Here’s How The Stock Market Can Make or Break Your Retirement

The stock market doesn’t care for what you want or need. It’s a cold and heartless beast – I know, it’s unfair.

Some things don’t make me happy to say, but there is a lottery aspect to all of this: when you were born, when you retire, and when your children go to college. And you have no control over that.

Jack Bogle

The lottery that Mr Bogle is referring to is the luck of the draw: What will the financial markets be doing when you retire? If you retired in the early 2000’s, you we’re ‘in luck’. If you retired in 2007, you were ‘out of luck’.

One of the biggest risks that isn’t spoken about in the financial world, is sequencing risk. Although it may sound complicated, it’s probably one of the most simplest, yet underrated risks. The risk that you suffer investment losses early in your retirement years, which is a matter of luck, your odds of making it over the long run fade very quickly. In essence, the earliest years of your retirement will define your later years.

Don’t believe me? Let’s take a look at two retirees, David and Carol.

David, age 65, has accumulated $1,000,000 and is about to retire. His portfolio is invested in line with a ‘balanced’ portfolio, that is 60% in stocks, and 40% in bonds. David draws $50,000 (indexed by 3% each year) from his portfolio each year to help fund his retirement.


David experiences some losses early on in his retirement – three years in a row in fact. And within five years, his portfolio has been cut in half. Withdrawing funds when the market is down makes it even worse. Although David’s portfolio makes up ground in the following years, the damage has been done. By the time he reaches 85 years of age, his portfolio has collapsed. he withdrew a total of $1,255,843 from his original investment of $1,000,000.


Let’s now consider Carol. Carol also retires at the age of 65 with $1,000,000 in the kitty. Carol experiences the exact same market returns as David, however in reverse order. Here’s what her portfolio looks like:

By simply reversing the order, or sequence of returns, Carol has a vastly different retirement experience. In fact, by the time she is 88 years of age, she has withdrawn $1,721,323 and still has over $2,485,000 in her retirement portfolio.

It’s mind boggling. Two retirees with the same investment balance, same withdrawal rate, same investment time frame, same average returns. Yet one penniless, the other living a completely financial free retirement.

You can do all the things right, but if you, just for one second, need to start drawing on your funds when the market is spiraling out of control, there can be a devastating impact on your nest egg. For some, this may mean not being able to care for their loved ones, or fund the retirement they’ve always dreamed of. For others, it means not being able to send their grandchildren to an independent school.

The market doesn’t care for what you want or need. For this reason, your personal life and balance sheet have never needed to be been more connected. Be clear on what you want and why. Then make investment decisions accordingly.

It certainly helps when you have a life and financial plan mapped out. Sure, it’s unlikely to go to plan, but like every pilot has a route mapped to their destination, and when the whether changes, they know exactly where they need to go, how far they deviated, and what to do to get back on track.

Sequencing risk is real. And investors deserve risk management strategies that will help give them the financial freedom they deserve.

The Greatest Bubble In History

It was 170 years ago when Scottish journalist, Charles Mackay noted:

We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.

When people think about really, really ridiculous bubbles, the Dutch Tulip bubble of 1636 instantly should come to mind. It’s generally considered the first recorded speculative bubble.

Source: Wikipedia (click for larger image)

How did people even get excited about tulip bulbs!?

Tulips came completely out of nowhere, having been imported from Turkey in 1554. The tulip was different from every other flower known to Europe at that time, with a saturated intense petal color that no other plant had. They blew everyone’s mind, and ownership of them became a major status symbol for the elites.

As the flowers grew in popularity, professional growers paid higher and higher prices for bulbs, and prices rose steadily. By 1634, in part as a result of demand from the French, speculators began to enter the market. Soon after, the Dutch created a type of formal futures market where contracts to buy bulbs at the end of the season were bought and sold. The Dutch described tulip contract trading as windhandel (literally “wind trade”), because no bulbs were actually changing hands.

By 1636, the tulip bulb became the fourth leading export product of the Netherlands, after gin, herrings and cheese. The price of tulips skyrocketed because of speculation in tulip futures among people who never saw the bulbs. Many men made and lost fortunes overnight.

