Key Messages
A Holistic Guide To Money Management: Applying 17Th Century Philosophy To Modern Day Investment
It’s never been more important to manage your money effectively and to ensure that you’re making the right investments.
Thankfully, The Geometry of Wealth by seasoned investor Brian Portnoy provides a comprehensive guide to financial management that anyone can follow.
The book explores how we can learn valuable lessons about investing from an eighteenth-century philosopher, instilling humility and gratitude which can lead to increased financial success.
It also covers diversification techniques which can help protect against losses in the volatile markets – so you know that your hard earned money is safe from riskier investments.
Overall, The Geometry of Wealth is an invaluable resource for anyone who wants to not just understand, but also actively engage with money and create a secure financial future for themselves.
Self-Funding Retirement Is Becoming The Norm, But Human Instincts Undermine Our Efforts To Achieve Financial Security
It’s become increasingly clear that financial insecurity is the new normal, and a big part of this is due to our inability to invest our money wisely.
Historically, pension plans were funded by employers, meaning a comfortable retirement was within reach.
Now, however, pension plans are becoming less common as workers are expected to self-fund their retirements through investment tools such as 401(k)s.
Statistics show that this sea change has created a great deal of insecurity – only 18% of Americans expect a comfortable retirement – which appears to be linked to how people approach investing.
Instinctively, when faced with an economic downturn many choose to hoard their money rather than invest it in stocks at cut-price prices.
However, this strategy is often shortsighted and overlooks the fact that buying low is usually cheaper in the long run and more profitable over time.
In The Geometry of Wealth book summary it dives further into these topics, exploring more advanced tools available for increased financial security such as human capital contracts and income smoothing strategies.
These tools can help reduce risk and build wealth for greater financial well-being long-term.
With the right strategies in place, you could have true financial freedom!
Use Your Slow Brain To Make Smart Financial Decisions And Find Happiness
The Geometry of Wealth by Lars Svendsen reminds us that not every aspect of our financial lives is in our control.
Some decisions may be determined by our circumstances and genetics, but there is still a significant amount of agency within our own grasp.
In Thinking Fast and Slow, Daniel Kahnemann argues that two cognitive settings exist in the human brain: fast thinking and slow thinking.
Our fast brains are habitually triggered by environmental events, meaning we don’t always have control over the decisions this mode makes for us; financial decisions made on a whim being a common example.
On the flip side, our slow brains are responsible for rational thought and analysis.
According to Edward Deci and Richard Ryan’s 2015 publication in Encyclopedia of the Social and Behavioral Sciences, 60 percent of our ability to make sound decisions is predetermined while 40 percent is conscious choices.
So if we use this slower processing speed to make decisions that benefit us financially, we increaseour chance of achieving financial happiness!
How Taking Risks With Strategy Can Lead To Success In Money Management
When it comes to risk management, the best approach is minimizing your exposure to losses.
That’s why many of the world’s most successful investors, including Warren Buffett and Charlie Munger, focus heavily on this strategy.
They wait until the odds are clearly stacked in their favor before putting any money down, thereby avoiding as much damage and risk as possible.
This is a lesson we can learn from the insurance industry – when you buy a house, it’s wise to protect yourself financially by taking out an insurance policy in case disaster strikes.
The same principle applies to investing: be smart and don’t overexpose yourself to potential losses.
It all goes back to 17th-century French philosopher Blaise Pascal who argued that belief is simply more likely if one minimizes risk.
When it comes to money management and investments, this mantra holds true – by being smart about your risk-taking, you stand a better chance of realizing huge financial gains!
Understanding Your Net Worth Is The Foundation For Crafting Financial Goals
When it comes to managing your finances, one of the first steps you should take is to determine your net worth.
To do this, calculate the sum of all your assets (such as your house, car and retirement fund) in one column and any debt (credit cards debts, college loans etc.) in a second column.
The difference between these two columns is your net worth – an accurate overview of your current financial health.
This figure serves as the starting point for planning further – by working out what you need or want financially in the future.
For example, you may want to aim for a certain amount of downpayment on a house or income in retirement.
When you have this goal, create a financial plan that helps you work towards it and check on your progress every year.
Knowing what your goals are allows you to make better decisions about how to spend and save money today – giving you peace of mind for tomorrow.
Gratitude Is Good For Your Wallet And Your Soul
The Geometry of Wealth explains that true financial health comes from understanding more than just investments and budgeting – it also involves practicing gratitude, which makes a lot of sense.
