We focus on stock investing at Telescope Investing, and a big part of that is psychology – having the right investing mindset and managing your emotions, as the markets, as they tend to do, take unexpected turns.
Personal finance is as much personal as it is financial, and how we feel about money is influenced by the experiences we’ve lived and the stories we tell ourselves. These stories can have both positive and negative impacts on our financial decisions, but we can rewrite those stories and change our attitudes towards wealth. In this week’s pod, we talk to Ronald Wong about the importance of financial wellbeing and how our true net worth is more than our bank balances.
Ronald is an executive coach and founder of theLibrary&, based in Hong Kong. He works with executives on being better leaders, navigating change, and developing their teams. He is especially interested in mindset, decision-making, teams and systems, and the ‘dark arts’ of behavioural finance and investing. He draws inspiration from his family, yoga, architecture, and design, and in the Stoic principles of leading a purposeful life.
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Transcript
Albert: Hi, this is Albert.
Luke: And this is Luke.
Albert: Today is Monday the 20th of September.
Luke: Welcome to the Telescope Investing podcast
Intro
Albert: Here at Telescope Investing, we focus on investing in the stock market, or even more specifically, investing in individual companies. We appreciate that this is not for everyone, but we do believe that everyone should save and invest in some way to achieve financial security and maybe financial independence. Investing is just one aspect of managing your personal finances.
Luke: Yeah, and you know what, Albert, we said it before, but a big part of personal finance is psychology and driven by our own relationship with money. You and I have talked about how a key foundation of successful investing is mindset and managing your emotions and impulses. So we’ve been wanting to expand on these ideas, and today, we’re delighted to welcome a special guest, Ronald Wong, and Ronald’s an executive coach and founder of theLibrary& based in Hong Kong. Welcome, Ronald.
Ronald: Good afternoon, gents.
Albert: Thanks for joining us, Ronald.
Ronald: You’re welcome.
About Ronald
Albert: Ronald, why don’t we just start by you telling us a little bit about yourself and the work that you do.
Ronald: As Luke said, I am an executive coach. I work with leaders and managers across a whole wide range of areas, mainly around building teams, leadership in a professional sense. What’s becoming increasingly common, and you spoke about mindset earlier, is that money does play a part in the conversations around well-being, so that’s something that I’m personally interested in. So it’s something that I’m bringing more and more into my practice as I think that’s a bit of an underserved area right now.
Luke: And does it feel there’s a lot of demand for your coaching in Hong Kong? Are you finding lots of people who need a bit of financial wellness reset?
Ronald: I think people don’t naturally speak of it, but when I mention that this is something that I’m personally interested in from an investing perspective, as well as from a well-being perspective, then I think that opens a door, if you like, that people go, oh okay, tell me a bit more and I’ve been wanting that. So it’s quite interesting. They don’t come out with it, and I think that’s partly because our relationship or society’s relationship with money and finances. So it’s not something that people naturally talk about as they would, perhaps, the other types of well-being like physical health or even mental these days.
Albert: Yeah, Ronald, I see a lot of books in your background of your video. I just wonder, what do you do in your spare time?
Ronald: I’m in that very fortunate position in my life that both my wife, Vivian, and I have accumulated enough capital to try to do something different. And so you guys speak a lot about financial independence, and so for me, that journey towards financial independence has allowed me to do other things.
Now it’s around family. It’s around my own well-being. I love reading hence the library, and for me, I see books as this wonderful resource. You know, people think I can listen to audiobooks or I can read Blinkist and get summaries. But when you think about it, the way I associate it with finance, a good book and author has probably spent hundreds, if not thousands, of hours researching and putting something into his or her book. And so the leverage we have in just spending a few hours reading that book, the knowledge we gained from that, and we’re 10 X-ing our knowledge. So that’s where I spend a lot of my time and the reading is both for personal interests as well as professional growth. So I see that wonderful confluence of being able to read and build my knowledge and try to be 1% better every day.
Albert: I wish I had more time to read books actually.
Luke: And, you know, Albert, you and I almost decided to write a book a few years ago, and that mission turned into the Telescope Investing website. Maybe one day we do come back to that and perhaps we’ll have a little space on Ronald’s bookshelf.
