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Week 50: Weekend reading for health, wealth and happiness

By Sam Instone - December 10, 2020

Our relationship with money is one of our longest and most consequential.

From an impressionable age, we develop attitudes toward saving and spending.

Whether we notice it or not, these preconceived views steer our decision-making.

We haven't evolved to deal well with making decisions for the future, having historically always been concerned about surviving the day!

The challenge of good wealth creation is that it presumes individuals know what their long-term goals are, and can effectively articulate them...

In practice, however, this is rarely the case.

Humans in general aren't wired to envision a future that is substantially different from what we experience today.

Especially for our financial futures.

Understanding the boggling maths of compounding wealth accumulation isn't easy.

The engrained views about wealth we inherit cloud our view, and it's difficult to set goals if you don't know what the power of compound interest might make possible.

It's little wonder that many high-net-worth investors don't have very good answers when asked what their goals are, and many have wildly unrealistic expectations.

This means the first (and perhaps most underrated) thing that any good investment professional should do, is help clients understand the myriad of possibilities ahead of them, explore a range of scenarios, and understand the inevitable trade-offs and choices they will have to make along the way.

Unfortunately, this isn't what happens.

The traditional financial industry instead focusses on the sale of investment products. The standard approach taken is to expose a potential gap for a product that can be sold to the client (and generate a healthy commission in the process).

Instead of product-centricity, professional planners are therefore focussed on asking questions that lead to meaningful conversations to help investors like yourself discover the things that are most important to them, where they want to get to and building a path to start moving towards that goal.

Defining goals with a possibilities-based discovery approach creates room to reassess those aims and to shift over time. Small changes, nudges and habits add up, and a good planner acts as a guide in a constantly changing landscape - not a defender of outdated maps.

If you understand the distinctions clearly, a vast array of lifestyle, emotional and financial benefits are available. If you fail to properly answer life's most expensive questions and pander to the traditional investment industry's status quo, the costs will add up.

So, I begin this week's reading with an article asking 'What's your magic number?'

This is followed by a piece on how to avoid the confirmation bias fallacy, entitled 'Why you can't argue with a vegan'.

I often hear a lot of misconceptions about equities ("the great companies of the world"), and this article helps to answer
'Why do stocks beat bonds?'

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, in his piece 'Find, Fix, Strike, Exploit'. The key to success? Exploit. Whatever has gone before, the leader who acts most quickly in a new situation will shape the operating environment.

A question for you

Ask yourself - Will you find, fix, strike and exploit an opportunity or problem today?


This week's meditations

"What the human being is best at doing, is interpreting all new information so that their prior conclusions remain intact."
- Warren Buffett

"When the facts change, I change my mind - what do you do, sir?"
- John Maynard Keynes

"Any jackass can kick a barn down. But it takes a good carpenter to build one."
- Sam Rayburn

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


The Rational Walk's article 'What's Your Magic Number?'

Nudging Financial Behaviour's 'Why You Can't Argue With A Vegan'

Eddy Elfenbein on 'Why Do Stocks Beat Bonds?'

David Labouchere's article 'Find, Fix, Strike, Exploit'