Melrose Arch Newsletter

Feel free to reach out to PSG Wealth Manager Patrick Duggan directly.

Superpowers, however, do not have to come in the shape of a red cape with flying abilities. Heroes also exist in our day-to- day lives. We came to appreciate them even more during the emergence of a global pandemic that killed millions of people.

Superheroes are inspiring because they show traits that can fuel fantastic success stories. They demonstrate extraordinary abilities, moral conviction, great courage, and have a mission to serve.

The investing world has its very own version of superheroes: Buffett, Munger, Lynch, Templeton, Bogle, the list goes on. They have created significant wealth for themselves, but also others. In addition, they have empowered millions of investors by sharing their hard-earned lessons and have helped democratize sound investing principles.

Financial Superpowers

While trying to boil down the many reasons for Warren Buffett’s long-term success, ex-Chairman of the Federal Reserve Alan Greenspan once told the Oracle, “Warren, it strikes me that if you did nothing else you never sell. That is, if you can grit your teeth through and just disregard short-term declines in the market or even long-term declines in the market, you will come out well.”

Buffett has shown the ability to stick with his investment strategy for decades on end.

American hedge fund manager Cliff Asness once tweeted,

“Having, and sticking to, a true long-term perspective is the closest you can come to possessing an investing superpower.”

Then in a blog post by Ben Carlson, author of ‘A Wealth of Common Sense,’ Ben suggests the following additional financial superpowers:

1. The ability to delay gratification

The complete process of investing involves putting off consumption now for consumption later. The ability to wait when it comes to spending money can help keep you out of credit card debt, compound your money for future use, and give you a margin of safety when things inevitably go wrong.

He goes on to say that he is also a believer that patience with your finances can make that future gratification feel even better when it finally happens. The feeling of anticipation becomes even more worthwhile when it does not come with a debt hangover.

2. The ability to witness your neighbour getting rich or buying stuff without getting FOMO

According to Morgan Housel, author of The Psychology of Money, “Not having FOMO is the single most important financial skill.”

Money is always relative when we think about our position in life. This clip explains this brilliantly: (Please do watch it. It is short and very funny!).

Two Monkeys Were Paid Unequally: Excerpt from Frans de Waal’s TED Talk (youtube.com)

When we see other people getting stuff it triggers all sorts of thoughts and emotions.

Wow, they must be rich!

I deserve to have the same toys they do!

You made how much on that crapshoot investment?!

The majority of the keeping up with the Joneses mentality is driven by the fear of missing out. The problem with trying to keep up is you never know the exact financial circumstances of your peers, friends, family, or co-workers.

Plus, there is a stark difference between buying stuff and generating wealth. True wealth is technically the absence of spending money on too much stuff.

3. The ability to further your career

The secret most personal finance experts do not tell you is the best way to save and get ahead is not about being frugal but about making more money. A higher income does not solve all your financial problems, nor does it guarantee your happiness, but it sure makes life a whole lot easier. This is an obvious but often overlooked aspect of personal finance. The ability to improve your career prospects and therefore your earnings potential offers a huge advantage.

4. The ability to avoid lifestyle creep

Making more money makes your life easier but the ability to keep your wants constant is how you supercharge your savings.

5. The ability to stop comparing yourself to other people’s earnings or jobs

Jealously can be a killer when it comes to your finances but also life in general. It is hard to find contentment when you are constantly trying to copy the career path of other people or worrying how much others make.

6. An addiction to learning

Being smart can get you places in life, but intelligence has its limits. An insatiable curiosity is far more helpful because the world is constantly changing. If you are not consistently learning you are going to be left behind.

7. An ability to set realistic expectations

Mistakes are borne out of a misalignment between expectations and reality. When it comes to money decisions, those expectations are always changing depending on how things are going now.

Setting a reasonable range of outcomes in financial matters can reduce the onset of mistakes with your money by avoiding the overreactions that tend to accompany life’s frequent curveballs.

8. An ability to be uncomfortable

If you are not a tad uncomfortable every month with your finances, you are not saving enough. If it is not a little painful, you are not moving the needle. If you want to get ahead in your career you are going to have to have difficult conversations, with either yourself or your employer, to figure out how to maximize your earnings and job growth.

Investors are rarely comfortable with their current positions because we live in an uncertain world and there are always other investments that are performing better than our own. Being uncomfortable is a prerequisite when trying to get ahead financially.

9. An ability to be satisfied with what you have.

Everyone says their main goal in life is to be happy, but happiness is just a feeling that comes and goes. Contentment and satisfaction with what you have in life may be a more worthy goal than happiness.

As Ben says, find me someone who is content with their life and I will show you a person who is truly wealthy.

Bottom Line

Not all superpowers belong in the Marvel Multiverse.
We are surrounded by ordinary human beings that have demonstrated extraordinary abilities in their investment process. Taking inspiration from them can help you improve your returns over a lifetime of investing. By knowing the traits of legendary investors, you are more likely to be self- aware when you are about to make a big mistake.

Creating a habit structure that nurtures your curiosity and helps you keep perspective can be the difference between success and failure.

Rebalancing your portfolio

Continuing with the theme of ‘superpowers’ I should like to add discipline, specifically the discipline to rebalance a portfolio when the asset mix originally created by/for an investor inevitably changes because of differing returns among various securities and asset classes.

When you and/or your Adviser first created your financial portfolio, you took several things into account, including your goals, age, and risk tolerance. You then created an asset mix you were comfortable with, which included a ratio of equities to bonds. Now that you have established that ratio and your investments, it is important to continuously monitor your financial situation. As circumstances change over time, you may need to adjust your portfolio.

To keep your asset allocation on track rebalancing is the process of buying and selling portions of your portfolio to set the weight of each asset class back to its original state. Think of it as ‘buying low and selling high.’ In addition, if an investor’s investment strategy or tolerance for risk has changed, they can use rebalancing to readjust the weightings of each security or asset class in the portfolio to fulfil a newly devised asset allocation

As your Advisers we typically take on this ‘superpower’
for and on your behalf and therefore every so often (roughly once a year) we rebalance our model portfolios back to target asset allocation. Therefore, and if you hold one or more of our model portfolios, you can expect to see
minor changes.

Office news

Congratulations to Heinrich Richter: ‘Wealth Manager
of the Year’ (and one of the superheroes of PSG Wealth Melrose Arch). We would like to congratulate our founding partner, colleague and friend, Heinrich Richter who received the highly coveted ‘Wealth Manager of the Year’ award
at the recent PSG Financial Services national conference hosted at Sun City. Well-deserved Hein, we are enormously proud of you!