Broker Check

Tempe Office

222 S. Mill Avenue

Ste 800
Tempe, AZ 85281

Three Things: October 14, 2019

October 14, 2019
Share |

This week I was inspired by some quotes from Steve Jobs, an article about Ultra High Net Worth Investors, and an instagram video featuring Ray Dalio


Adam Harding, CFP / Smartvestor Pro

If this is your first time receiving this email, here's some background: "Three Things" is a quick weekly email to recap some things that stood out to me in the previous week. I try to find inspiration in articles, videos, images, and anything else that I can tie into a financial planning or investment tip. Let me know if there's something you'd like to see covered, or if you happen to spot something interesting which you'd like to share. I hope you find this insightful!

Thing #1: 

Extracted Wisdom of Steve Jobs
By: Steve Jobs 

I recently re-stumbled on some of Steve Jobs' wisdom.

The enigmatic co-founder of Apple died a billionaire, with a fortune of $7 billion, at the age of 56 from pancreatic cancer, and here are some of his notable words... 

“At this moment, lying on the bed, sick and remembering all my life, I realize that all my recognition and wealth that I have is meaningless in the face of imminent death. You can hire someone to drive a car for you, make money for you – but you can not rent someone to carry the disease for you.

As we get older we are smarter, and we slowly realize that the watch is worth $30 or $300 – both of which show the same time. Whether we drive a car worth $150,000, or a car worth $2000 – the road and distance are the same, we reach the same destination. If we drink a bottle worth $300 or wine worth $10 were drunk

"Do not educate your children to be rich. Educate them to be happy. – So when they grow up they will know the value of things, not the price."

"Eat your food as medicine, otherwise, you will need to eat your medicine as food."

"Whoever loves you will never leave you, even if he has 100 reasons to give up. He will always find one reason to hold on."

"There is a big difference between being human and human being."

"If you want to go fast – go alone! But if you want to go far – go together."

"Treat yourself well. Cherish others."

Key Takeaway: 

We manage money and we create financial plans, but more specifically,  we manage people's money and create financial plans for people. This is an important distinction. 

This wisdom helps us do our jobs better, we hope it helps you too. 

The more humanity we can adopt into our approach, the better.

Thing #2: 

Article: Statistical Profile of the Ultra Wealthy

Thomas Stanley's The Millionaire Next Door  was one of the first books I read about wealth. I remember my dad (a CPA) had a copy in his office and I casually confiscated it from him in my teens.

The lesson in that book: wealthy people rarely look like "wealthy people". 

When writing his book, Stanley studied millionaires to develop a profile of the "American Millionaire".

Earlier this year, Chris Hogan released Everyday Millionaires, which was largely a modern extension of Thomas Stanley's research, only Hogan was able to tap into a much larger research base (10,000 millionaires!).

His conclusions were largely the same as Stanley's: Millionaires tend to be like everyday people --not professional athletes or celebrities or beneficiaries of family fortunes. 

This article from Advisor Perspectives helps reinforce some of the same sentiment as Hogan & Stanley, yet it only evaluates Ultra High Net Worth Individuals with more than $30 million of invested wealth.  

Key Takeaway: 

There's no doubt about it, there is massive inequality between the individuals studied in this article and the rest of America. (Although I have some thoughts about whether inequality matters much when domestic and global poverty rates are at all time lows and the standard of living for the poorest Americans has never been higher.... but I'll leave that for a future economic debate ;))

Still, about 68% of these individuals are self-made and about 24% achieved their wealth by being self-made along with some inheritance. Only 8% were wealthy only as a result of inheritance. 

It's harder to become an Ultra High Net Worth individual than it is to become a millionaire, but it still can be done and most that do it did not get there by inheriting family wealth. 

Thing #3: 

Instagram Video: Ray Dalio on Preparing for a Recession

Source: Tony Robbins (@TonyRobbins


For those of you who don't know, Ray Dalio is a world famous-investor who runs the most successful and largest hedge fund in the world. His performance has been stellar since the 1970s, despite his fees being exorbitantly high (as is the case with most hedge funds), making Dalio a billionaire in the process. 

By now you may know that I don't believe in making big adjustments to a long term investment plan based on short term forecasts --after all, most who try to do this fail consistently (here's a graphic of hedge fund managers' performance in 2018). Even Dalio's Pure Alpha strategy was down 6% as of August 23rd this year --an environment where stocks have rebounded steadily in 2018.

The moral: The promise of aggressively active management is great, but the results often aren't. 

Still, as one of the great investing minds of our time, when Dalio speaks, I listen. 

In this video there are two things that stand out: 

1) Dalio advocates that most investors should stick to their strategic asset allocation and not try to make "tactical bets" to pursue alpha (i.e. excess return). Market timing is extraordinarily difficult even with massive resources. 

2) He also discusses how to play the business cycle by 'buying when there's blood in the streets'. This is clearly something we all try to do, but very few actually can do it....

Here's are the ways we aim to do this for clients: 

a) Adopt an asset allocation with target percentage exposures to stocks, bonds, real estate, and cash. 

b) When prices of each investment fluctuate, we may drift from these target percentages. Then we rebalance the portfolio and sell a little of what's appreciated in value and buy what's fallen. This takes away much of our subjectivity about when to buy/sell. 

c) In some cases, an investor's recurring savings and deposits into their portfolio represents a way to always buy --even when there's blood in the streets. 

Dalio's selling point for his strategy is his prescience (which is standard among 2/20 hedge fund managers), whereas mine is more about process. By building a process for managing challenging environments in advance we can avoid the potential for making emotional decisions. 

That’s all for now, have great week!


Adam Harding, CFP®