Ronald: Absolutely. In the 1930s, I think it was 1930, John Maynard Keynes wrote this essay where he said, I think it was titled Economic Opportunities for Our Grandchildren, and he was worried then that technology would enable future generations, i.e. us, to only work two days a week. Now, for most people that hasn’t turned out to be the case, and I would consider myself in that fortunate few that I’m able to direct my time and channel it to the things that I love, which is part of why, when we talk about financial well-being, it’s that journey we all take and how we get there is an individual pursuit.
Luke: And I suppose, actually, it’s quite timely. There do seem to be a growing demand for maybe moving to a four-day working week in some countries. Listing experiments taking place I think in Scotland at the moment around exactly that.
So we’ve established that you’re an avid reader. I wonder if you’re a fan of movies though. I’ve got a bit of a fun question just to warm up before we get into the real detail. Are you familiar with a film called Brewster’s Millions?
Ronald: I’ve heard of it. I don’t think I’ve ever watched it.
Luke: It’s a great movie that was remade in the 90s, I think, by Richard Pryor. Great fun. Anyway, it’s about Brewster who inherits, I think at the time, an enormous amount of money, in retrospect, probably a bit easier, something like 30 or $50 million, and he has to spend that money within one month and have no assets to show for it. So, Ronald, if we gave you a million dollars today and you had to spend it by the end of the day with nothing to show for it, how would you spend that million dollars?
Ronald: Poof, that’s a good one. I think for me, it would be around giving it to the charities that I already support. And we can talk about this later if it comes up about what enough is, right? And I think I’m making the assumption that you guys are at that stage as well, where buying more stuff doesn’t provide the satisfaction that it did when we were say, for example, in our 20s. A very important factor in deciding what well-being means to each and every one of us, but to me, if you said I could spend a million dollars on a McLaren, or a Ferrari, or Lamborghini, that just doesn’t tick that box anymore.
Luke: I’ve heard that term the hedonic treadmill that we can all get stuck on if we’re not careful.
Ronald: That’s right, and when we talk about well-being, the opposite or the corollary, I think, of hedonia is something the Greeks call eudaimonia, which is basically how we get into this flow of things. One of the things that I’m interested in is being a student of stoic philosophy. There is a lot of talk around that, which then permeates into how I look at my own investments as well and how I tried to live my life.
Financial well-being
Albert: This might be a bit of a silly question, but what is financial well-being, Ronald? And why is it important?
Ronald: Countless research has shown that worrying about money is one of the biggest stressors for most people. Putting food on the table, obviously, at one extreme to even having money but not knowing where to put it, and that’s partly our association with money. So the way I’ve looked at it is if we look at well-being as a three-legged stool, then emotional well-being, you know, how well we are. I think broadly speaking, the emotional and mental well-being is starting to surface within corporates and within society itself. You know, what can we do about it? Who do we talk to? That’s the first leg.
Physical well-being is very well-known. You know, we should sleep well, we should eat well, we should exercise. Now, whether we do it or not is a separate matter, but that’s well-founded in what people have to do, going to the gym, going to yoga, et cetera.
Financial well-being is this really interesting space because money is, for most people in most societies, still a taboo. We don’t like talking about it. And because we have so many associations with money, good and bad, and we associate so much with it, unless we look at our stories about money and our attraction to or detraction from money, the stool, if you like, is wobbly. So how can I, with my clients, work to have a really stable stool.
Carl Jung once said that if you don’t make the unconscious conscious, it will direct your life and you will call it fate. And I really feel that something like our money stories is really that, because we can say it’s too hard, we become victims, or we blame others apart from ourselves in being able to manage our own financial well-being. So part of the work I do, part of my interest, and part of my own journey is really trying to better understand myself, and then understanding all the biases and habits and behaviours I fall into as well in terms of trying to get to that place where I feel more comfortable. And it is really a journey. I don’t think there is that kind of endpoint for all of us because we change all the time as well.
Albert: Yeah, we hear stories of people working until the very last day of their lives and they don’t have the chance of a relaxing well-deserved retirement. And people really deserve that. After many years of working, they need to be able to rest and live their life a little bit, and financial well-being is the way to achieve that. This is very important.
