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Week 2: Weekend reading for health, wealth and happiness


By Sam Instone - January 14, 2021

Big financial goals are rarely achieved overnight.

But by creating checkpoints along the way, you can work towards your goals regularly.

We begin this week with some tips from Goldman Sachs on 'creating financial checkpoints' to help keep you moving towards achieving them, big or small.

They also recently posted a short video on their 'preliminary 2021 thoughts' and the potential light at the end of this long tunnel.

One of my favourite authors Morgan Housel wrote an interesting article for CNBC titled 'a powerful money lesson from Bill Gates: why you should save like a pessimist, but invest like an optimist'.

This might be true, but is the in-vogue cryptocurrency Bitcoin an 'optimistic' investment, or just a 'speculative bet' more akin to playing the national lottery?

David B. Armstrong of Monument Wealth Management considers why he and many other experienced investment professionals believe 'monotony is your friend', rather than chasing thrills like Bitcoin.

Housel's book The Psychology of Money explains why many investors won't agree with David, arguing that our minds, society and life in general are designed to reinforce the many types of mindset bias that impact our money success.

Personally, I like the words of Andy Hart at 'Humans Under Management' who said;

"If you're in any way occupied with helping your families attain financial independence, I encourage you to keep the following close to you as you journey through this year:

1. The only sane definition of money is purchasing power.

2. Therefore, your greatest challenge is not in preserving capital, but in preserving purchasing power.

3. The greatest enemy in this battle is inflation, the slow and steady erosion of purchasing power.

4. Historically, equities (ownership in the great businesses of the world) have consistently been the best asset class in helping fight the destructive power of inflation.

5. To earn these enemy-defeating returns, the investor has to pay a price of admission: market volatility.

6. On average, the market declines from top to bottom by about 15% every year. Roughly every 3 to 5 years, the investor can expect a decline of at least 30%.

7. The timing, and reason for, these market drawdowns cannot be predicted and do not coincide with economic trends.

8. This volatility can only be avoided by sacrificing real-life long-term returns.

9. As such, the investor is trading temporary volatility for permanent returns.

10. Most clients are unable to understand, accept and endure the above cost of investing without a caring, empathetic, independent and experienced viewpoint and guide. That is human nature."

This advice creates inevitable wealth and there is an argument that helping the next generation get on their financial feet and find their successful track in the economy is not "spoiling" your children. Millennials are already predicted to be the first generation to be worse off financially than their parents, even though a higher percentage have a Bachelor's degree.

Instead of withholding the inheritance until your death, the author recommends that (after proper cash-flow analysis) you gift early to encourage your children to start building their own financial freedom.

You will be able to see and enjoy the impact of your legacy, and you can reduce their economic struggle. Some examples include helping to pay off debts or contributing towards the cost of further education.

As always, and true to my own military roots, the final word is taken by former senior British Army officer, inspirational leader and Ironman champion David Labouchere on 'Control'.

We can control the most valuable asset any of us have; our health.

Consistent sleep, good hygiene, real food and frequent exercise are the foundations of mental, emotional and physical happiness. We can and should focus on these every day.

As we age, and particularly once we reach around 40, we should all have regular medical check-ups. Don't put your annual health checkup on the back burner. Control what you can control.

 

A question for you 

Ask yourself - What will you control today?

 

This week's meditations

"An investor never buys purely because an asset's price has been going up and never sells merely because its price has been going down. An investor uses internal sources of return - dividends, rising future profits or asset values - to estimate what an investment is worth. A spectator buys and sells on the basis of recent fluctuations in price. A spectator uses external sources of return - primarily what he thinks someone else might pay - to estimate what a speculation is worth."
Jason Zweig

"To live only for some future goal is shallow. It's the sides of the mountain which sustain life, not the top."
- Robert Pirsig

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Have a great weekend and enjoy the ‘light’ reading! 

 

Adam Vega for Goldman Sachs on 'Creating Financial Checkpoints: A Key to Helping you Reach Your Goals'

Goldman Sachs' 'market update' video

Morgan Housel's article 'A powerful money lesson from Bill Gates: Why you should save like a pessimist, but invest like an optimist'

David B. Armstrong's take on Bitcoin 'Monotony is your friend'

David Labouchere's article 'Control'

Jason Zweig's article 'Are you an investor or a speculator?'

Advisor Perspectives' 'Parents shouldn't wait to pass down their wealth'

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