Begin With The End In Mind

“Our plans miscarry because they have no aim. When a man does not know what harbor he is heading for, no wind is the right wind.”

– Lucius Annaeus Seneca


Why do we invest for?

It seems like an easy question to answer, and the most commenters recommend focusing on achieving a specific return.

Here is a classic example: “You want to attain an average return of 7% over the next five years while minimizing risk through proper position sizing.”  ZzZzZz

Or consider this bad piece of advice, ‘Just try to beat the market.’

What do these two statements actually mean? Both fail to take into consideration your own financial situation. Fund managers have to compare their returns with the market to help potential investors make a comparison between funds and their returns over the years as compared to the market. But we are lucky we don’t have this disadvantage and it is almost pointless to do so. I’ll explain in detail why a bit later on.

According to Dalbar’s Quantitative Analysis of Investor Behavior report (QAIB), ‘Analysis of the underperformance shows that investor behavior is the number one cause.’

And they further added, ‘One thing that all the negative behaviors have in common is that they can lead investors to deviate from a sound investment strategy that was narrowly tailored towards their goals, risk tolerance, and time horizon’.

No wonder the majority of investors average 2.5% over a ten year period (source).

Keep in mind that we invest in an economic asset like a business, property, farm or bond, to make money. But what does this mean? What does making money mean? And what happens when we make money?

How much cash do I get and when do I get it?

When we make money we get more money back in the future than the amount we invested today. What determines our return from investing in an economic asset?

The price we pay. How much we get back. And when we get it back.

These three essential statements need to be kept in mind during our assessment of investment opportunities. While they are simple statements that everyone says they follow, but in reality, they are often forgotten or distorted due to human bias or lack of knowledge.

The first step.

Setting investment goals is no different from setting a fitness goal or career goal, there are fundamental factors to goal setting.

The question to ask is, ‘what is your outcome or result?’

Intrinsic Motivation Trumps Extrinsic Motivation, Every Time.

Before setting a dollar target to reach for, first need to determine what is the purpose of achieving your objective?

If it’s ‘I want to make a 100 million dollars.’ You have already lost.

As soon as you hit the first little obstacle you will give up, trust me, I know because I started out this way. I thought that if I just make the first million dollars I’d be set, and it would be the cure to all my problems.

Saying ‘I want to make a 100 million dollars’, is meaningless.

You need to ask why three times to uncover the real underlying reason. I wrote this when I was 18 years old.

  1. Why do I want to make a million dollars? Because I will then be able to buy a Ferrari.
  2. Why do you need to buy a Ferrari? Because then chicks will notice me.
  3. Why do you need to be noticed? Because then I have a chance of getting

Lame right!

Research has found that those fund managers who grow up wealthy turn out to be poor fund managers (source).

“Managers born poor face higher entry barriers into asset management, and only the most skilled succeed,” the researchers wrote in a paper for the National Bureau of Economic Research.

The managers born poor had the greater intrinsic motivation to perform. They had nothing to fall back onto, no trust fund, and no daddies money to invest.

And the latest neuroscience confirms this, and here are two takeaways from the book, The Leading Brian: Powerful Science-Based Strategies for Achieving Peak Performance, authors Friederike Fabritius & Hans W. Hagemann.

  • Goals that look good on paper have no guarantee of being achieved. In order to be successful, your goal must be emotionally relevant.
  • People who don’t have an emotional stake in the process are unlikely to change. Unless they can anticipate meaningful reward or threat, they might go through the emotions but fail to make the necessary effort that change requires.


What’s Your WHY?

Are you after financial security? Or financial independence? Or financial freedom?

Financial security is where you can earn enough income to cover the basics, like food, daily transport, electricity & water expenses plus other expenses needed to live your life?

Financial Independence is where all your financial security expenses are covered by income not related to income from work, where, for example, you could sit on the couch all year and do nothing and you can still comfortably cover all your financial security expenses.

Financial Freedom means quite literally that you could afford to fly around the moon (current estimate is USD $70 – 100 million) and still comfortably cover all financial independence expenses.

Your Turn

What is your why? Visualize it. 



A wealthy man nearing the end of his days summoned his twin son and daughter to his bedside and told them that before he died, he wanted to pass on to them the opportunity to experience the richness of life that he had enjoyed for his many years on earth.

