Mark Cuban Says This ‘Investment’ Beats the Stock Market for Most People

History’s verdict is clear: The stock market is one of the best places to be if you want to grow your wealth.

Stocks historically have produced big returns for investors. And yet, billionaire business mogul Mark Cuban says there is one “investment” that tops even stocks. Here’s what the Shark Tank star and famous investor recommends for most people.

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The investment Cuban recommends over the stock market

Paying off high-interest debt is a no-brainer way to top returns in the stock market, according to Cuban. Historically, the stock market has produced an average annual return of around 10%. That’s a phenomenal return, but it still pales compared to what you can save by ridding yourself of expensive debt.

For example, imagine you have debt on a credit card with an onerous 20% interest rate attached to it. By paying off that debt, you are essentially guaranteeing yourself a 20% return.

In addition, you will not owe fees, including brokerage fees, or taxes on the return you get. Cuban has said, “Paying off your debt is always your first best investment.”

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Unpacking Cuban’s logic

Even if the interest rate on your debt is relatively modest, Cuban still thinks paying off debt can beat investing in stocks. For example, in an interview with Kitco News, Cuban suggested that someone who has a student loan with a modest 7% rate would be better off paying off the debt.

That’s because doing so is “a lot safer than trying to pick a stock, or trying to pick real estate or whatever it may be,” according to Cuban.

What else does Cuban recommend?

Paying down debt is just one money move that Cuban has suggested over the years. The following are some other financial strategies Cuban often recommends in lieu of investing in stocks.

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1. Buy household essentials in bulk

Cuban has said that one key to becoming financially savvy is to buy household necessities in bulk or when they are on sale. He takes this idea seriously, recommending that if you find a great deal on toothpaste, you buy enough of the product to last you for a couple of years.

In an email to NPR, he once wrote: “The money you save by investing in bulk will provide a better return on investment than any investment vehicle on the planet.”

2. Put money into savings accounts and CDs

The returns you can earn on stocks usually trounce what you will get by parking your money in a savings account or CD. But that is not always the case. Sometimes, the stock market experiences a deep dive, taking much of your wealth with it.

In an interview with Young Money, Cuban called the stock market “probably the worst investment vehicle out there” and characterized the notion of buying and holding stocks as “a sucker’s game.” Instead, Cuban urges people to put at least some of their money into savings accounts and CDs. “Those who put their money in CDs sleep well at night and definitely have more money today than they did yesterday,” Cuban said.

3. Focus on cash

The old saying that “cash is king” still rings true today. Cuban says a willingness to pay in cash can help you to strike better deals. He once told Vanity Fair that someone who intends to sign up for a $30 yoga class should pull a $20 bill from their wallet and offer that instead. “You know what? They’re going to take it,” Cuban said. “Negotiating with cash is a far better way to get a return on your investment.”

He also advises holding cash over speculating. When in doubt over a specific investment, it is best to keep the cash. If you are fairly certain about an investment, he states it is a good next step to then invest in a low-cost S&P 500 index fund.

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4. Go to college

If you don’t have a college degree, you might want to defer investing in the stock market and instead plunk down some money to invest in yourself. However, although Cuban believes in the wisdom of earning a degree, he recommends that people choose their school carefully. On the Fishbowl podcast, Cuban urged listeners to “go to a cheap school.”

That is the approach Cuban used when he enrolled at the University of Indiana. Cuban has said he chose Indiana because it had the lowest costs among the top 10 business schools in the nation.

5. Keep an emergency fund

Many experts recommend keeping the equivalent of three to six months’ worth of expenses in an emergency fund. This money should be in a savings account or other low-risk vehicle that allows you to access your cash quickly.

Cuban agrees with this advice. As he told Vanity Fair, “If you don’t like your job at some point or you get fired or you have to move or something goes wrong, you’re going to need at least six months’ income.”

6. Go for the 401(k) match

One major exception to Cuban’s rule that paying off debt is your best investment is that if your employer offers a 401(k) match, you should almost always take full advantage of it. Contributing enough to receive the match is essentially earning a 100% immediate return on your investment, something that’s very difficult to replicate elsewhere, making it one of the smartest and most reliable financial moves available.

Bottom line

If you are hoping to get rich, investing in the stock market might be the way to go. But if you are simply looking to get the best bang for your buck, finding clever ways to pay off debt might be a better option.

So, if you are deep in the red on your credit card or another form of high-interest debt, consider paying off your obligations fast. After that debt is finally behind you, the stock market will still be there if you are ready to invest.

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