People were purchasing bulbs at higher and higher prices, intending to re-sell them for a profit. Such a scheme could not last unless someone was ultimately willing to pay such high prices and take possession of the bulbs. In February 1637, tulip traders could no longer find new buyers willing to pay increasingly inflated prices for their bulbs. As this realization set in, and buyers refused to show up to routine bulb auctions, the demand for tulips collapsed, and prices plummeted—the speculative bubble burst. Some were left holding contracts to purchase tulips at prices now ten times greater than those on the open market, while others found themselves in possession of bulbs now worth a fraction of the price they had paid.

Many individuals grew suddenly rich. A golden bait hung temptingly out before the people, and, one after the other, they rushed to the tulip marts, like flies around a honey-pot. Every one imagined that the passion for tulips would last for ever, and that the wealthy from every part of the world would send to Holland, and pay whatever prices were asked for them. The riches of Europe would be concentrated on the shores of the Zuyder Zee, and poverty banished from the favoured clime of Holland. Nobles, citizens, farmers, mechanics, seamen, footmen, maidservants, even chimney sweeps and old clotheswomen, dabbled in tulips.

– Charles Mackay

The ensuing rapid ascent of tulips became the very definition of the ‘greater fool’ theory in action.

Whether it’s tulips, property, stocks, weed, Beanie Babies, or Bitcoin (crypto), bubbles have been growing and popping for centuries, as far back as 1637 in the case of Tulip Mania. Since then, mainstream media has had a terrible track record of identifying bubbles accurately, and in real time. In fact, it’s probably quite the opposite.

Will we see another bubble in financial markets? Sure we will – I guess we won’t know it was a bubble until after it’s popped. Here are some of the greatest bubbles in financial history and their relative magnitude to each other.

Financial bubbles completely change the way certain investors approach financial markets and investing. I also believe some investors forget the main lessons of financial bubbles far too quickly.

Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.

– Charles Mackay

Here are four tips to avoid a bubble:

  1. Don’t mind missing the party. The music always sounds good, until the police raid the joint. If something feels wrong, don’t join in just because it looks like everyone else is having fun.
  2. Focus on your objectives. Don’t get sucked into playing someone else’s game. If you focus on investing to meet your needs and circumstances, you will be less inclined to follow the crowd.
  3. Diversify. It is one of the most basic of investment principles, but one that people abandon too readily. If you spread your investments out sufficiently, you will minimize the impact of any one bubble bursting.
  4. Have an exit strategy. When you buy something, have a predetermined exit strategy. That way, if you are fortunate to see your investment go up, you won’t get drawn into holding on just because it seems to be getting more popular.
  5. Rebalance. This will help you execute tactics 3 and 4: As individual investments or asset classes rise, periodically trim them back to keep them in line with your planned mix. That way, a bubble won’t inflate an investment to the point at which it has an oversized impact on your portfolio.

Don’t say I didn’t warn you.

Source: Business Insider, Wikipedia, Forbes

Jack Ma’s Guide To Sanity And Success

There are no experts of tomorrow, only of yesterday.

– Jack Ma

In 1999, Jack Ma co-founded what would become a multinational behemoth specialising in e-commerce, retail, internet and technology – Alibaba.

He’s someone I’ve been following for the last couple of years. His wisdom and simple, yet powerful advice is invaluable. One of my favourite video’s is Jack Ma’s original sales pitch to 17 of his friends is his apartment introducing Alibaba, where he lay out his plan to compete with US internet titans.

In his pitch you gain glimpses of his long-term thinking, his vision, his hunger, his determination, and his work ethic. Most importantly you gain insight into his mindset. If you haven’t seen the video, here it is:

In his video he talks about the tech bubble, the fact that stocks will rise and fall, and that they need to pay a painful price in 3-5 years, yet it is the only way they will succeed – and oh how right he was.

20 years on, Jack Ma is sharper than ever. He recently presented at the World Economic Forum in Davos to pass on his advice to young entrepreneurs. Here are his top quotes:


“Of course I was scared and had doubts [when I started Alibaba]. But I believed someone, if not us, would win. There are no experts of tomorrow, only of yesterday.”


“In business, never worry about competition, never worry about the pressure. If you worry about pressure, don’t be a businessman … If you create value, there is opportunity. Today the whole world worries. That means there is great opportunity.”


“Your first job is your most important. Not necessarily a company that has a great name but you should find a good boss that can teach you how to be a human being, how to do things properly, and stay there. Give yourself a promise: I will stay there for three years.”


“How can we teach kids to be more creative and do things that machines cannot do? Machines have chips, but human beings have hearts … Education should move in this direction.”