“If I could do so, I would give you both the world,” he told them, “but of course, I can’t. Instead, I am leaving you both with a gift.”
The both wept to hear their father speak of his approaching death, but he bade them hush with a wave of his hand. “I am giving you each a purse to finance your adventures. What goes into each purse is your choice.”
The man lifted a pair of beautiful lacquer boxes from the bedside table onto his lap, then reached inside one and held out his hands to his sons. One hand grasped a sheaf of one thousand crisp, new $1,000 bills—one million dollars, cash. In the palm of his other hand sat a shiny new copper penny.

“I offer the same choice to you both. This million dollars; or this single penny. Whichever you choose, you must leave it in your purse under my butler’s care for one full month to give you time to think about how you will use it. Whatever you do not take will be returned to my estate, which I’ll leave to charity.
“One more thing,” he added. “If you choose the million, you may, if you wish, draw against it as credit with my bank in town. If you choose the penny, you can also draw against it, but every day you choose to leave the penny’s line of credit untouched, my butler has instructions to double the contents of your purse, for as long as it is under his care.
“Now, go rest and think. Here, take this book with you to pass the evening hours. Tomorrow morning, come back and tell me your choice.”
He gave them each a copy of a little book of stories, kissed them both and sent them on their way.

Late that night the girl lay in bed musing over the day’s events.

“Which should I take?” she wondered. “And why is our father giving us this choice?” Unable to sleep, she turned on his light and looked around for the book his father had given them both. She figured a little reading would help pass the time, and who knew, maybe she’d get sleepy.
She found the book and for the first time noticed the title embossed on the cover in simple gold lettering: The Choice

“Hm,” she muttered. “The Choice. Sounds mysterious. Choice between what and what?” Flipping through the book’s pages, she saw that each of its many chapters was no more than a single page long, and at least at first glance their titles didn’t appear to have anything to do with each other. It seemed like a random assortment of fables or children’s stories. She was about to toss the book aside, but some nudge from within whispered, Go ahead, read a little.
She turned back to the first story, which was called “The Water Hyacinth,” and began to read.

The Water Hyacinth

Once there was a little water hyacinth that grew near the edge of a big pond. It had dreams of seeing the other side of the pond, but when it murmured to itself about these dreams, the water just laughed and lapped at it dismissively. The other side indeed … for a tiny plant that couldn’t even move? Impossible!

The water hyacinth can typically be found floating on the surface of ponds in warm climates around the world, and it is a beautiful plant, with delicate six-petaled flowers that range from purplish blue to lavender to pink. This particular plant was a perfect specimen: very beautiful, very small, and very delicate.

However—and this was something the water didn’t know—the water hyacinth is also one of the most productive plants on earth, with a reproductive rate that astonishes botanists and ecologists. A single plant can produce as many as five thousand seeds, but its preferred method for colonizing a new area is not to cast its seeds to the vagaries of wind and water, but instead to grow by doubling itself, sending out short runner stems that become “daughter plants.”

The first day this little water hyacinth appeared, nobody but the water even noticed it was there. Nobody noticed it on the second day either, as it doubled, nor on the third or the fourth, as it doubled again and then once more. It was so insignificant, in fact, that for the first two weeks, even though it doubled in size every day, you would have had to search hard to see it at all.

By day 15 it had reproduced to cover barely one square foot of water, a tiny dollop of lavender-pink dotting the pond’s glassy green surface. On day 20, two-thirds of the way through the month, one person passing by the pond noticed the little patch of foliage floating off to the side, but mistook it for a lost bath towel or perhaps a discarded piece of wrapping paper.

More than a week later, on day 29, half the pond’s surface was still open water. And on day 30, just twenty-four hours later, the water’s surface had totally disappeared. The entire pond had been overtaken by a rich blanket of purple-pink water hyacinth.

The girl imagined the pond, covered with the lush, gorgeous plant. “Not sure what that has to do with a ‘choice,’” she said out loud. She stretched and yawned. “That’s enough reading for one night.” She turned off the light and settled against the pillow.

A minute later he was sitting up again, switching on the light. Something prodded her to keep going and take in more of this book. Turning the page, she came to the next story, this one entitled “In the Pail.” Once again, he began to read.

Two frogs left the safety of their swamp one day and ventured into a nearby farm to explore. Soon they found themselves in a dairy, where they found a large milk pail. Hopping into the pail, they found it was half filled with fresh cream.

The two little frogs were absolutely thrilled. They had never tasted anything so delicious! Soon their bellies were full. Feeling sleepy, they decided it was time to leave—and that’s when they realized they were in trouble.

They’d had no trouble hopping in. But how were they going to get out? The inside of the pail was too slippery to climb. And because they couldn’t reach the bottom and there was nothing for them to step on for traction, hopping to safety was out of the question, too. They were trapped.

