Simple book with profound wisdom

Sanjay Thaker, Independent Financial Advisor, Invest N Gain Financial Services, Rajkot, reviews Nick Murray’s Simple Wealth Inevitable Wealth and finds it is a must read book for all financial advisors and their clients

Much like the advertisement of mobile service provider being aired currently, Nick urges his readers to keep it simple. His belief is that wealth creation through investments is an outcome of adhering to certain simple rules.

Key tenets

This book revolves around three key tenets:

1. The long term investor (i.e. minimum 5 years holding) has found that historically, equities have done a much better job of preserving and enhancing purchasing power, i.e. real wealth than bonds did.
    
2. Due to equities’ inherent volatility, many or most investors will find it almost impossible to stay the course in equities, i.e. to actually get their long term return, without the steady behavioral guidance of a professional advisor.
    
3. Most serious investors will probably produce a better return and with a lot less effort by investing in mutual funds rather than managing one’s own portfolio of stocks.

This book does not say that your mutual funds are going to “outperform” most other people’s mutual funds. But it says you can “outperform” most people simply by behaving better than they do.

Packed with wisdom

The book is full of wisdom

• Be an Owner, not a Loaner:
  Nick makes a strong case for equity. He says,” All our common sense and all our life experience tell us that the owners of good businesses make more money than do their lenders, if only because owners take more risk.”
   
• What the Real Risk Isn’t:
  People fatally misperceive risk, in two distinct ways. They overestimate the risk of holding stocks and underestimate the risk of not holding them. No one can time the market; you have to stay in it to win it.
   
• What the Real Risk Is:
  Nick says there is no such thing as NO RISK. There is only this choice of what to risk and when to risk it. Embrace volatility and anxiety now for wealth later on OR take comfort in “Guaranteed” debt instruments now and face destitution later on.
   
• Behaving Your Way to Wealth:
  Controlling their behaviour is an important attribute in turning wealthy.
   
• Equities don’t make people wealthy; people make themselves wealthy.

Role of Advisors

What makes the book relevant for advisors and investment professionals is how he sees their participation as integral to the success of investors. This is how the book sees the role of advisors:

• The primary task of financial advisor is to keep investor “on plan” regardless of the fads or fears of the moment.
   
• Investors need to choose a coach based on trust and mutual respect; empathy and a shared sense of mission. Those are the hallmarks of an investor’s relationship with the life time coach who’s right for him. Then and only then, comes competence.
   
• The most important functions of a gifted empathetic financial advisor are to help families find the emotional strength to own what they need to own, instead of what they want to own.

Nick Murray has been in the financial advisory profession since 1967 and is the author of ten books. He was the 2007 recipient of the Malcolm S. Forbes Public Awareness Award for Excellence in Advancing Financial Understanding. Nick Murray’s website: www.nickmurray.com