Investing

How to Invest Like Mark Cuban

Mark Cuban’s advice is universal: Focus on eliminating debt, saving money, and living cheaply. Here’s more advice from the man worth $4.1 billion.

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So, you want to invest like Mark Cuban? An excellent choice. Mark Cuban is one of the 200 wealthiest people on the planet. He co-founded Broadcast.com, stars on ABCs Shark Tank, and owns the Dallas Mavericks. Here are six ways you can start investing like Mark Cuban.

1. Pay Off Your Debts

Mark Cuban gave an interview with MarketWatch in April 2018. During the conversation, he gave people his number one piece of advice about investing: The best investment you can make is paying off your credit cards, paying off whatever debt you have.

Cuban used a student loan as an example. Let’s say you have a loan with a 7% interest rate. You can pay off that debt and make a guaranteed 7% return on investment. While it’s not as sexy as picking stocks or investing in artwork, it’s a safer and smarter investment, according to Cuban.

Credit cards are especially precarious. That’s because credit cards are unsecured, meaning that a lender can’t collect collateral if a customer defaults. Lenders offset this risk by charging people higher-than-average interest rates.

For example, if you have a 17.98% interest rate and don’t pay your $1,000 credit card statement at the end of the month, you’ll have to pay $1,180 the next month. That’s on top of any additional purchases you make between now and then.

One of the common traps people fall into is the minimum payment. The feature gives people the option to make a small payment, usually $25, toward their debt. The problem is that high-interest rates can cause your debts to skyrocket, and you’ll wind up paying hundreds or thousands of dollars more than you expected.

Cuban emphasizes getting rid of your debt, and with good reason. When you don’t have outstanding balances, whether they’re for credit cards, cars, or personal loans, you are able to invest freely. You can use the extra money to take online classes, start a side hustle, or bolster your rainy-day fund, knowing that income would otherwise be going toward interest payments.

It’s worth noting that some debts aren’t easy to eliminate. Mortgages and student loans can take upwards of 30 years to pay off. Cuban recommends refinancing your loans during economic downturns so that you can save money on interest payments.

Tip: You can find competitive mortgage and refinance rates at Credible

2. Save 6 Months of Income

Investing like Mark Cuban doesn’t necessarily mean buying companies or equity. You also need to take care of the little things, like saving money. Cuban recommends putting aside 6 months’ worth of income for a worst-case scenario.

Worst-case scenarios never come at an opportune time. Imagine losing your job right before having a child. Perhaps you break your leg and have to pay substantial medical bills because your insurance doesn’t cover the injury. While these events are unlikely to happen on any given day, Cuban believes a 6-month cushion gives you financial leeway in case the unexpected happens.

TIP: I’d recommend taking a look at the American Express® High Yield Savings Account - MEMBER FDIC.

3. Make a Few Risky Investments

The best investors regularly weigh risk and reward. While many startups will fail, those few ambitious and risky companies that succeed can make their founders and initial investors incredibly wealthy. Just imagine if you had been one of the first people to put money in Airbnb, Facebook, or Uber?

Cuban recommends putting 10% of your investment money in risky investments. Perhaps you believe Bitcoin or Ethereum will supplant physical money as we know it. Take a portion of your disposable income and invest with confidence.

Cuban told Vanity Fair that it’s crucial to invest as you’ve already lost your money. If you invest in Bitcoin or Ethereum, there’s a chance that cryptocurrencies will make you a lot of money. There’s also a chance that their values will fall. The true value of the return will depend on what other people are willing to pay for it.

Mark Cuban is worth $4.1 billion, so he has more room than most of us regarding risky investments. One way we can glimpse Cuban’s riskier investments is on the show Shark Tank, where he, along with other entrepreneurs, invests in up-and-coming companies. Here are some of the startups in which he’s purchased equity since joining in 2012:

  • Mush - oats that use cold-soaking and pressure-based technology, so people don’t have to cook them
  • The Long Hairs - a global community that publishes tips and tricks for men with long hair
  • Goverre - portable, stemless wine glasses that allow users to drink their favorite adult beverage through the lid
  • The Lapel Project - affordable, yet stylish suit lapels for men
  • Slyde Handboards - high-quality bodysurfing handboards with stylish graphics and scratch-resistant surfaces
  • Nohbo - a single-use shampoo ball that’s 100% waste-free
  • Combat Flip Flops - highly durable footwear for men and women that come from war-torn countries

Related: How to Invest in Companies You Believe in

4. Look for Discounts

Incremental savings can make a massive difference later. The key is stringing those small amounts together over time. Buying laundry detergent in bulk won’t make a huge difference by itself, but buying all your household items in bulk can save you several hundred dollars over the course of a year.