Luke: That’s right, and I guess that whole FIRE movement, financial independence retire early, that’s as much built around wealth that will look after you, but also reducing your outgoings and managing your costs. Getting off of that hedonic treadmill, not wanting that McLaren so that you’re living a life that you can sustain.
Ronald: Absolutely.
Luke: I guess you work with many clients in Hong Kong over the years. What would you say is typically the most difficult element for them in establishing financial well-being?
Ronald: I find that just opening that door to that conversation to say what money is to us. When we first engage in the conversation, it’s a bit like a dance. So people will say the superficial stuff, right? It’s a value. It’s a dollar amount. And then you say, well, okay, let’s go a bit deeper, and then it might be about being in control, having agency, if you like. Ok, and you go a bit deeper, so why do you want control over it? And then the deeper you go then, for some people, not all of us, it’s then the money stories we hold that holds us back.
So, for example, in my case, I wasn’t born with any money. So, my parents were working-class parents. And so, that is a story that can hold us back because we feel like, back to the Carl Jung thing about fate, you know, this is our position in life. And so, then what do we do about it? For others, they may have, and I’m using air quotes here, normal relationships with money from their families, but then again, they have their own issues about, should I spend, should I not spend it?
So I think it’s when you get into the layers, just as we would in other coaching, saying what’s holding you back, that’s when the stories come out. And really, the work is around just understanding it is a story. It’s a lived experience, and that story can hold us back or we can just say we are the authors of our own future selves, and therefore, how do we write a new chapter in our lives and where do we want to get to? And so, that’s where the conversations then pivot or fast-forward to, well, okay, what does a rich life look like to you? Rich, not just in dollar terms, but rich in terms of things you want to do, your relationships. And then that just takes us to another new place about, okay, options suddenly open and people are able to then to see a much brighter future. It’s almost like having an abundance mindset as opposed to a scarcity mindset.
Having said all of that, obviously, there are people who are not fortunate enough to be in that position, right? So I’m talking about mainly professional people who have the ability to use their human capital to generate a lot of money. Definitely, if you’re working every day to put food on the table, it’s not a conversation really you can do much reflection on because you being like a hamster on a running wheel.
Physical, emotional, and financial well-being
Albert: I really like the way you described it before, about the physical, the emotional, and the financial. All those three things do impact on your life. How do you think those three things are connected?
Ronald: If you imagine a Venn diagram, they’re all interrelated to each other. So, for example, if we look at the physical and emotional, one thing I like to talk about is this body budget. Are you sleeping well? Are you eating the right foods? Because that will impact your decision-making process. If you’re under stress and you’ve only had two hours of sleep, then making a decision, either in a professional sense, a personal sense, or a financial sense. The market is going down and you’re holding on to the position, that’s the worst time to sell, or if the market is going up, that might be the wrong time to buy, right? You just running on adrenaline almost. And so that’s how, if you like, the linkage of the physical and the financial comes in. Unless you’re aware of where you are operating at that particular point in time, it is very difficult to make great decisions.
So if you look at those three things as circles in a Venn diagram and the coming together, if you like, the bits which are common, the Japanese would call it ikigai, I think that’s where, if you’re well-resourced, then you’re in that sweet spot to say, okay, I have the resources, I’m feeling good, I’m mentally feeling fit, now I can make a decision in the financial sense. Should I buy? Should I sell? Should I allocate? And so that’s where, Albert, I think the three of them actually do link as opposed to be three discrete domains.
Albert: I think a friend said to me many years ago that the most important thing is personal health, like physical health. And that is high up there, but also, I think, financial health and emotional health are just as important. If you don’t have any of these three things, your life can really be quite terrible.
Ronald: Yeah, absolutely.
Luke: I guess particularly if you live in the US with such a high cost of healthcare. You know, if you can’t afford to get medical treatment, you can definitely see how that can be a vicious circle.
Ronald: When we think about health in that perspective, it’s the small things we do today that compounds. So, for example, not having a 10 ounce of Coke and not having it every day for the next 10 years, because what that leads to is type two diabetes, which then increases your medical costs, et cetera. Likewise, in investing, we can always delay investing or we can delay gratification. Both will have different outcomes. And that’s why it permeates all three well-being circles, if you like.
Albert: It’s funny you mentioned the Coke every day because when I was a teenager, I literally drank a can of Coke every single day, and in doing so, I completely destroyed my teeth. I’ve had like multiple fillings.