What keeps Jack Ma awake at night? “Nothing! If I don’t sleep well, the problem will still be there. If I sleep, I have a better chance to fight it.”


“To manage smart people you have to use culture, the value system, they believe what they do. If you just want to use rules and laws and documents to control – that’s how you control stupid people.”


“When I hire people, I hire the people who are smarter than I am. People who four, five years later could be my boss. I like people who are positive and who never give up.”

Whether you’re setting up a business, or setting up your family’s wealth, having a vision, being hungry for success, being determined, having the right work ethic, and most importantly having the right mindset is paramount. I believe there are 3 key steps in getting what you want:

  1. Know your outcome – be clear on what you want
  2. Know why you want it – purpose provides drive
  3. Take action – stop talking about shit and start doing shit

Take these three actions, and you’re ahead of 95% of the population. It’s a fact.

Source: WEF, YouTube

Stocks & Storytelling

It’s 1994. Iomega (presently Lenovo) is expected to release a product that will revolutionize the PC and storage world. The product is the zip drive – a floppy disk storage system. Like the one in the picture below…you know, the one that’s sitting next to your computer (NOT!).

The stock was hot. It began with a whisper, then to web forums, and eventually to Wall Street who were touting the stock to anyone that was breathing. The story was spreading and it was on fire. People who lived near the company’s factory in Utah, would drive by the factory on a Sunday to see how crowded the employee car park was. And if it was full, the story was, the company can’t meet demand – keep buying the stock! The stock gained 2,135% in one year. Eventually CD-Roms and USB drives killed the Zip Drive, and the company.

Story-telling. Once upon a time, investing began this way. Once the portfolio was built, data was used to market it – we like ABC Company because <insert reason here>, and we expect earnings to surprise to the upside. There was no evidence behind the decision making. It was a gut-feel. A hunch. A story. Eventually, investment professionals realised this game wouldn’t last forever. The narrative changed from telling stories about individual companies to telling stories about investment themes and managed funds – we like Europe because <insert story here> and ABC manager has a strong track record in this space, we expect strong upside from here.

These statements would imply anecdotal insight into the future of a company, region, fund, and ultimately, it’s stock/s.

A lot has changed over the last 25 years. Today, portfolios are constructed very differently. They are constructed using math, data and evidence. And story telling is used to market them. Unlike 25 years ago, the story would sell the stock, and if the data was compelling (after the fact), it would be used to market the stock/manager.

Some money managers still operate like its 1994. Other than a very small handful of managers, most are not very good at it (managing money). The difficulty for end investors and investment professionals selling these portfolios of stocks, is that investors can only identify the winners after the fact, which is of no use to anyone.

Here’s the latest (Australian) data showing the percentage of funds that under performed their benchmark.

Source: SPIVA

The numbers are quite staggering. This is not an Australian phenomenon, the numbers are similar all around the world. Click here if you want to see the rest.

So who should care? Every investor who sometimes confuses brains with bullshit stories should care. Investors should ensure their portfolios are built using evidence and data, not gut-feels and hunches.

Stop Playing Russian Roulette With Your Money

Berkshire will forever remain a financial fortress. In managing, I will make expensive mistakes of  commission and will also miss many opportunities, some of which should have been obvious to me. At times, our stock will tumble as investors flee from equities. But I will never risk getting caught short of cash.

– Warren Buffett (2018 Annual  Letter)

For sometime now, Berkshire Hathaway has been criticized for holding this most cash in the company’s history – a whopping US$111 billion. Until the critics show me their investment track-record, I’m siding with Warren on this one. He goes on to say:

In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects.

Investors haven’t seen bargain basement prices for a long time now. December did however, provide us with a sneak peek – the market falling 20% peak to trough, officially falling into ‘bear market’ territory (who came up with this magic number anyway?). Alas, it wan’t meant to be, with the market rallying about 15% from it’s lows making it one of the shortest bear markers on record:

Source: Charlie Billelo – Pension Partners

Investors who were waiting for lower prices didn’t see it. Investors who were speculating with their wealth got away with one. The buyers will have their day, as long as they remain patient and disciplined. The speculators will too face their day of reckoning.

Rational people don’t risk what they have and need for what they don’t have and don’t need.