Cuban recommends purchasing items that you’ll “absolutely spend money on” instead of investing for the sake of investing. Prioritize certain things in your life and find ways to save money on them when possible. Remember, you’re only saving money on a purchase if you were initially going to buy the item.

Many banks give you the option to roll cash over into your savings. For instance, the financial app Chime rounds up each purchase and deposits the remainder into your savings account. If you buy a coffee for $3.25, it automatically puts 75 cents into your savings.

TIP: Chime offers a ton of cool features, such as a spending account, savings account, and debit card.

Chime Disclosure - Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank or Stride Bank, N.A.; Members FDIC.

1Chime cannot guarantee when files are sent by the IRS and funds can be made available.

^Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.

Several browser extensions help users shop smarter online. The applications find, test, and apply different coupons, so you can save money without lifting a finger. Some of the most popular money-saving apps include Honey and CamelCamelCamel.

5. Don’t Make Rash Decisions

The Dow Jones Industrial Average set its highest closing record at 29,551.42 in February 2020. A month later, it fell below 19,000. The coronavirus pandemic tanked the Dow Jones and many other stock markets globally, spurring a worldwide recession.

If you are like most investors, you probably felt a tinge of panic. Your stocks and other public equities were worth a fraction of their price one month earlier. So, what would Mark Cuban do? Nothing.

In 2010, Cuban said, If you don’t fully understand the risks of an investment you are contemplating, it’s okay to do nothing. That means you shouldn’t start selling stocks because the economy looks bleak right now. You also don’t have to purchase stocks even though they’re at a discounted price.

It’s more important to do your homework and wait. Patience will often go a long way in helping you earn the maximum return on investments.

Related: How to Handle Stock Market Volatility

6. Books Are Always a Worthy Investment

Historians often say "knowledge is power." Being a perpetual learner is one of the best ways to get ahead in life.

Cuban advocates living simply, saving constantly, and reading a lot. He evangelizes books to improve yourself and your business endeavors. Cuban once said in a Vanity Fair interview, I used to love to walk through bookstores when there were bookstores everywhere, and if there was something that caught my eye, and I thought it could give me one idea, to spend $30 to get one idea that could help propel me, make my businesses better it was a bargain.

Cuban has a long list of recommended books. In interviews, he has mentioned that Ayn Rand’s “Fountainhead” and “The Only Investment Guide You’ll Ever Need” by Andrew Tobias get him fired up. Here are some other books that have shaped Cuban into the investor he is today:

  • "How to Retire by the Age of 35" by Paul Terhorst
  • "Rework" by Jason Fried and David Heinemeier Hansson
  • "The Gospel of Wealth" by Andrew Carnegie
  • "The Undoing Project" by Michael Lewis
  • “That’s What She Said” by Joanne Lipman
  • "The True Believer: Thoughts on the Nature of Mass Movements" by Eric Hoffer
  • "Political Tribes: Group Instinct and the Fate of Nations" by Amy Chua

The Bottom Line

The best part of Mark Cuban's advice is that it's universal. You don't need millions of dollars to pay off your credit card debt or save 6 months' worth of income. You certainly do not need a fortune to purchase a few books, either.

Cuban's advice applies to people of all ages and income levels. Focus on eliminating debt, saving money, and living cheaply. Make some sage investments in the meantime, and your bank account will most likely thank you later.

Want to know more? Here's the MarketWatch interview with Mark Cuban we reference in this article.

Related:

Chris Muller

Chris Muller

Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He's also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016. You can connect with Chris on Twitter @moneymozartblog.


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