Ronald: Yeah, unfortunately, not all of us have Warren Buffett’s constitution, right? To eat hamburgers and Cherry Coke or whatever, and he eats See’s candy, unfortunately.
Financial well-being as we age
Albert: Actually, speaking of Warren Buffett, I think he’s like 90 or thereabouts. I guess we’re all living longer and living these healthier lives due to advances in medical science. Do you think this makes financial well-being even more important?
Ronald: Yes, definitely. So one of the headwinds I like talking about is health is a two-way sword. Medical science will, as you say, allow us to live till at least our 80s, if not our 90s. Now, that’s a great place if we’re well, coming back to emotional and physical well-being, but if we don’t have the capital to let us enjoy that life, it’s going to be a very miserable place to be. Because we all know given the ageing demographics all over the developed world, governments can’t afford the social security that they could, say, in our parents’ lifetime.
Secondly, we no longer have a defined benefit in our pension plans, right? It’s all defined contribution. And so if we don’t take control of that, the risk is we end up eating cat food or we eat one meal a day, and we can’t afford to put on the heater at nights and during winter. And so that can become a very miserable life. So, therefore, one of the things in the workshops I do or in the coaching I do is we have to start. You know, no matter where we are in life, if we haven’t started, we have to take it on. That old Chinese proverb, right? When was the best time to plant a tree was 20 years ago. When’s the next best time? Today. So, it’s really as simple as that.
Luke: Ronald, I also quote a FinTwit great on this podcast, a chap called Brian Feroldi. So I saw a very relevant Brian Feroldi quote just this morning. He said, I wish I’d started investing 20 years ago, and that quote is attributed to everybody in 2041.
Personal nature of finance
Luke: Well, we mentioned money stories before, if we drill into that in a little way. So we often hear that personal finance is as much personal as it is financial. Why is it you think some people view money so differently?
Ronald: Yes. When you think about money, it’s this social construct. And really, it is this thing we use to exchange, but the way we, our lived experiences, our culture, the way our parents brought us up, our identities are created by our lived experiences. So, if our parents told us growing up that we shouldn’t spend money, doesn’t grow on trees, you come in with a scarcity or a much more cautious mindset. Or on the other hand, the other extreme is, you know, money will always be available, and therefore, you spend like there’s no tomorrow. And all those stories really makes it personal for each of us, which is why, back to the point about knowing that there is a story. So how do we create the behaviour so we can almost like view that as someone else’s story?
And actually, a large part of coaching is being that neutral or dispassionate observer that looks at us. Luke, you spoke about our 20-year old younger us, and in saying, well, that was what I was then when I was eight or 10, or whenever the money stories took hold, and saying, well, how does that help me or how does that hinder me in being what I am today when it comes to investing? So I think money stories can be a very powerful anchor for us; it can be a powerful enabler, and it’s just understanding what it is for each of us.
Luke: Would you say it’s about becoming conscious that that may be a story you’ve told yourself, and it is perhaps just that, it shouldn’t necessarily have power over you so that you can reprogram yourself to think more healthily?
Ronald: Yeah. Yes, I would say that how we should look at it because we are the authors of our own stories, and the great thing is we can’t change the past, but we can definitely change the future. So how can we reauthor the story we felt has held us back?
Albert: I saw a tweet last week written by a guy called Michael Batnick. He wrote an article titled How You Feel About Money, and in it, he told a story about this guy, who felt anxiety whenever you spent money. This guy was 70 years old, had $6 million in savings, and lived in a $1 million house, all paid off, and yet, he was unable to spend money without feeling pangs of guilt. And it was because his father grew up during the Great Depression and never invested and was living paycheck to paycheck. Kind of sad, really, when you’re that age and you have all this money and yet you can’t spend it without feeling sad.
Ronald: Hmm, and it comes back to this scarcity mindset versus abundance mindset. You know, where do you start from? Because if it is a scarcity mindset then the money you have, you can decouple it, right? You will still always feel that. And I think the challenge for us these days, especially if you’re a 20-something-year-old listener, is since 2009, since the Great Financial Crisis, the stock market generally has been in this upswing. It’s gone up something like 752% for the S&P 500, so compounding at 19%. And the recency bias that we all have, the anchor we’ll have is this to continue and it might not. So, the challenge for investors today is to say, well, what’s going to happen in the next decade or two decades? It may not be what it is today, and so, therefore, how do we not get caught up that what has happened in the last 10 years will still happen for the next 10 or 20?
