunity comes knocking
Why would he just let money sit around earning next to nothing in a bank account? ”Because then its available for when I get a good opportunity,” Cuban said. He explained his reasoning: “Every five years of so there is a bubble bursting or amazing deals available because of a change in the economy.”
When he was giving the interview, the US economy was still clawing its way out of the Great Recession. The housing market was experiencing a peak in foreclosures after the 2008 crash due to the housing bubble bursting because of the subprime mortgage crisis. “Anyone who just kept their cash in the bank rather than in stocks over the past five to 10 years could be buying the home of their dreams for half price in most of the country,” Cuban told Forbes.
Those who have transactional value available to them, even though they might not have made much on their money sitting in the bank, can take advantage of when markets crater having cash on hand to invest.
But most importantly for him, they can sleep “great” at night. “Cash is king--and works far better than Ambien when you want a good night’s sleep every night,” he explained.
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