Frantic, they began thrashing about, their feet scrabbling for a foothold on the elusive, slippery curve of the pail’s sides.

Finally one frog cried out, “It’s no use. We’re doomed!”

“No,” the other frog gasped, “we can’t give up. When we were tadpoles, could we have dreamed that someday we would emerge from the water and hop about on land? Swim on, brother, and pray for a miracle!”

But the first frog only eyed his brother sadly. “There are no miracles in the life of a frog,” he croaked. “Farewell.” And he sank slowly out of sight.

The second frog refused to give up. He continued paddling in the same tiny circle, over and over, hoping against hope for a miracle. An hour later, he was still paddling in his futile little circle. He no longer even knew why. His brother’s dying words clutched at his thoughts as fatigue tugged at his tiny muscles. “Was my brother right?” he thought desperately. “Are there no miracles in the life of a frog?” Finally he could swim no more. With a whimper of anguish, he stopped paddling and let go, ready to face his fate …

But by this time the boy was no longer reading. Unable to keep his eyes open any longer, he had fallen fast asleep as the frog paddled in his desperate circle, refusing to give up. Somewhere in the back of his mind, though, the boy had already guessed how the tale of the two frogs would turn out, and his guess was pretty much the way the story’s last paragraph did in fact read:

Yet to his surprise, unlike his brother, the second frog did not sink. In fact, he stayed right where he was, as if suspended in midair. He stretched out a foot tentatively—and felt it touch something solid. He heaved a big sigh, said a silent farewell to his poor departed brother frog, then scrambled up onto the top of the big lump of butter he had just churned, hopped out of the pail and off toward his home in the swamp.

That night, the girl dreamed of frogs paddling on a bed of flowers, floating on a pond of pennies.

The wealthy man’s other son lay awake that night, too, but he never opened his copy of the storybook their father had given them. He was too busy thinking to sleep or read. He’d made his decision the moment his father had held out that sheaf of thousand-dollar bills. He was already making big plans for his next thirty-one days.

When morning came, he sprang into action.

After notifying his father of his choice, he opened his million-dollar line of credit at his father’s bank. Next, he hired an executive director to help him execute his ambitious plan, and the two rented out a hotel suite in the center of town, where they conducted interviews for the next six days. By week’s end they had hired a staff of the sharpest financial advisors, market analysts, and investment experts available.

The group spent the second week researching, brainstorming, and drafting strategies to help the wealthy man’s son transform his million-dollar windfall into a genuine fortune. By the beginning of week 3, they were locked and loaded and ready to rumble, and off they marched into the battlefields of commerce and speculation to turn the boy’s million into billions.

A few days later, the boy decided to pay a visit to his brother, to see what she was doing with her million—but when he arrived, he found to his astonishment that his sister had turned down the million and taken the penny instead.

“I went to see Father again the day after we all met,” the girl told her brother, “and his butler gave me a peek into the purse: my lone penny had been joined by a companion. On the third day, I went back, peeked in again and now saw four pennies. On the fourth day, there were eight.” The brother listened in disbelief as the girly continued describing his insignificant little pile of pennies. On day 5, there had been sixteen pennies; on day 6, thirty-two; and by week’s end the girl had amassed a whopping nest egg of sixty-four cents. By the end of the second week, the cache of pennies was just shy of ninety dollars ($81.92, to be precise)—not even enough to pay for a decent dinner for two at the hotel where her brother’s ace financial team had their base of operations. Now, a few days into the third week, the purse had grown to $655.35, barely enough to sustain the girl on her own for a week.

“You poor girl!” cried her brother. “I can’t believe you went for the penny! But it’s not too late—visit our father, see if he’ll let you change your mind. Even if he gives you only half your million, it’s certainly better than scraping by on what you’ve got now. Or at least let me help; I can’t stand the idea of you venturing out into the world with scarcely enough to feed yourself for a week.”

But the first boy wouldn’t hear of it.
That night, the old man died peacefully in his sleep.

Toward the end of the month, the second boy’s executive director brought him some worrisome news. The markets had gone a bit soft, and the team’s earlier rosy projections would need to be revised downward. The boy thanked him and waited anxiously for the next report.

“On the morning of day 31, the day on which the both were to visit the butler and finally receive their purses, the executive director came back with his final report. He shuffled his feet and cleared his throat for a minute, asked for a glass of water, and then began his report by saying that the news was mixed. Some investments had performed quite well, others had suffered. All in all, the boy had made a modest gain: the team had succeeded in parlaying his one million into nearly one and a half million, an appreciation of 50 percent. That was the good news.