And so, just like the person living through the Great Depression who didn’t want to spend anything, someone living today who has built up some wealth may think it will continue and have the opposite view in terms of spending as well. And that can also be a dangerous place, which is why studying history and looking back and seeing how different regimes or eras formed is just so important to make us more grounded and self-aware about where investing may go, because the future really is unknowable, and it’s best to be positioned to be able to benefit from any upside, but also if there is going to be a downside and there’s going to be 10 years of harsh winters, then we are able to sustain that.
Having a financial plan
Luke: Maybe you’ve put that plan in place, but how do you know if it’s right for you in terms of perhaps the level of risk you’ve taken on and the gains you hope to realize?
Ronald: That’s a great question, Luke. In my mind, it’s that personal bit of personal finance because it’s a different one for each one of us. People like to say, having a plan that allows you to sleep at night. I think it’s more nuanced than that because sleep may be disturbed by many things. And so the way I try to overcome that, because I do know if markets go up and down, it will impact my sleep, so it’s less about that, but the importance then of writing down in an investment plan. I can’t reiterate that strongly enough. Because if you have an investment plan, could be a one-pager, it could be five pages, and you simply state, I will expect this will happen or I may expect that to happen.
And if you have a range of things that may happen, when the worst things happen, you can look back and say, right, the one-month younger me or whenever you wrote it, said these things, and this is just part of what might happen. As opposed to not having a plan, going with the flow, and suddenly realizing, oh, bugger, the market has gone down, my portfolio has gone up 30%, and then make the wrong decisions at that point. And because the future’s unknowable, to have that range of outcomes, writing that down, I think, is a great way of just tying ourselves to the mast and not allowing then our emotions to dictate our behaviours.
Albert: Yeah, I remember doing this many years ago. Basically, as you said, writing down a financial plan, what do I want to achieve and what am I willing to accept to achieve that? And since then, obviously, things have happened, such as the pandemic last year, the market dropped 30, 40%. I can’t say that it wasn’t stressful, but it meant I could handle it better than if I hadn’t planned.
Ronald: And it doesn’t mean that plan has to be set in stone. It just means that at that point in time, this is what’s happening, and if there has to be changes made, it’s okay to change because we change, our circumstances change. So it’s less about saying, this is what I said six months ago and I’ll never deviate from it, it’s just saying, is it right to deviate from it? But at least I had something written down that allows me then to look at it and then say, okay, maybe I need to make some changes.
Luke: We’ve talked on other episodes just about the value of being honest with yourself by keeping something like an investment diary. It does give the opportunity to look back and, actually, I hadn’t thought of it that way – studying your own mindset. I was thinking more in terms of being objective about the investment decisions I’ve made, but that’s a great idea to write down your best-case and worst-case outcomes. And then almost, well, one would hope, almost inevitably when you look back, it’s never as bad as the worst case.
True net worth
Albert: And when we talked prior to recording, Ronald, you mentioned something about true net worth, and I thought it was a really interesting way to reframe the concept of net worth. How does this tie in with financial well-being?
Ronald: So imagine… I like to use a metaphor of a house. So, you can either have a house of cards that kind of topple over when the first headwind comes in, or you can have a strong foundation. And if we’re to Google what net worth is, we’d get the typical answer of the financial net worth, i.e. your assets and liabilities, inflows and your outflows. But looking at it with a well-being lens on, it’s the other stuff that helps form the foundation.
So what goes into the other stuff? Some of it is block and tackling type of thing. So, for example, do I have a will? If something happens to me and/or my partner, do we know what’s going to happen to the assets I have or we have, or do they go into probate and, you know, held up by the government? And that becomes really important when we have children or grandchildren because we want to leave them with things rather than the government dictating where they go. So that’s on that side of things and that’s actually quite a difficult one because I’m no longer surprised at how many of clients or people I speak with don’t have wills, very senior people as well as junior people, because coming back to this facing death can be quite challenging. Because when you’re writing a will, it’s almost like saying, okay, if something happens to me, this is what happens. But in a way, this journey that you take, when you’ve completed it, it’s actually quite cathartic or refreshing to be able to say, right, I’ve put that down. And that gives one a peace of mind, which comes back to the well-being piece. So, the block and tackling is around wills and trusts if you’ve got complicated assets.
