Brian Portnoy

How I Invest My Money – Joshua Brown and Brian Portnoy

How I Invest My Money – by Joshua Brown and Brian Portnoy
Recommendation: 8/10. Date read: 2/11/21.

Instead of financial gurus preaching what you should do with your money, this book is a collection of essays by 25 financial experts detailing how they invest, save, spend, give, and borrow in their own lives. Through reflection and personal stories, each expert breathes life into the how and why of their investments. Each investment strategy is quite different which illustrates a key point of the book, there’s no single “right” way. What matters most is that you’re thoughtful and true to yourself in your approach.

See my notes below or Amazon for details and reviews.

My Notes:

Independence:
“I did not intend to get rich. I just wanted to get independent.” Charlie Munger 

“I mostly just want to wake up every day knowing my family and I can do whatever we want on our own terms. Every financial decision we make revolves around that goal.” Morgan Housel

“Independence, to me, doesn’t mean you’ll stop working. It means you only do the work you like with people you like at the time you want for as long as you want.” Morgan Housel

Get the goal post to stop moving: “Independence, at any income level, is driven by your savings rate. And past a certain level of income your savings rate is driven by your ability to keep your lifestyle expectations from running away.” Morgan Housel

Define what is enough: simplify by finding the line between excess and satisfaction. 

Investing strategy:
High savings + patience: “My investing strategy doesn’t rely on picking the right sector, or timing the next recession. It relies on a high savings rate, patience, and optimism that the global economy will create value over the next several decades.” Morgan Housel

Get the big stuff right: “Getting the big stuff right—living within their means, setting a reasonable savings rate, staying employed—will be a bigger determinant of whether they reach their goals than will their investment selections.” Christine Benz

Invest in yourself: “Invest in yourself. Your ability to work is your safest and highest returning asset. By lifelong learning, and taking care of your physical health, mental health, and relationships, you are much more likely to lead a secure and satisfying life without regrets.” Carolyn McClanahan

You biggest asset is your earning power: “I’m about 40, and plan on working for another 20 years. So, my biggest asset is still my earning power—my ability to turn my time and effort into money.” Dan Egan

Working matters more than investments: “I wonder if the greatest trick the devil ever played on investors is making them think it is the investing part that matters most. The working part moves the needle more, both for the math of deposits but also in the discipline of a purpose.” Ryan Krueger

Maximize for choice: “Having options and a little bit of luck are the key to financial security.” Debbie Freeman

Avoid the herd: “The more intensely and emotionally a lot of people ‘hate on’ a particular investment, that is a good signal to buy.” Joshua Rogers 

Move with purpose:
“You have exactly one life in which to do everything you will ever do. Act accordingly.” Colin Wright

Karma:
“Karma may be important in achieving wealth accumulation, but karma is definitely important in wealth preservation.” Joshua Rogers 

The Geometry of Wealth – Brian Portnoy

The Geometry of Wealth – by Brian Portnoy
Date read: 7/4/18. Recommendation: 9/10.

A look into the relationship between money and meaning. Portnoy suggests that wealth and investing are about funding contentment and underwriting a meaningful life, as defined by you. Not about getting rich, having "more," and losing yourself on the hedonic treadmill. He explains that simplification is the path towards effectively managing expectations in money and life–and the trajectory of a happy life is shaped by expectations. The Geometry of Wealth is as practical as it is philosophical. À la Charlie Munger, Portnoy emphasizes individual behavior, mainly self-control and self-awareness, as the most important factor in investment success. He suggests we focus on being "less wrong" over being "more right," in the sense that asset allocation is far more important than security selection and market timing. But he also takes a deeper look at experienced happiness, reflective happiness, expectations, and human nature, which adds an entire extra dimension to this fascinating book.

See my notes below or Amazon for details and reviews.

 

My Notes:

"Do not hurry; do not rest." -Johann Wolfgang von Goethe

Examines the relationship between money and meaning, and how wealth figures into a joyful life.

Difference between rich and wealthy
-Rich is having "more" - hedonic treadmill on which satisfaction is fleeting
-Wealth is funded contentment, ability to underwrite a meaningful life, as defined by you
-Wealth is only achievable when purpose and practice are calibrated

Simplification is the smart path toward effectively managing expectations. In general terms, met expectations lead to temporary happiness and unmet ones lead to temporary sadness.

A "good" investment is one that meets expectations. And when expectations of the future don't match reality, we end up with dismal outcomes–not only financially, but emotionally. 

Dual Process Theory: "System 1" versus "System 2" (as popularized by Daniel Kahneman)
System 1: Fast brain loves consistency, biased to confirm beliefs and see patterns even when they don't exist. Avoid ambiguity and doubt.
System 2: Specializes in effortful mental activities, slow brain requires significantly more energy (glucose and other chemicals)

Three factors which determine lifelong happiness:
-Genetic disposition ~ 40%. This is your set point, return to this level (features and attitudes you're born with).