– Warren Buffett

If you’ve been playing Russian roulette – usually win, occasionally die – with your wealth, enjoy the present calm. But understand this, you’re strategy is fundamentally flawed. We will eventually see, and investors will need to contend with a sustained decline in asset prices. When this decline occurs no-one really knows. Whilst we have some harmony in financial markets (if I can call it that), you may want reassess your game plan. Here are 3 tips to consider:

  1. Reassess your tolerance and capacity for risk. How much, and for how long, can you afford to lose money. How would your life be impacted if tomorrow you woke up to find out financial markets had collapsed 10%, and began their treacherous road to falling 60% over a 24 month period? How much of your chip stack have you pushed into the pot? The time to reassess risk is when markets are going up, not down.
  2. Invest with purpose. Why are you making this investment? What is the purpose? How did you arrive to the amount of money you invested? What is the exit strategy? Be clear and specific with your investments. If you can’t answer these questions, you have a flawed game plan.
  3. Diversify. If you’re truly following point number 2, your portfolio should naturally be diversified. If you’re not following point number 2, work on point number 3. Is your portfolio diversified all major asset classes, cash, fixed income, property, shares? Is it diversified within each major asset class – for example, sectors, markets, geographies, currencies? How much cash are you holding for opportunities?

If you haven’t had a chance to read Mr Buffett’s 2018 Annual Letter to shareholders, may I suggest you set aside 10 minutes and download your daily dose of wisdom. You can download it here. It constantly perplexes me why so many investors choose to make the journey of wealth accumulation so difficult for themselves and their families.

I’ll leave you with this passage from Mr Buffett’s 2018 Letter:

Let’s put numbers to that claim: If my $114.75 had been invested in a no-fee S&P 500 index fund, and all dividends had been reinvested, my stake would have grown to be worth (pre-taxes) $606,811 on January 31, 2019 (the latest data available before the printing of this letter). That is a gain of 5,288 for 1. Meanwhile, a $1 million investment by a tax-free institution of that time – say, a pension fund or college endowment – would have grown to about $5.3 billion.

Let me add one additional calculation that I believe will shock you: If that hypothetical institution had paid only 1% of assets annually to various “helpers,” such as investment managers and consultants, its gain would have been cut in half, to $2.65 billion. That’s what happens over 77 years when the 11.8% annual return actually achieved by the S&P 500 is recalculated at a 10.8% rate.

Invest like the best.

Here’s The Advice From One of The World’s Most Successful Investors

Last week, Charlie Munger, the 95 year old Birkshire Hathaway Chairman and Chairman of the Daily Journal, spoke to shareholders of the newspaper’s annual meeting. In his usual no holds barred manner, he spoke for two hours addressing and answering questions from shareholders.

I watched his address from beginning to end. The man is 95 years of age, he’s one of the smartest minds in investing, and when he speaks, investors stop and listen.

His investment concepts, processes, and beliefs are so simple, which I believe is what makes it so difficult to implement and replicate.

It’s amazing how intelligent it is to spend some time just sitting. A lot of people are way too active.

– Charlie Munger

I’ve taken some of his best responses to questions he was asked in the hope that it would give you insight into, and be valuable in your endeavor to build your financial wealth. If you want to be anywhere near as successful as this man, take his advice. Okay, here we go…

Which money managers would you recommend besides you and Warren?

I’ve only hired one in my lifetime, I don’t think that makes me an expert. Everybody would love to have a money manager that would make him rich. Of course we would all want that. I would like to be able to turn lead into gold. But it’s hard. It’s very hard.

Next question.

How do you know when to exit an investment?

You’re not talking to a great exiter. I’ve been a good picker. Other people know more about exiting. I’m trying never to have to exit. I’m no good at exits. I don’t even like looking for exits. I’m looking for holds.

Think of the pleasure I’ve got from watching Costco march ahead. Such an utter meritocracy and it does so well. Why would I trade that experience for a series of transactions? Firstly I’d be less rich, not more after taxes, and secondly it’s a much less satisfactory life than rooting for people I like and admire. So I say find Costco’s not good exits.

I’m a very patient man, and I know a lot, but I don’t know everything.

Why has apple stock declined over the past 12 months?

I don’t know why Apple stock is going up or down . I know enough about it so I admire the place, but I don’t know enough to have any big opinion about why it’s going up or down recently. Part of our secret is we don’t attempt to know a lot of things.