Then there’s the other two big things to me are around human capital and social capital. So human capital being, are we doing all we can to improve ourselves, to stay relevant to our workplaces, because as we know with the future of work and what’s going on, technology will take a lot of jobs away. Blockchain may take some of our jobs away, and therefore, how can we continue being relevant to future employers? Maybe have a second career or a third career. So all of those things require us to invest in ourselves, and so that’s very important.
And the final leg, if you like, of that is social capital – our relationships with our loved ones, our communities, et cetera. And so in Maslow’s hierarchy, this will be the kind of the top two rungs, if you like. And you may be familiar with the Harvard Grant Study, which looked at over 80 years, different people who went through Harvard from, I think JFK was one of those to other people. And at the end of people’s lives, the best predictor of a good life, you know, coming back to the stoic thing, is the quality of our relationships and it wasn’t fame and fortune, it is really the quality of our relationships.
So that’s social capital, that human capital, and just having the will and doing all of that gives one a very strong base or foundation from which then to say, okay, where should I allocate my assets and all the other type of stuff, I see as kind of the framework and then, you know, the windows and the doors, et cetera. But if you don’t have that foundation mentally well-being-wise, it is quite a shaky foundation.
Albert: It’s really interesting that you mentioned social capital, Ronald, because I never really thought about social capital as part of your net worth, but it kind of reminds me of that saying, it’s not what you know, it’s who you know, and that’s another way of saying that your relationships are even more important than what you know.
Ronald: Yeah, that’s right. I totally agree. As human beings, we’re tricky creatures, right? And we spend our lives trying to be in the right social tribe, if you like. But our lives are more than just about money, it’s about purpose and meaning and motivation and all that type of stuff. And that’s where social capital is important, which is why the well-being side of financial well-being is as important as the financial side.
Luke: I remember reading a study last year, I think, and it talked about some of the factors that influence having a longer, healthier life. And I suppose it’s easy to think about this social capital thing as being your professional network and the people you know, but it’s much deeper than that, I think, and I was very surprised to note that wealth and physical fitness weren’t at the very top of the list of factors that correlate with being healthy. They were actually those social things. You know, do you have a close partnership with your other half? Do you have close family relationships? Do you have close friends that you converse with and spend time with in your older ages?
Ronald: And you see countless studies showing when people go to old people’s homes and nursing homes, and how quickly their cognitive health as well as their physical health declines. It’s because they don’t have that reason to get out of bed in the morning anymore because their partners may have passed, their friends may have passed, and there’s no reason to live anymore. And so, how do we keep that social side going as much as the physical and the financial?
Luke: That true net worth, that’s a very powerful concept, something that’s given me a bit of food for thought as well, actually. We don’t want to take too much away from your coaching sessions. We want to give people the chance to come and learn lots more from you directly. As we maybe bring our conversations to a bit of a close, is there one key takeaway you could offer to Telescope Investing listeners? What might that be?
Key takeaways
Ronald: Well, I’m going to be greedy and say there’s one that has three linkages. Um, so in effect, there are three parts to it. And it starts with really knowing ourselves. Socrates said that an unexamined life is not worth living, and really, to me, unless you know yourself, it becomes very difficult to move forward from there. So, were there any money stories that held me back? Was anything in my childhood about money that influences what I am today? So that’s the first thing.
The second one is then having a plan. Luke, you spoke earlier about 20 years, I’d say 25 years is a good thing. And now, you don’t have to have a well-defined 25-year plan because the future is unknowable, but what research has also shown is that people who have long-term plans are happier, are more motivated, and finally, save more money. So kind of having that direction of travel, you know, some people call it their North Star and working towards that. So one of the things I do with my clients is saying if we want to be 1% better, then 1% of 25 years works out to be about 90 days. So we like talking about 90 and 100-day plans. So if you haven’t started, how can you start that 100-day plan? So it might just be looking at your true net worth. Do I have a will for example? So it’s a long way off, 25 years, but if we start with at 1%, then it really helps galvanize us into having a plan.