-Circumstance ~ 10%. Only a slight impact (and these are the attributes many of us define ourselves by). Where you live, what type of house you have, physical appearance, family dynamic, job, etc.
How can these have such a small impact? The brain is wired with an ability to adapt to whatever situation we find ourselves in, and it does it so much more quickly than we anticipate. It's a remarkable defense mechanism, for it allows us to transcend most setbacks in life. 

-Intention ~ 40%. Conscious decision-making and deliberate actions have significant impact on our quality of life experiences. Empowering, while you can't get around biological set point, still have capacity to make a big difference through personal drive and self-improvement.

"[Those who far better in life] have better coping strategies in the face of adversity–they confront problems rather than avoid them, plan better for the future, focus on what they can control and change, and persist when they encounter obstacles instead of giving up." -Timothy Wilson

Prepared mind = better life outcomes

When it comes to money, simplicity means having a limited number of clearly articulated concepts that both make sense of a noisy world and drive sharp, reasonable decisions.

Experienced Happiness: Maximize pleasure, narrower in scope, shorter in duration, hedonic, daily mood.
*Impact of money on experienced happiness caps out around $75k/year. Life's basic comforts met (which we become quickly accustomed to). Good and bad moods come at same pace for someone making $100k vs. $1m.

Reflective Happiness: Maximize contentment, broader in scope, longer in duration, eudaimonic (human flourishing), purpose, deeper sense of fulfillment.
*Reflective happiness does not cap out a specific income level. Does not diminish, keeps growing. But it always remains relative to your current position ($1000 raise for new college grad has larger impact than it would for CEO). When money is spent to underwrite sources of contentment, money buys happiness. 

Contentment = control (afford better nutrition, healthcare, more independence, time, flexibility), competence (invest in skills, potential), connection (sociality of experience, networks, memberships, access), context (time to find purpose). 

The "good life" is not the tweak of ephemeral pleasure, but the engagement with more meaningful, virtuous pursuits. Momentary pleasures are distinct from the enduring gravity of meaningful experience. 

"[Success stems not from] beating others at their game. It's about controlling yourself at your own game." -Jason Zweig
*Your own behavior far most important factor in investment success.

Much of what humans are good at does not center on weighing consequences of a possibility many years in the future.

Getting the restaurant right is more important than picking the right dish. Choosing investments works similarly. Big choice at hand is asset classes. Don't fetishize precision. Get it roughly right. Save yourself time and mental energy.

Asset allocation = far more influential than security selection and market timing. 
*90% of performance differences among investors are explained by asset allocation

Prioritize being "less wrong" over being "more right."

Only a handful of basic principles needed to achieve good investment results (but we crave complexity so we fail to execute):
-Buy low and sell high
-Diversify
-Stick to your plan

Crave complexity because we crave choice, which is a proxy for the control we perceive to have over our lives. More choice translates into a greater sense of safety (however false it might be).

A "good" decision is one that leads to a reasonable and appropriate outcome, not one that achieves other arbitrary goals like beating the market or trumping others. A "bad" decision starts with either vague or unrealistic expectations.

Accept the uncertainty of this game, remain humble in the pursuit of better things, and there's a decent chance that things will be okay.

"To achieve satisfactory investment results is easier than most realize; to achieve superior results is harder than it looks." -Benjamin Graham

The trajectory of a happy life is shaped by expectations. When the future meets or exceeds our expectations, we tend to be happy' when it doesn't, we're not.

Assessing annualized returns -- the longer the time frame, the narrower the range of outcomes (+/-10%). Shorter time frame, large (and more erratic) range of outcomes (170 to -70%). 

When we say that stocks make about 10% per year, it would be a mistake to assign the outcome of the entire group to any one member. Individual stock can be a dud or rocket ship. Best bet is to own a broad swath of the market.

With true diversification, there will always be something in your portfolio that sucks (and that's okay).

Compounding is the quiet protagonist in more tales of progress than nearly any of us has considered. Einstein supposedly called it the most powerful force in the universe.

Charlie Munger: "The first rule of compounding: Never interrupt it unnecessarily."

"Approximately 99% of the time, the single most important thing investors should do is absolutely nothing." -Jason Zweig

"The authentic individual is neither an end nor a beginning but a link between ages, both memory and expectation. Every moment is a new beginning with a continuum of history. It is fallacious to segregate a moment and not to sense its involvement in both the past and future." -Abraham Heschel

Our ability to think through time and see our future selves has limitations. Most profoundly, we discount the future: we value today more than tomorrow. Time discounting is an evolutionary instinct. We didn't pass on killing the small animal right in front of us in hopes of maintaining our energy to attack a larger herd of fatter animals that may or may not come later. We tend to live in the now because it seems the safer thing to do.

"Human beings are works in progress that mistakenly think they're finished." -Daniel Gilbert

Narrative of the book: Stoic playbook for navigating money life, moving from perception to action to will. Self-awareness and self-control are key principles. Embrace adaptive simplicity.