I have a pile on my desk that solves most of my problems – it’s called the too hard pile. And I just keep shifting things to the too hard pile. And every once in a while an easy decision comes along, and I make it. That’s my system.

In October of 2008,  a month later Lehman fell bankrupt, and in the depths of the abyss. Mr. Buffett famously wrote an editorial saying that he was buying stocks and that he was bullish on America. You’re famous for bottom picking Wells Fargo in March of 2009. What made you decide to buy Wells Fargo in March of 2009, instead of October of 2008?

Well, I had the money at a later period. And the stock was cheaper. Those are two very important parts of the purchase.

If you didn’t have access to Li Lu and to the Chinese exchanges through him like many American’s don’t, would you feel comfortable investing in the American Depository of most Chinese companies that are comprised of a VIA structure, and offer shareholders few rights and minimal protections from the Chinese government?

I don’t know much about depository shares. I tend to be suspicious of all investment products created by professionals and I tend to go where nothing is being hawked aggressively or merchandised oppressively or sold aggressively, so you’re talking about a world which I don’t even enter. So I can’t help you. You’re talking about a territory I avoid.

Do you worry about the large use of derivatives on the balance sheet of banks?

All intelligent investors worry about banks. Because banks present temptations to their managers to do dumb things. There are so many things you easily do in a bank that looks like a cinch way of reporting more earnings soon, where it’s a mistake to do it long-term considerations being properly considered.

As Warren puts it, the trouble with banking is there are more banks than there are good bankers. And he’s right about that. So if you’re going to invest in banks, you have to go in at a time when you’ve got a lot going on for you. Because there’ll be a fair amount of stupidity that creeps into banking.

What level of discount would you be applying to potential investments today?

Generally speaking, I think professional investors have to accept less than they were used to getting under different conditions. Just as an old man expects less out of his sex life than he was 20.

Why is Warren so much richer than you?

Well, he got an earlier start. He’s probably a little smarter, he works harder, there are not a lot of reasons. Why was Albert Einstein poorer than I was?

He finishes his address with the following statement. A statement which I believe more investors should take into consideration when it comes to financial wealth creation.

If you actually figure out how many decisions were made in the history of the Daily Journal Corporation and Birkshire Hathaway, it wasn’t very many per year that were meaningful. It’s a game of being there all the time. And recognizing the rare opportunity when it comes. and recognizing the normal human allotment is to not have very many. Now there’s a very confident bunch of people who sell securities who act as though they’ve got an endless supply of wonderful opportunities. Well, those people are the equivalent of the race track tout – they’re not even respectable. It’s not a good way to live your life – to pretend to know a lot of stuff you don’t know. My advice is avoid those people, but not if you’re running a stock brokerage firm – you need then.

It’s not the right way to make money. And this business of controlling your costs and living simply, that was the secret. Warren and I had tiny bits of money. We always under spent our incomes and we invested, and if you live long enough you end up rich. It’s not very complicated.

Investing is simple, but not easy.

The Cost of Complexity

They say simplicity trumps complexity. I’m a big believer in that statement, especially when it comes to the investment world. The financial world is a big bullshit machine. Our industry is simply trying to sell shit to investors and profiteer during the process. Facades, charades, charlatans, smokes and mirrors is the game. Here one day, gone the next.

I get it. The scarcity. The exclusivity. The complexity. The money. It’s all enticing.

The most recent National Association of College and University Business Officers (NACUBO) Study of Endowments was released a week ago. It’s based on 802 U.S. college and university endowments and affiliated foundations, representing nearly $617 billion in endowment assets.

These are some of the largest, most sophisticated and powerful endowments from around the world. The resources at the finger tips of these institutions are incredible. They have specialist teams dedicated to analysing sectors and stocks – their job is to analyse investments every-single-day. They employ economists and strategists who are some of the brightest people in the finance world. Their investment committees and boards include some of the world’s most highly educated and connected people. These people spend their days meeting money managers and undertaking due diligence on investment opportunities, both locally and globally.

They’ve literally got one job. To make great investment decisions. That’s it.

Here’s how they performed:

Here are some relative indices for comparison:

Here are the funds’ asset allocation:

These funds have not only over-complicated their investment strategy, but they’ve also taken on more risk, yet achieved a lower rate of return. For reference, a Vanguard 10/90 (defensive/risky) portfolio returned 9.70% and 7.10% pa over 5 and 10 years respectively.