And to have that plan, then just journal it, write down what I’m thinking today. What might I think when I look back in a year’s time at this plan that I’ve done. The Stoics like to talk about this practice where they call it prospective retrospection. So if you could fast forward into the future, what would the future you be telling you today? So similar to the Brian Feroldi thing, and that’s how I would put it. So those three things that are interlinked, but that helps get us on that start of the journey, if you like.
Luke: Albert, what would the 60-year old Albert be telling you today?
Albert: Eat better, do more exercise, get out more, see your friends.
Ronald: Let me ask you a question. Do either of you have a will?
Albert: It’s interesting that you say that, Ronald. I actually got my will written last year. I started doing it just before the pandemic hit and when it hit, it kind of pushed me to speed up the process just in case. And I really resonated with what you said before because when I actually finally did my will, it was a huge relief. It just felt great just to be able to relax and know that that’s all been taken of.
Ronald: Hmm, what about you. Luke?
Luke: So I had one a long time ago, but it’s invalidated by marriage and, actually, Albert refreshing his own will reminded me, so I had an estate planning meeting last week and we’re putting together the new will. I’ve got a bit of a funny perspective on this one, actually. I’ll share a bit of an anecdote. So, I ride motorcycles and I do some fairly hairy things on snowboards from time to. So I’m relatively confident that one of those sports is how I’m going to meet my end. And I imagine this last second or two, as I’m about to go under the lorry on the motorway on the bike, or meet some horrible end, and not that I’m looking forward to that moment, but I’m looking forward to the idea of knowing that, actually, I’ve put in place a few things and some fun and games for a lot of friends.
So, I’ve created a bit of a treasure hunt for my wife. I’ve recorded some videos for friends and family. There’s a video for you, Albert. And I’ve got some specific wishes which would involve my wife taking a whole bunch of different friends on different vacations to watch the videos and celebrate the idiotic life that was Luke’s. So, yeah, I guess I’ve put in place a bit of a will from a financial perspective, but also from a let’s celebrate rather than being miserable perspective.
Ronald: Yeah, that’s a great way to look at a life well-lived, I think, because oftentimes we associate death with this morbid thing and we don’t like thinking about it, but taking control of it, I think, it’s just another rung in the financial well-being ladder.
Albert: So, Ronald, you’ve been talking about financial well-being for the last half an hour or so, if you don’t mind us asking, how do you manage your own investments?
Ronald: Well, I talk a lot around biases and behaviours and all that good stuff, and I will be one who freely admits that I fall prey to all those biases, you know, whether it’s fear of missing out and fear in greed and the rest of it as well, so I’m going to put my hands up and do that. So the way I’ve thought about it, and it is an ongoing journey, so it’s okay to change your mind, and yes, you can have an investment plan. To me, you don’t have to be rigid to it. It just has to be very robust and we are allowed to change our minds. But for most people, a low-cost index fund is a great base, and so that’s mine. And then on the other end, for me, it’s some things around exposure to decentralized finance and some crypto. So that’s the asymmetric risk, if you like, losing it all or, hopefully, making a big return.
I do invest in some active fund managers, but my criteria is that those fund managers also need to have their own investments in the funds. So what that means is those funds tend to be single-manager, i.e. they are the CIO, which means that if the fund doesn’t do well, they also don’t do well. So that’s the criteria, and then there’s one or two publicly listed things where it’s founder-led, if you like, and Berkshire Hathaway’s a good one where you know it’s not going to shoot the lights out, but it’s almost like an index fund to me.
So it’s kind of a mixture. So I can’t say I’m a pure passive index person or investor because I do, at the end of the day, I think investing can be fun, right? It doesn’t have to be stressful. And part of that is building your own knowledge, knowing your circle of competence, and not trying to stray too much out of that. And if you do stray and sometimes I do stray and I make mistakes, it’s like comes back to saying, what did I write down in my investment journal? And did I learn from that? So it can be fun as well.
Albert: That rule about your fund managers having their own money in their own fund is really important, I think. We have similar criteria for the companies that we invest in. We want the leadership of our companies having skin in the game by having shares in their own company, so their motives or incentives are aligned with their shareholders. And, as you said, the same applies to fund managers. They need to have their own money in the game, otherwise, they’re just gambling with other people’s money.