Gratitude isn’t just good for your spirit; its good for your wallet too.
In the book, psychologist Robert Emmons highlights two techniques to boost feelings of thankfulness: considering everything you have in life, instead of comparing yourself to others; and being humble and recognizing the role luck and other people have played in helping you become who you are today.
By having a sense of appreciation towards the things you already possess, like food on your plate or friends you can rely on, you won’t find yourself constantly trying to keep up with your neighbor’s new car or latest fancy gadgets.
And if keeping up doesn’t make sense financially or emotionally, then why do it? Theoratically speaking, by cultivating a feeling of contentment and gratitude within ourselves we’re able to guard against impulse purchases that don’t bring us any joy or satisfaction.
So to sum up, being grateful not only benefits our mental wellbeing but also extends into our spending habits – making financial health an easier goal to strive towards.
The Benefits Of Keeping Investing Simple: Three Rules To Follow
Ignaz Semmelweis was a doctor in Vienna, Austria who took a hard look at the death rates among women giving birth on his ward and the “street births.” He found that it was actually safer to have a street birth than to be treated by a doctor who hadn’t washed his hands.
From this situation, he learned an important lesson – simple can often be far more effective than complex when it comes to making decisions.
This same principle applies to money as well.
A lot of times, people will make choices based on complexity – they’ll think that with so many options available, they must have made the best choice possible.
But this isn’t always the case and it’s important to remember that simplicity can often be just as effective or even more so than complex solutions when it comes to making financial decisions.
When you’re investing your money, for example, try to stick with three straightforward rules.
First, buy when prices are low and sell when prices are high.
Second, diversify your portfolio of assets – in other words, don’t put all your eggs in one basket.
Third and finally, invest for the long term instead of jumping from one investment opportunity to another – doing so is more likely to reap rewards over time rather than short-term gains.
By remembering these three simple rules for making investments, you’ll be able to make decisions about where and how to put your money wisely and securely.
So if you want sound financial advice backed up by tried-and-true wisdom, then keep things as simple as possible; simplicity really does beat complexity every time when it comes to making smart financial decisions!
The Wisdom Of Humility In Investing: Why Admitting You Don’T Know It All Pays Off
Investing is often touted as a precise science, with sophisticated algorithms and equations making difficult market predictions appear nearly perfect and predictable.
In reality, this isn’t the case – money-making through the stock market simply doesn’t work that way.
The Geometry of Wealth advises that the best investors understand that investing isn’t an exact science, but rather an art.
Charlie Munger – one of the world’s most successful investors – explained that no investor can predict precisely how their investment decisions will fare, although they can pick investments with a high chance of success.
In practical terms, this means being humble regarding your financial knowledge and recognizing your limitations.
It might seem like you need to have insider information before you can make it big in finance, but staying realistic and honest is far more beneficial than overconfidence.
Understand that you’ll never know everything about the markets when it comes to investing wisely; remaining level-headed will help you manage portfolio diversification and risk management so that losses are avoided and gains are made.
The Average Return On Investment Doesn’T Tell The Whole Story: Don’t Underestimate Probabilities And Expectations
When it comes to investing in stocks, you might hear that you can expect about a ten percent return.
This common sense wisdom does reflect reality as the average yearly return rate of stocks does tend to be around that number based on data from the Ned Davis Research Group.
But what this figure leaves out is important: probabilities.
If you look at the range of possible investment outcomes, the stock market actually fluctuates wildly over short periods of time due to swings in company performance, resulting in very real potential to gain or lose substantial amounts on your investments over time – much more than the average would suggest.
For example, some years have seen US stocks gain incredible returns of up to 167%.
While other years have seen losses in excess of 67%.
Over longer periods though, these large swings tend to even out and settle back into a similar range again; typically between 0 and 20% with small losses likely in some cases.
So when assessing your investments, it is important not get too caught up in those early ups and downs of your stock’s value as it will eventually even out if you give them long enough.
Wrap Up
The Geometry of Wealth by Matthew R.
Ferry provides a powerful and important lesson about investing: that it is important to stay humble and recognize luck’s role in the financial markets.
The key takeaway from this book is to diversify your investment portfolio, as this will help you reach maximum return or limit downside risk.
Additionally, it is crucial for investors to stay in the game over the long term and understand that nothing comes without some risk associated with it.
Ultimately, The Geometry of Wealth leaves readers with an actionable plan for success in investments: maximize returns while minimizing risks by diversifying across multiple investments, sticking with reliable schemes, remaining humble and having patience with your assets over the long term.
