Derren Brown debunks magicians. A lot of things seem like magic. Things we don't understand. British Science Fiction Writer Arthur C. Clark famously said, 'Any technology sufficiently advanced is indistinguishable from magic.' The way Brown debunks magic is by showing that he is able to perform the same tricks.
I believe investing is the same. There are no magic tricks. The key things in your control are (1) how much you spend, and (2) how much you invest. How much you start with, get given, earn, or how much your money earns are much less under your control. Seth Klarman said, 'The real secret to investing is that there is no secret to investing. Every important aspect of value investing has been made available to the public many times over, beginning in 1934 with the first edition of Security Analysis. That so many people fail to follow this timeless and almost foolproof approach enables those who adopt it to remain successful.'
Most of the stories we hear are about the big successes and failures. Stories on the edges. The majority of us need to deal with reality. Not magic. Do the research. Find out what your options are. Find out what you need to do to increase your number of options. Pick one. Make a plan. Surround yourself with people who can help you stick to your plan.
I believe in building Engines. An Engine is something that can earn more than you spend. An Engine is something that can free you to make non-monetary decisions. That takes time, not magic. Time is the only magic I believe in. There is no short-cut. It takes delayed gratification, discipline, calm, and patience. Engine Building is far more about Emotional Intelligence than being book smart.
Huge returns are mostly luck. You can't plan for that. Epic failures are a lot easier to plan for. The best investment strategy is to avoid being stupid. Howard Marks said, 'When there is nothing particularly clever to do, the potential pitfall lies in insisting on being clever.' Once a solid plan is in place, normally the best thing to do is nothing.
The strategy I support is a 15-year plan. If somehow you can get your spending under control, so that with discipline you can match dollar-for-dollar what you spend and what you invest, then you will be well on track. What that investment earns is much less under your control. But, if it is in a vehicle that is left alone, I don't think 5% (after all expenses) is a completely unreasonable long-term goal. If you are lucky, a little more will shorten the time required. A little less will lengthen it.
If you are able to match your spending for 15 years, and your investment earns 5% a year after expenses, you will have a powerful Engine.
I believe in building Engines. An Engine is something that can earn more than you spend. An Engine is something that can free you to make non-monetary decisions. That takes time, not magic. Time is the only magic I believe in. There is no short-cut. It takes delayed gratification, discipline, calm, and patience. Engine Building is far more about Emotional Intelligence than being book smart.
Huge returns are mostly luck. You can't plan for that. Epic failures are a lot easier to plan for. The best investment strategy is to avoid being stupid. Howard Marks said, 'When there is nothing particularly clever to do, the potential pitfall lies in insisting on being clever.' Once a solid plan is in place, normally the best thing to do is nothing.
The strategy I support is a 15-year plan. If somehow you can get your spending under control, so that with discipline you can match dollar-for-dollar what you spend and what you invest, then you will be well on track. What that investment earns is much less under your control. But, if it is in a vehicle that is left alone, I don't think 5% (after all expenses) is a completely unreasonable long-term goal. If you are lucky, a little more will shorten the time required. A little less will lengthen it.
If you are able to match your spending for 15 years, and your investment earns 5% a year after expenses, you will have a powerful Engine.
Invest 50%. For 15 years. At 5%.
50-15-5
This is not magic. Although the results are magical.
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