I completed the 7 Bridges Walk in Sydney over the weekend with a friend.
asserted
I → complete → friend
As we crossed one of the bridges, we admired the views – the water, the boats, the mansions.
asserted
we → cross → views
My friend joked: “How do I get one of those?”
asserted
I → joke → those
I said, “Well, learning to invest helps.”
asserted
learning → say → ?
We had chatted about investing a few times before, so I knew it was an area of interest.
asserted
it → chat → interest
This sparked an interesting conversation about wealth, some of which I’m sharing today:
asserted
I → spark → which
Her: How do you know which ETFs to pick?
Me:
asserted
you → know → ETFs
Most people think you’re supposed to pick investments that will give you the “best return”, but it’s more about getting a good balance of return and risk.
asserted
it → think → return
Each asset class has different characteristics.
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class → have → characteristics
Something like cash may have less risk, but it also has low returns.
uncertain
it → have → returns
Something like stocks may have higher potential returns, but also comes with greater risks.
uncertain
Something → have → risks
So, instead of trying to pick the best returning investment – it’s better to learn how to design a portfolio that balances the risk and return across different asset classes.
asserted
that → try → classes
They say money doesn’t change you, it amplifies who you are.
asserted
you → say → you
If you just pick the investment you think will have the highest return, there’s a good chance you’ll be taking on more risk than you realise – and this is one reason why people lose money.
asserted
people → pick → money
But if you design the portfolio as a whole across different asset classes first, you balance out the risk.
asserted
you → design → risk
I have some ETFs, but their returns aren’t great?
asserted
returns → have → ETFs
You can’t judge returns in the short term.
asserted
You → judge → term
Most of us are trained to think of growth linearly – so we see our investments grow by a few dollars, and we can’t imagine how that will add up to millions in the future.
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that → train → future
But it doesn’t “add up” the way we think it does.
asserted
it → add → ?
With investing, the gold isn’t in what you earn today, it’s in the exponential growth, long-term.
asserted
it → earn → growth
Eventually, you’re doubling, tripling, quadrupling your results.
asserted
you → double → results
So, don’t think about returns today, think about returns 10 years from now if you start today.
asserted
you → think → returns
But you can lose money with investing, right?
asserted
you → lose → investing
I got her to pull out her phone and searched for “ASX 200”.
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her → get → ASX
A graph popped up.
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graph → pop → ?
This is how the ASX 200 has performed over the last five days.
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ASX → perform → days
Now let’s look at the ASX over the last five years.
asserted
’s → let → years
Now, let’s look at the ASX since 2006.
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’s → let → 2006
Now you’re starting to see that over time, the market trends upwards – yes, there are fluctuations in between, and the shorter the time-horizon, the more dramatic those fluctuations feel.
asserted
fluctuations → start → between
But over a long period of time, those fluctuations smooth out.
asserted
fluctuations → smooth → time
It seems like it’s easier to get ahead if you have two incomes.
asserted
you → seem → incomes
But I’ve had plenty of people who come to me in tough situations – maybe after a divorce, or a financial setback – and I find that they often progress faster than those who, on paper, are far more financially comfortable.
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who → have → paper
They have a real motivation to make change.
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They → have → change
So, they take it more seriously, they take action, they do the work.
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they → take → work
Sometimes, if you’re already financially comfortable, you don’t have that pain driving you.
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pain → ’re → you
It can be easy to keep procrastinating.
asserted
It → keep → ?
Even if you know you could be adding six figures to your bank balance at some point in the future, that might not be enough to move you out of inertia.
uncertain
that → know → inertia
I don’t like who you have to become to wind up wealthy.
asserted
you → like → who
It seems like people end up becoming quite negative – or doing negative things to get there.
asserted
people → seem → things
I feel lucky that I’ve had the opportunity to work with and get to know people who are very wealthy, and are also wholesome people with good values.
asserted
who → feel → values
…and 13 more, not listed.
The Aporia
