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How I Invest My Money
Finance Experts Reveal How They Save, Spend, and Invest
- Read in 12 minutes
- Audio & text available
- Contains 7 key ideas
How I Invest My Money (2020) isn’t about the right way of planning your financial future. Instead, it offers a rare insight into what financial industry insiders do with their own money. So how do the pros play the market? Well, it turns out there’s no single answer to that question. How people invest depends on who they are and what kind of values and goals they have.
Key idea 1 of 7
There are no universal truths when it comes to investing.
Sandy Gottesman is a billionaire who founded the New York-based investment firm called First Manhattan. He always asks interviewees hoping to join his team the same question. He doesn’t quiz them about the best stocks to buy right now or which economy is heading into a recession, though – what he wants to know is what candidates own, and why.
What, in other words, do they do with their own money? Financial writer Morgan Housel, the first investor we’ll be looking at in these blinks, loves this question because it underscores how personal money is. How you spend or save your money says something about who you are.
The key message in this blink is: There are no universal truths when it comes to investing.
According to the financial services firm Morningstar, just half of all mutual fund portfolio managers in the US invest in their own funds. At first sight, that might look like hypocrisy. If those funds were so great, wouldn’t the people managing them put their money where their mouths are and invest in them too? Not necessarily.
We can see why by turning to an article titled “How Doctors Die” published in 2011 by the American professor of medicine Ken Murray.
Murray shows that doctors diagnosed with terminal illnesses typically choose much more minimal end-of-life treatments than they prescribe for patients in the same position. Why? Well, their patients aren’t medical experts. Unlike doctors, they may not fully understand their situation; some may even continue to hope for a miraculous recovery. In short, they want more treatment.
Doctors and non-doctors, it turns out, have different needs in identical situations, which is why they get different treatments.
That just goes to show that it’s not always a bad thing when someone tells you to do something they don’t intend to do themselves. Financial experts are like doctors in this respect. Their job is to help you meet your needs – not to hand out universal prescriptions that also meet their needs.
So, what you do with your money depends on what you want to achieve. Housel and his wife, for example, value nothing more than independence, and that shapes their financial decisions.
Despite enjoying rising incomes for over a decade, they’ve kept their lifestyle pegged at the same level it was at when they married. Every cent of every raise since then has gone into an independence fund – a financial buffer which will allow them to do what they want on their own terms later on in life.