Financial and Investing Beliefs
1) Money itself is not the goal
Remember: money is not the ultimate goal - it’s pointless to be the richest person in the graveyard. But money can be a helpful enabler of the things you want in life.
At corporations, strategy always precedes financial planning, and the same should be true for you. What do you want from life? The answer will shape your financial plan.
2) Save intentionally and avoid debt
This can be said many ways: Live below your means. Don’t spend money you don’t have.
High cost consumer debt is crippling and should be avoided like the plague (e.g. credit card debt). While there may be times when debt is acceptable (e.g. house, college), it should be used conservatively and with caution.
Albert Einstein proverbially said: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
3) Invest early and often
Time is an investor’s best friend. Starting early and continuing with dogged persistence can produce amazing results, but it takes patience and courage. This story captures it beautifully:
“Investing is like growing a Chinese bamboo tree…[it] takes more than 5 years to start growing, but once it does, it grows rapidly to 80 feet in less than 6 weeks. In the initial years, compounding tests your patience and in later years, your bewilderment.”
If you are later in life, remember: the best time to plant a tree was twenty years ago. The second best is now.
4) Take an appropriate amount of risk
Taking risk is inherent to investing. But taking too little risk or too much risk can both lead to financial ruin.
In The Missing Billionaires, Hagani and White argue that failure to take an appropriate amount of risk is the reason many wealthy family fortunes from the early 1900s have completely dissipated.
Finding the goldilocks amount of risk that makes sense for you is a critical part of a robust financial plan.
5) Don’t put all your eggs in one basket
Diversification is one of the few “free lunches” in investing. An optimally diversified portfolio can achieve a higher return for the same amount of risk.
You don’t want to put all your eggs in one basket - whether that basket be a company, a sector, or even a country. Andy prefers to own investments across the globe, and when inter-planetary investing emerges, he will look into that too!
6) You probably won’t beat the market
Sure, Warren Buffet crushed the S&P 500, but many studies show how rare a feat this is - even by professional investors. As one example, SPIVA’s year-end 2024 report shows that a mere ~5% of active managers beat the market over a 20-year horizon (and that’s before taxes).
That is a sobering thought: not only is it highly unlikely that you can beat the market, it’s also a long-shot that you could pick a manager that could accomplish the feat.
So don’t try to find the needle in the haystack. Own the whole haystack.
7) Keep fees low
In “The Arithmetic of Active Management”, Nobel prize winning economist William Sharpe elegantly explains: “After costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar.”
Given active managers rarely beat the market (#6), it follows that you want to own the whole market as cheaply as possible. As Allan Roth says, “In investing, you get what you don’t pay for.”
Andy’s recommended investments are almost always ultra low-cost, broadly diversified index funds or ETFs (the natural conclusion of #5, 6, and 7).
This is why Crewson Financial charges an hourly or flat fee instead of the 1.0% asset under management (AUM) fee charged by many advisers. Those high fees are great for advisors, but awful for investors.
8) Optimize your taxes
For most households, taxes are one of their largest expenses. Over time, savvy tax planning can deliver significant savings…no one wants to pay more than they have to!
But investors need to be careful that the tax tail doesn’t wag the investment dog. The task is not to minimize taxes - it’s to maximize after-tax wealth.
9) Keep it simple
While perhaps boring at a cocktail party, a simple portfolio of low-cost, diversified, passive index funds will typically beat the exotic and high-cost investments recommended by many financial advisers.
Complexity is the siren’s song that lures to value destruction. Resist the urge - your future self will thank you.
10) Give generously
“It is more blessed to give than to receive.” Whether to charity, individuals, or heirs, giving to others is a meaningful priority for many people.
The IRS offers incentives for charitable giving, but many people give sub-optimally and leave money on the table. A strategic multi-year giving plan can decrease your tax bill.
Similarly, a thoughtful estate plan can magnify your after-tax impact, increasing the amount to heirs and charity, while minimizing the portion taken by the government.