The more sophisticated a system and strategy, although it may appear attractive on paper, often fails to bear fruit. Why? The people behind them and their (and your) behavioural errors – buy high, sell low, derails the most seasoned investor. Your IT help desk actually has an acronym for this issue – PEBKAC, or “problem exists between keyboard and chair.”

By understanding our own cognitive biases, we can design an investment portfolio to bypass our behavioural errors. One way is to simplify your investment strategy. Here are a few ways of doing so:

  1. Go passive. Here’s a dirty little secret – stock picking is totally over-rated. Just click here.
  2. Diversify your portfolio (properly) across and within major asset classes.
  3. Keep your investment costs low. If you’re paying more than 0.50% pa., you’re paying too much. It’s like taking an Uber-Black when an Uber-X would have got you to the same place, in the same time, but would have cost you (at least) half the price.
  4. Re-balance your portfolio – annually is ideal for a variety of reasons, which I won’t bore you with here.

Investors spend far too much time and money trying to beat the market. When in fact they should be trying to make sure the market doesn’t beat them.

Tidying Up with Robert Baharian

I’m so excited, because I love…mess!

That’s Marie Konda from the latest Netflix series, Tidying Up with Marie Kondo. In a series of inspiring home makeovers, world-renowned tidying expert Marie Kondo helps clients clear out the clutter – and choose joy.

For some reason, we have so much stuff…

Kondo has designed the KonMari Method – a unique Japanese method whereby she organises by category rather than location, and tidies five categories in a specific order:

  1. Clothing
  2. Books
  3. Paper
  4. Komono (kitchen, bathroom, garage, miscellaneous)
  5. Sentimental items

We feel stressed at home, because of the clutter.

Kondo and I have one thing in common. We both love mess! Well, Kondo loves messy homes and I love messy financial lives.

It’s kinda hard to let it go, because I really like this one…(crying)

Inspired by Kondo, I’ve designed the RobBahari Method – a unique Armenian method of organizing your wealth by category rather than investment, which I’ve broken down into five specific categories:

1. Security

This is the no to low risk stuff – from cash, term deposits, to government and corporate bonds. This bucket provides you with certainty in your life, and it’s the bucket you should keep the part of your wealth you cannot afford to lose.

2. Growth

This is the engine room of your financial wealth. And one that you need to take a long-term view on. Anything less than 10 years and you’re speculating – simple. This bucket includes your share portfolio, real estate, land, collectibles, etc.

3. Cashflow

This is the bucket that helps you live your life – clearly a very important bucket. This bucket may include items from the Security and Growth bucket too. Primarily this bucket includes your salary, shareholder drawings/business income, property developments, business ventures, etc.

4. Lifestyle

Life is about more than just money, and this buckets includes just that. Your family home, the beach house, the sports car, that nice piece of jewellery.

But hey, just because it’s lifestyle, it doesn’t mean it can’t be an investment either.

5. Contribution

They say the secret to living is giving. It’s taken me a little while, but I’m a big believer in that. The more you give to others, the happier you’ll be, and the more you have, the more you can give.

My beautiful wife has taught me that having a scarcity mentality of money is what will prevent you from being wealthy. If you don’t give away money when you have $100, then you won’t give it away when you have $1m. And it’s not just about giving away your money – that’s easy. It’s more about your time, your efforts, your ideas, your advice, your attention, your love, and your presence.

Far too many individuals and families go by each day without a strategy, without a game plan. In fact, far too many individuals and families are not clear on their goals and priorities. I ask you to challenge yourself…

  1. What are you working towards and why?
  2. What does money mean to you and why?
  3. What does wealthy mean to you and why?

I’ll leave you with this quote from Marie Kondo:

Keep only things that speak to your heart.

2019: My Year And Yours

When do you officially stop saying happy new year? This debate continues. There are no rules really, rather, personal preference – so do whatever you want. Happy New Year folks! The team at BWM are officially back from a very well deserved break, and we’re looking forward to a massive year ahead.

The new year is probably one of the most common periods when we set new goals for ourselves. I’m not talking about new year’s resolutions, I’m talking about real goals. Whether it’s to run a marathon later in the year, to travel the world, to double your income, or whether it’s to quit your job and set up that business you’ve always wanted, January is a great excuse to get you doing something about it.