“And the bad news?” The boy held his breath.

“Well, ah,” continued his executive director, “expenses, including the team’s commissions, taxes, broker fees, interest on the credit line, the bill for the hotel suite,” he cleared his throat again, took a sip of water, and continued, “and of course, ah, my salary for the month, come to just over one-point-seven-five million.”

The boy was $250,000 in the red. Not only was he not rich, he actually owed a fortune. He was ruined. In a panic, he rushed across town to see his sister, and this time he received an even larger shock than the first time he’d gone to visit.

On day 28, the first girl’s purse of pennies had passed the million-dollar mark, and on day 29, the two-and-a-half-million mark. Yesterday, on day 30, it had exceeded five million, and today, when the butler handed his purse over to his own care, it had topped out at $10,737,418 … and twenty-four cents.

The girl who chose to wait for the penny had discovered the remarkable creative force of compound interest—the very same force that blanketed the pond’s surface with water hyacinth and churned the frog’s cream into butter.

The boy who chose the million was broke and deeply in debt and the girl who chose the penny was worth more than ten million dollars.

Actionable steps

If you want to achieve financial independence, meaning never work again and having all bases covered, know that it takes discipline to do the work regardless of how you feel, patience and belief in the process, like the frog in the fable, because results will not be immediate and finally a goal to aim at.

You can start by conducting the following exercise.

This is why I wrote earlier to forget about measuring your end of year investment returns against the market, because knowing what investment return you need to earn each year to cover your annual living expenses plus the annual inflation rate is much more important than satisfying your ego.

Let’s see it in action. Jason and Sarah are two work friends, both enjoy talking to each other about investing. Jason is a tight arse, he watches what he earns, will remind Sarah about how much she can save per year by not buying that daily latte.

Jason calculated that his living expenses are approximately $40,000 dollars per year, whereas Sarah is less focused on cutting trivial costs, like buying her daily latte, and is more focused on increasing her income by investing her extra earned income and earning an extra $1k on the side. Sarah approximately calculated her annual living expenses around $80,000 dollars per year.

Assuming nothing changes, how much would each need to live off their investment returns?

Using the table below, we can calculate the amount of money needed in Sarah’s portfolio to allow her to achieve financial independence. If Sarah had a total of $2 million (circled red), earned an 11% net return after fees, her capital would have grown by $220,000 dollars. Exceeding her living expenses by $140,000 dollars!

Sarah can now reinvest $140,000 back into her portfolio to compound, like the girl in old fable. That $140,000 also acts like a safety net during the one or two years where the market crashes. Keep in mind that $6,600 (3%) was eaten by inflation.

Jason just needs a bare minimum of $500,000 dollars earning 11% to cover living expenses and the inflation rate of 3%.

What would you say to Jason, if he came bragging about how he beat the market by 5%, if the market only earned 2%? Would you be impressed? I’d bet not.

Now Your Turn.

What is your total annual living expenses?


Next: Using the table above, what total amount is needed in your portfolio to cover your annual living expenses?

I’d suggest starting at 7% and move horizontally (left to right) till you reach your annual total in living expenses, then see what headline amount lines up with your annual total loving expenses.


Thirdly: What is the gap? The gap is the amount of money your portfolio is worth today and the total amount you calculated from the above table.

The gap is now your number one financial priority!

Real Life example:
Why I decided to skip home ownership to retire at the ripe age of 35  By Pat Seyrak.


Before you do make it your priority, there is one last thing you need covered.

Credit Card Debt. If you have it make it your priority to pay it off first! If you do have credit card debt check out Remit Sethi website, he awesome, he will provide you with the free tools to handle it. (Link)

If you’re a fellow Australian, I’d recommend checking out Scott Pape ‘The Barefoot Investor’ (Link

No credit card debt? High five my friend! 

Casanova contributed his success in life to his ability to concentrate on a single goal and push at it until it yielded.

“When he was imprisoned in the treacherous “leads” of the doge’s palace in Venice, a prison from which no had ever escaped, he concentrated his mind on the single goal of escape, day after day. A change in cells, which months of digging had been for naught, did not discourage him; he persisted and eventually escaped. “I have always believed,” he later wrote, “that when a man gets it in his head to do something, and when he exclusively occupies himself in that design, he must succeed, whatever the difficulties.” Robert Greene

Gates senior, Bills dad, once asked both Warren Buffett and Bill Gates at the dinner table, “What is one word you would contribute to your success?” Both independently answered with the same word – FOCUS.

