Lessons from Private Family Money Management

Joshua Derrington Keystone Private Wealth

You are not accountable to institutional asset consultants – your liquidity requirements are entirely yours alone, as are your liabilities and your underlying circle of competence.

Truly breaking it down, underlying inflation, your propensity to remain rational, your ability to appoint quality advisors while controlling your ego should be your biggest concerns – not your portfolio’s Beta or its Sharpe ratio.

Are you tactically asset allocated like the Future Fund? No.

Does it matter? Absolutely not.
You aren’t an institutional superfund – do it your way and work on what matters to you, and pick the right people to help you.
It’s a massive advantage, not a disadvantage.

1. Take your time and design a system that suits you.

It’s important to acknowledge there is no one right answer and that everyone’s timeline is different.

“He who holds the gold sets the rules.” Don’t feel any pressure to do anything and don’t be afraid to hold cash as a default.

The stock market could be going vertical right now, it could be plunging. What the market is doing is irrelevant. What your friends are doing is irrelevant.

2. Don’t get on the envy trolley. Your only competition is your ego and inflation, it is not the Future fund or your mate down the road.

Antifragility is the combination of aggressiveness plus paranoia — clip your downside, build competence and conviction, trust your asset allocation, protect yourself from extreme harm, and let the upside, the positive Black Swans, take care of itself.

Source: Nassim Taleb.

3. Identify what you’re good at and how you’re going to use it as a strength.

First, try to establish what you and the people who know you believe you have credibility in doing.

Outsource outside areas of competence and build a framework around you to assess your credibility and that of potential partners, using this to decide on how to divide your capital.

Credibility = proven competence + relationships + integrity

Source: Stanley McChrystal

If you don’t trust your outsourced partners to manage your money, sit in cash; if you do, give them the money and allow them the freedom to do their job within clear boundaries.

Control the controllable

  1. Asset Alocation
  2. Spending (Ego) vs. Saving

 

 

 

 

 

 

Source: J P Morgan