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The Missing Ingredient to Build a Successful Money Strategy

Author

AJ Neeme
May 26, 2024

In this week’s edition:

  • The Overlooked Challenge in getting results

  • How to choose the right Strategy from the Start

  • Practical Strategy Assessment Example

In the first edition of this newsletter, we covered how to create a 3 Step System to determine your Money Priorities.

To recap, the System highlights priorities across the 4 Things your Money should be doing for you:

  1. Cover Living Expenses

  2. Protect from Emergencies 

  3. Work for you

  4. Improve quality of Life

Once you have your Priorities, the real challenge is getting it done.

It’s one thing to be told “You should invest”. 

But, figuring out what to invest in and sticking to it is where the struggle is.

You’ll find blanket advice like “invest $500 in Stocks/Index Funds”.
In my opinion, this sucks. 

The advice itself is not “Bad”. But, it might not be right for you.

It’s like a Doctor telling you to exercise 3x per week. 

Great! But what kind of exercise will get you results and work for you given your specific circumstances ? 

There’s a lot of great content on how to create Habits (I added 3 Books I loved at the end of this edition).


But, not nearly enough on how to choose what Habits to pursue in the first place. 

Here’s a Simple Assessment Question that has greatly improved my Decision Making.

Before committing to a plan, ask yourself: 

Does it align with your Strengths and Weaknesses ?

In my experience, the more it does, the higher the chances of success.

Our Strengths might raise us to new heights but it's our Weaknesses that we fall back to.

To drive the point, here’s a fictional example. 

Let’s say you’re deciding between Day Trading Stocks (ie: buying and selling a stock in the same day to make money) or Passive investing in Exchange Traded Funds (holding for the long term)

Day Trading Stocks: 
Weaknesses:

  1. Need to learn the necessary skills (high time and effort investment)

  2. High stress when faced with potential loss of money

  3. Requires a lot of time which I don’t have

  4. Low chance of making money (most day traders lose money)

Strengths:

  1. Enjoy fast paced decision making

  2. Potential for High gains (though rare)

  3. Easier to access than ever due to technology


Invest in Index Funds
Weaknesses:

  1. Need to overcome my tendency to want to be “active” investing

  2. Potential lower returns (but more confident to achieve those returns)

Strengths:

  1. Requires less financial expertise, as you're investing in a diversified basket of assets.

  2. Lower stress level due to a "buy and hold" strategy, which aligns better with your anxiety.

  3. Have historically proven performance

  4. Doesn’t require a lot of time

Decision: Invest in ETFs

Tips:

  • It is possible for 1 Weakness to outweigh all Strength in a specific situation (and vice versa) . Don’t base your decision on just the count of Strength and Weaknesses.

  • If you want to be fancy, you could split your Strengths and Weaknesses into both Internal and External 

  • Some Weaknesses are definitely worth trying to overcome. But, if you need to get started asap, it might be better to bypass them.

In Summary:

  • Taking action on your money priorities is key.

  • The best plan is the one you can stick to

  • Choose strategies that fit your Strengths and Weaknesses.

PS: check out these Books about Habits

  • Atomic Habits

  • The Power of Habit 

  • The War of Art

The information contained in this newsletter is for general informational purposes only. It should not be construed as financial or investment advice. Please consult a qualified financial advisor before making any investment decisions.