A goal is a dream with a deadline

– Napoleon Hill

Like the management of money, goal setting is something we are not taught at school, yet there is some impressive evidence that supports goal setting. A Harvard Business Study found that 3% of Harvard MBAs who had written down their goals ended up making 10 times as much as the other 97% combined.

I’ve always set goals for myself that I was confident I would achieve – it came as no surprise when I was told this. Not only could I have stretched a little further, but I could have done a better job benchmarking my progress as well as setting new goals when I had achieved my goals in advance. So a few weeks ago I did something a little different. I set goals for myself that literally scared me. Goals that were totally out of my comfort zone. Goals that would put a big smile on my face when I imagined achieving them. There are some simple stuff in there, and a couple of goals that start to make me a little nervous – but that’s the point of stretching yourself and your ambitions, otherwise we wouldn’t achieve greater heights.

Here’s what I did (using the Goal Mapping worksheet and the BWM Clever Cashflow Guide):

I used this Goal Mapping worksheet produced by team Tony Robbins. It’s probably the best tool I’ve used because it’s super simple, and straight to the point – 1) what is your goal 2) why is it important/what is the purpose 3) what actions will you take to achieve it.

When setting my goals, I stick to the S.M.A.R.T. acronym:

Specific: Saying you “want to earn more” is too vague. Pick a number for how much money you want to earn. Do you want to start making $150,000 per year, $500,000, $1 million? Set a clear number that will enable you to track your progress. As you work toward this goal, visualize your specific outcome.

Measurable: When it comes to goal setting, you need a way to track your progress. For example, by setting a clear goal (earning $150,000) you can check the numbers as the year goes on. How are you matching up to your goal? Are you on track to succeed?

Achievable: If you pick a goal that you know is outrageous – say you’re currently earning $30,000 and want to earn $5 million next year – you’re most likely not going to achieve it. Pick a goal that requires effort on your end, but is actually achievable as well. When you create a goal that’s too lofty, you might begin to feel that it’s impossible and eventually give up.

Realistic: You’ve always wanted to learn Japanese, but it’s not realistic to learn an entirely new language with foreign characters in three months. Be realistic about how much time you have to commit to your goal and the amount of resources it takes to do so.

(In a) Time frame: The final S.M.A.R.T. principle is setting a clear time frame in which you can achieve your goal. Give yourself a reasonable amount of time to accomplish your goal. Do you think you can start earning your desired salary in six months, one year or two years? Having a clear time frame is essential for checking your progress along the way to reaching your goal.

Finally, in order to help manage the finances to support some of my goals, using inspiration from my good friends at SiDCOR, I built on their budget tool to create the BWM Clever Cashflow Guide.

You can download it here for free. Please use it to help manage your own household’s cashflows, and pass it on to your friends, kids, and family. If you have any questions or would like some help with either the Goal Mapping worksheet, or the BWM Clever Cashflow Guide, please give me a call as I would be delighted to help.

What now? Print off the Goal Mapping worksheet right now! Block 1 hour out of your day start writing. Remember to leave any bullshit excuse as to why you can’t do something at the door – don’t let them into the same room!

And if your goals are finance related, then set some time aside and start filling in the BWM Clever Cash Flow Guide so that you know where you are now and what you need to do to make your dreams a reality. And if you tell me you don’t have time to write down your goals, where are you going to find the time to accomplish them?

Let’s go!

New Arguments Against Low-Cost, Passive Investing Are No Better Than The Old Ones

Since the GFC, index funds have taken a huge slice of investable assets globally. And in my opinion, rightly so. There will be many that disagree with me on this, but let the evidence and data speak for itself I say. For every winning stock picker, there is a loser – it’s just how it works. Unless active funds dramatically reduce their fees, index funds will always be at or near the top quartile of long-term performance.

The premise of active management is essentially that with enough skill, it’s easy to consistently outperform the market, or the benchmark. When this view was challenged decades ago, it sparked a longstanding debate with strong believers on both sides, and some in between.

If you want to see some of the data, you can click here. The SPIVA (S&P Index Versus Active) Scorecard is a robust, widely-referenced research piece conducted and published by S&P that compares actively managed funds against their appropriate benchmarks on a semiannual basis.

Investors have been voting with their feet and ploughing money into index funds over the last 10 years. Vanguard, the primary beneficiary of this evolution, took in as much as its eight competitors in 2017.

In fact, over the last 8 years, Vanguard’s total Assets Under Management (AUM) has grown exponentially from US$1 trillion to over US$5 trillion. Mind blowing.

