The premise of this book is that doing well with money has little to do with how smart you are and much more to do with how you behave. In fact, a recent study showed that 87% of return of an investment portfolio is due to saving and investing behavior. Simply, how much are you saving and for how long.
"Your personal experiences with money make up maybe 0.00000001% of what's happened in the world, but maybe 80% of how you think the world works."
Some of my key takeaways:
➡️ Modern day saving and investing for the lion’s share of our population is fairly new. The 401k plan did not exist until 1978 and the Roth IRA was an option for investors starting in 1998. Thus, it is almost expected for us to struggle with some basic principles since we are basically on the 2nd generation of people who have relied solely on these for the long-term retirement.
➡️ The importance of compound wealth and more importantly giving your investments time to grow. An interesting state reference that approximately 90% of Warren Buffet’s wealth came after his 65th birthday. He is 91 today and has been saving and investing for over 70 years. Many of his peers retired in their 50s or maybe 60s and have not had the fortune of growth of the last 30 years. If you want to be a better investor, the single most powerful thing you can do is increase your time horizon.
➡️ Getting money and keeping money are two different skills. This can also sometimes be illustrated by comparing someone who is rich vs. someone who is wealthy. Rich is current income, while wealth often is hidden for all to see.
➡️ When we finish a plan for a client, we let them know this will not come true. There are so many assumptions built into a plan that there is no chance it will play out the way it is designed. Morgan reminds us that an important part of every plan is to plan on the plan not going according to plan.
➡️ Stanford Professor Scott Sagan once said, “Things that have never happened before happen all the time.” This emphasizes the thought of focusing on things you can control which is your investment behavior. Your success as an investor will be determined by how you respond to punctuated moments of terror, not the years spent on cruise control.
➡️ Do your best to be reasonable. Understand we all are not playing the same game and have different goals, timelines, and experience. Develop an investment strategy that you can live with and helps you sleep at night.
🎙 For those of you who prefer a listen to Morgan, he was recently on a podcast with Tim Ferris. Those who are not familiar Tim does a long form podcast (approximately 3 hours), you can find it here!