Life should be interesting and investing should be boring

As Financial Planners, we find the language used by the financial press and investment fund management industry to be fascinating. They speak about funds and money in a different way to most of us. It’s all about excitement and opportunity.

In reality, for most people money is just a way of exchanging their time and expertise for a store or reserve which can be used to buy things or experiences in the future. If you listen to how most real people speak about money it’s about security, safety and the practicality of what they can do with it.

Life

In short, life is the sum of your experiences, both good and bad.

It follows that the real object of saving and investing is to increase the size of that store or reserve, and this means that the opportunities and experiences that can be bought are also increased.

Experiences include having children, climbing Kilimanjaro, painting, weekends away and setting up a business. All require us to exchange time and effort – or money – in order to enjoy them.

Turning to the money industry, its role is rather to look after the wealth, making sure it is happy and has lots of attention spent on it, which it does with energy and enthusiasm.

Do what you love

As with anyone who is involved in any industry, it is easy to get fascinated with that industry, be it scrapping cars, cleaning houses, running a hotel or, in this case, looking after other people's money.

And in the eyes of those who are thrilled by looking after it, the money gets to live an exciting life. Ducking and weaving, trading in and out. It is all so thrilling!

In the meantime its real owner gets to spend lots of time worrying, following markets and tips, filling in forms and reading research.

Can we step back for a minute? Who is actually the centre of attention? Who is the real client here? Who is the process truly designed for? 

It feels as if the money has become the real client, and is the most important thing.

Surely that cannot be right?

Putting money back in its place

We strongly suggest that the central and most valuable role we, as Financial Planners, can do is to calm the money down and condemn it to a life of, if not quite drudgery, then a routine existence of nine-to-five.

A Buy and Hold investment strategy. Diversification. Work down to a risk budget. Rebalance as appropriate. Keep the tax simple. Long-only investments, taking no bets. Simplify the reporting for the real client.

In other words, make money boring!

And what does the owner do while the money is being bored this way? Well, anything they like.

Walking the Great Wall of China. Visiting the grandkids in Australia, playing golf or simply sitting at home reading. Whatever they want, using the time they previously spent babysitting the money and filling in paperwork.

Plan, prepare, live

This financial planning role requires constant vigilance, as the investment noise around us really wants the money to come out and play. It whispers, screams and cajoles. It entices the money with The Top 10 funds you should have in your portfolio, and scares us with artificial deadlines and threats. It seduces us with images of investing in tropical forests, helping to save the planet. We think, ‘Well, if we can’t go to Brazil, perhaps our money can go instead of us?’ 

But like many a fleeting fantasy, the real world intrudes. Next week The Top 10 funds to have in your portfolio are different from the week before, and the dream of your money not only getting to Brazil but coming back as well, seems to fade.

So what’s the point of all this noise and activity? How do we regain a balance?

Tipping the scales

Firstly, we need to resolve to put ourselves firmly back in charge. We are the masters and money is our servant. Any other arrangement brings madness.

Having done that, we need to really think about what kind of life we want. That is, what do we want out of it? Do we want to work forever – because work is fun? Or do we have a long-held secret dream of us, our family and a little boat somewhere? 

Whatever the dream is, the key is then to put the money firmly to work for us.

In the books of the late, great, and much-missed Sir Terry Pratchett, he borrows from a medieval Central European Jewish tradition – concept of a Golem. A thing of clay that works tirelessly, on our behalf, governed by the words in its head.

I suggest that our wealth – money – should be our Golem. A thing that is tireless, patient and governed by our words.

Once we have that concept in place, we can get the bike out of the shed, book that cottage or sign up for the language course we always wanted.

We wish you – but not your money – an interesting life.