The more investors passive funds attract, the more they’re criticized. And all the new arguments you hear against low-cost, passive investing are no better than the old ones.

There are three reasons why indexing has become so popular. First, it costs less — often much less. High fees are a drag on returns; compounded over decades, they lead to a 20 to 30 percent penalty on total returns. Next, the alternative is active-stock or mutual-fund selection or some form of market timing. Academic research overwhelming shows that the vast majority of investors lack the skills or discipline to do that. Attempts at out-performance invariably lead to under-performance. Last, even among those who have the requisite skills, the discipline and emotional control necessary to successfully manage money is intermittent at best, absent at worst.

Market Watch recently published an opinion column arguing index funds are terrible for our economy and highlighted 3 key areas indexing is creating a risk to our markets and economy. Barry Ritholtz responds to each of these in order:

Index funds contribute to market melt-ups and meltdowns.

Really? That statement is at odds with the experience of most Registered Investment Advisors (RIAs) and index-fund managers. Indeed, we have experienced several bubbles and crashes, melt-ups and meltdowns, during the past few decades. The evidence is clear that passive-index investors behave better than active-fund investors or market timers, tending to blunt rather than aggravate volatility.

During the financial crisis, passive investors sat tight and for the most part didn’t sell. Indeed, they were net buyers, according to former Vanguard Chief Executive Officer Bill McNabb. As my Bloomberg colleague Eric Balchunas pointed out, during the 2008 credit crunch, the money flows were into index funds and exchange-traded funds, in part because they displayed less volatility; more than $205 billion was put into these funds while active funds experienced $259 billion in withdrawals.

“Index funds reduce the quality of stock analysis.”

If this were offered as a joke, we could ignore it. But this is a serious — and a seriously flawed — allegation.

Let’s be blunt: Stock analysis has been famously terrible for most of forever. Analysts are too bullish when things are going well, and perhaps too bearish when they are not. They are highly conflicted. Since research itself doesn’t generate income, analysts are paid out the funds generated by other parts of a securities firm’s business, such as investment banking. Their goal is to encourage more active trading, which generates commissions but also higher tax bills and lower returns. For a reminder of how problematic Wall Street research is, recall the analyst scandals of the late 1990s and early 2000s.

I believe this author has it exactly backward: Expensive and ethically compromised analysts were shown to be of so little help to investors that they actively contributed to the rise of indexing.

“Index funds contribute to poor corporate governance.”

Again, I think this is exactly backward — it’s the long-term owners of public stock, that is, index funds — that management must deal with year after year.

Consider what Dave Nadig, managing director of (part of CBOE Global Markets) wrote earlier this year:

State Street voted against the slates of directors proposed by companies over 400 times, because those companies failed to add women to their boards. And BlackRock recently published an open letter to markets, putting every company on notice that they would be taking a hard, hard look at everything from executive compensation to community development to environmental impact.

Active managers and activist investors can threaten to sell their stock, and sometimes they do. But then what? The indexers are long-term owners — and they vote their proxies. Management has to acknowledge their permanence.

The complaints about indexing have become tiresome: Indexing is Marxist, it’s a bubble waiting to burst, it’s dangerous to the economy or the efficiency of the market, and so on. The need to relitigate every lost battle is telling. The people who want to sell you newsletters, expensive mutual funds, or costly trading advice have suffered greatly from the move toward low-cost, passive investing. No wonder so many of them refuse to accept the obvious benefits of indexing to average investors.


Next time you’re looking at your investment statement, take a moment to think about how much you’re leaving on the table – 10, 20, 30%? The fact that investors choose to, year after year, make voluntary donations via the sacrifice of returns from their portfolio to those that purport to be able to ‘beat the market’ astounds me.

There’s a great book by Fred Schwed Jr. titled, Where Are The Customers Yachts?, which exposes the folly and hypocrisy of Wall Street. The title refers to a story about a visitor to New York who admired the yachts of the bankers and brokers. Naively, he asked where all the customers’ yachts were? Of course, none of the customers could afford yachts, even though they dutifully followed the advice of their bankers and brokers. Full of wise contrarian advice and offering a true look at the world of investing, in which brokers get rich while their customers go broke, this book continues to open the eyes of investors to the reality of Wall Street.


  • Bloomberg –
  • Market Watch –
  • Morningstar