Wealth Management or Returns? Part IV
Time is the Essence
Objective investing is wealth management. Rate of return investing ignores the purpose of money and the function of markets. In brief, cash flow and investment strategy must be combined for true wealth management, but even that is not complete without consideration for the cause of wealth.
The previous three essays in this series were quantitative and illustrated the consequences of sequence of return risk combined with the timing of your cash flow expectations. And while the order of returns is the uncertainty of capital market performance and out of our control, the timing of cash flow involves overspending or underspending risks that are within your control.
Furthermore, the most important aspects of cash flow are qualitative. To that end, The Moneyball Method helps you answer the questions: What is the source of wealth? What is the nature of money? What are the material goods and activities that I want to own and experience? Why are they important? How much do they cost? When are they needed?
As discussed in Part I of my book, the source of all wealth is the productive human mind, and the nature of money is a tool of exchange for goods and services across time and space. But the remaining questions require introspection, are unique to everyone, and will change with time and circumstances.
They are also common to entrepreneurs running a business. Both of you must create your vision, take calculated risks, learn from experience, and measure success according to your standards and the reality of markets. And the reality of markets boils down to what RealClearMarket.com editor John Tamny says: “No one runs out of money, just investor trust.” But whereas the lifeblood of the entrepreneur is capital, the lifeblood of the objective investor is confidence in their own future.
Not only are you able to answer the question: to make money for what, but you also control the balance between overspending and underspending risk. Yes, underspending risk – the unnecessary sacrifice of short-term values for a life with less meaning or an unwanted and unplanned estate.
And no one described this better than novelist Ayn Rand through her character Ellis Wyatt in Atlas Shrugged:
What’s wealth but the means of expanding one’s life? There’s two ways one can do it: either by producing more or by producing it faster. And that’s what I’m doing: manufacturing time. Here, we trade achievements, not failures – values, not needs. We’re free of one another, yet we all grow together.
That is reason and elegance. To learn more, please click the link below:
https://www.amazon.com/Moneyball-Method-Middle-Class-Manifesto-Objective/dp/1696009111/