With the 24 hour news cycle pumping out constant news about war, death, division within the world and about U.S. President Trumps latest tweets, this creates a state of constant distraction and diffusion, hardly anyone keeps their minds in a one direction before its pulled in another thousands directions. And this all becomes internalized. 

Buffett, Gates and Greene have provide us the key to success, that is: single mindedness of purpose, total concentration on the goal, and the use of these qualities against people less focused, people in a state of distraction.

“Such an arrow will find its mark every time and overwhelm the enemy.” Greene

The Last Step: Before you go to bed, make a list of items that you can do tomorrow that will help close the gap. Once you have your list, prioritize them by impact, if you could only accomplish one item per day, which one would produce the biggest impact towards closing the gap? 

Before you go…

A merchant sent his son to learn the Secret of Happiness from the wisest of men. The young man wandered through the desert for forty days until he reached a beautiful castle at the top of a mountain. There lived the sage that the young man was looking for.

However, instead of finding a holy man, our hero entered a room and saw a great deal of activity; merchants coming and going, people chatting in the corners, a small orchestra playing sweet melodies, and there was a table laden with the most delectable dishes of that part of the world.

The wise man talked to everybody, and the young man had to wait for two hours until it was time for his audience.

With considerable patience, the Sage listened attentively to the reason for the boy’s visit, but told him that at that moment he did not have the time to explain to him the Secret of Happiness.

He suggested that the young man take a stroll around his palace and come back in two hours’ time.

“However, I want to ask you a favor,” he added, handling the boy a teaspoon, in which he poured two drops of oil. “While you walk, carry this spoon and don’t let the oil spill.”

The young man began to climb up and down the palace staircases, always keeping his eyes fixed on the spoon. At the end of two hours he returned to the presence of the wise man.

“So,” asked the sage, “did you see the Persian tapestries hanging in my dining room? Did you see the garden that the Master of Gardeners took ten years to create? Did you notice the beautiful parchments in my library?”

Embarrassed, the young man confessed that he had seen nothing. His only concern was not to spill the drops of oil that the wise man had entrusted to him.

“So, go back and see the wonders of my world,” said the wise man. “You can’t trust a man if you don’t know his house.”

Now more at ease, the young man took the spoon and strolled again through the palace, this time paying attention to all the works of art that hung from the ceiling and walls. He saw the gardens, the mountains all around the palace, the delicacy of the flowers, the taste with which each work of art was placed in its niche. Returning to the sage, he reported in detail all that he had seen.

“But where are the two drops of oil that I entrusted to you?” asked the sage.

Looking down at the spoon, the young man realized that he had spilled the oil.

“Well, that is the only advice I have to give you,” said the sage of sages. “The Secret of Happiness lies in looking at all the wonders of the world and never forgetting the two drops of oil in the spoon.”

From the book “The Alchemist”.

I learnt from reading the book “The Alchemist” by Paulo Coelho the lesson to appreciate and be grateful for where you are now in life, and the beauty that surrounds us on a daily basis all the while staying focus on our goal.

Not only does it lift our spirits, it also will help you create those aha moments too. How? This is a technique used by a number of high performers, if they get stuck on a problem they will stop the activity or thought and focus on a new task, change locations or sleep on it. They are letting go consciously and letting their subconscious tackle the problem.  This is why you’ll think of a idea in the shower, and getting back to the lesson of appreciating the beauty around us and using it to our advantage, we can end a work day enjoying a task that totally immerses us in. Viewing an art exhibition, playing a musical instrument, or what every you love to do. 

Hemingway would end mid sentence (mid thought) while writing, he wanted to end while he still had something to write about, and not stop writing when he ran out of thoughts to put on the page. Because he found that when started to the next day he started with momentum, as he was writing what already knew from yesterday, but also because these thoughts were swirling around in his subconsciousness since yesterday, they provided him with more clarity and ideas to add to the page. It is referred to as the Zeigarnik effect.

Here are three simple ideas you can do. 

  1. Go for a walk. Steve Jobs was famous for walking and talking about ideas.
  2. Change location. Have you noticed sometimes you forget why you walked into a room inside your house? this is referred to as Orienting Response.
  3. Shower or bath.   


In the coming weeks I’ll be releasing an investment strategy I call The Tsunami Wave Investment Strategy: ‘How you can turn $10k into $20k, $50k and $100k. And you will get it free in the Free Tools page or subscribe to receive it in your inbox.