Where to find Ronald
Luke: So, Ronald, that was a really great discussion. I’m sure we’ve just skimmed over a lot of the material you really go into in-depth in your coaching sessions. How could listeners get in touch with you if they wanted to find out more or perhaps book a session for themselves or for their company?
Ronald: My website’s www.libraryhk.com. There you find out a little bit about the books I like, my coaching style, and yeah, happy to have a chat with anyone on either professional matters or financial well-being matters.
Luke: Fantastic. Thank you, Ronald, and we’ll include those details in the show notes today.
Anecdote
Luke: You know, Albert, before we round it out, you’ve told a bit of an anecdote from Michael Batnick. I’ve got a bit of a silly anecdote of my own just to close out the show. A bit of fun. I’ve read about this, I think, on Reddit a few days ago. This is a chap who posted a thread to a financial advice forum. It may have been Wall St. Bets.
Albert: It must be true then, right?
Luke: It must be true. He said, my 12-year old son just started a stock market class in school. They’ve been trading for the past two months, starting with 10,000 imaginary dollars. He was telling me about it and I was like, sure, sure, just nodding along. And then he tells me he’s up to one and a half million dollars. I didn’t believe it until he showed me. This kid has a gift. I talked to his teacher. She was so impressed, she made an offhand comment about how lucky I am to have someone so good with stocks in my family. And that’s when it hit me. My son should run my portfolio.
But I don’t want to put too much pressure on him if anything goes wrong, so I don’t want him to even know it’s real money. My plan is to Enders Game him. I’m going to tell him I found an international scholarship program and the first person to turn a quarter of a million dollars into 10 billion wins a free scholarship to college, which I of course will be able to pay out of my winnings.
I feel really good about this plan and I’m planning on handing my passwords over to him on Monday. Just wondering if anyone has ever done anything like this and do they have any tricks or tips? My main concern is he realizes he’s actually trading real money. I want him to be ready to take the risks necessary to help daddy retire. This is the biggest risk I’ve ever taken, but I feel so freaking good about it. Thoughts and prayers are appreciated. Love the community.
Albert: What do you think, Ronald? Would you trust your portfolio to your kids?
Ronald: Well, I think the lesson one could draw from that or the long-term lesson could be a skill versus luck. I mean, I like the true story of some of the best-performing members are those that were deceased because they were no longer there to make decisions. And I think for 95% of the population, even 99%, that’s where you want to be. Take yourself out of the decision because rarely do we make the right decisions, you know, when it comes to investing because there’s so much emotion in it. I mean, it really reminds me in the 1970s, there was this cartoon character called Pogo, and there’s this famous cartoon where he says, I have met the enemy and it is us. And so it’s that thing about we getting in our own way.
So, I try to be humble, I try to stay out of it, but yes, I get tempted like everyone else, and so I think it then becomes a matter of degree. But I definitely wouldn’t trust myself to manage my own money that way, let alone my 12-year old daughter. That’s a lovely story though, isn’t it? It’ll be interesting to see, with a longer track record and when it’s no longer imaginary money, and what happens.
Luke: Yeah, I’ll try and track this guy down and see how it plays out over the next year or two.
Quote
Luke: Well, Alb, do you want to close this out with a quote today?
Albert: Sure, Luke. I have a quote from a Greek stoic philosopher named Epictetus, and he said, “Wealth consists not of having great possessions but in having few wants.”
Luke: Very relevant to today’s discussion. Thanks, Albert.
Wrap
Albert: Well, that’s all for this week. Thanks for listening.
Luke: If there’s a future topic you’d like us to cover, you can message us on Twitter. I’m @LukeTelescope.
Albert: And I’m @AlbertTelescope, or you can email us at feedback@telescopeinvesting.com.
Luke: If you enjoy this episode, you can find more content at our website, telescopeinvesting.com, where you can leave us a comment or a review.
Albert: And if this is your first time tuning in, perhaps consider subscribing to the website so that you’re the first to hear about new articles and episodes as they drop.
Luke: Thanks, Albert.
Albert: Thanks, Luke, and thank you, Ronald.
Ronald: Thanks, guys. I enjoyed that.
Luke: Thank you, Ronald. Great to have you on the show.
