Key learnings from Richer, Wiser, Happier

I recently finished “Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life” by William Green. In the book, Green shared life-changing lessons based on hundreds of hours of interviews that he conducted over twenty-five years with different well-known investors. I have had this book on my “to read” list for a long time and I am glad I finally borrowed it from the library and finished reading it. 

Having read many investing-related books in the last 15 years or so, I found this one a very interesting read with many concepts and insights not just about investing but also about life and wisdom that I – or indeed, anyone –  can apply along our financial independence journey.

Here are some of my key learnings from “Richer, Wiser, Happier.”

Be in alignment with who you are; don’t do what you don’t want to do or what’s not right for you 

Just because everyone is buying and everyone says and thinks there is a can’t-miss opportunity, it doesn’t mean you should jump in, too. Similarly, just because everyone is buying expensive watches, going on luxurious vacations, it doesn’t mean you should jump on those bandwagons too.

If things don’t align with your values and don’t feel right for you, simply don’t do it. 

Thanks to social media like Facebook, X, and TikTok, it is easy to just blindly follow the crowd. However, it’s a good idea to take a step back and make sure whatever decision you make is in alignment with who you are and your own values. 

Live by an inner scorecard; don’t worry about what others think of you; don’t be defined by external validation

We can’t control how other people think, so why worry about what they think of us? 

There’s no point wasting energy and time worrying about how others think of us and therefore there’s no point trying to pretend you are someone else and trying to impress others.

Stop worrying about what others think of you and lift the heavy weight off your shoulders. We don’t need external validations; seek internal validation and contentment instead.  

When it comes to investing, it means you don’t have to follow the herd (see previous point). For example, a few years ago, many people were buying ARK Investing ETFs and stocks like Tesla. If you don’t, others may label you as “stupid.” Or another example would be that many dividend investors are buying high-yield ETFs like one of the Yieldmax ETFs to boost their dividend income. Those who don’t follow the trend are cast as outliers and labelled as “can’t keep up with the new trend.” But ask yourself, does this make sense? Do you need to be validated by others? 

As Warren Buffett puts it: “Would I rather be the worst lover in the world and be known publicly as the best, or the best lover in the world and be known publicly as the worst?” 

Should we care how the world views us? 

The willingness to be lonely

The above sub-heading is not meant in the sense of being a complete loner and isolating yourself from the world. Rather, the idea is that the best investors in the world see the world differently from the crowd. They are confident in their decisions and follow their own path. This is not just in the ways they invest but also the way they think and live. They have the courage of their convictions and don’t follow the crowd.

Financial independence retire early is unconventional. Home schooling is unconventional. We have been on both unconventional paths since 2011 and that’s totally fine. 

Beware of emotion

I have written many times on this blog that emotion is not your amigo when it comes to investing and psychology is extremely important in investing. Because making emotional decisions without careful consideration can result in costly mistakes. 

As Sir John Templeton stated, “Most people get led astray by emotions in investing. They get led astray by being excessively careless and optimistic when they have big profits, and by getting excessively pessimistic and too cautious when they have big losses.”

This was exactly what happened during the tariff chaos in late March and early April this year (and this pattern may repeat). Many people exited the market due to emotion, only to find out that it was the worst time to sell and sit on cash.

Investing is the art of waiting for the right time when your odds of making money are higher than that of losing it

There’s no way that all of your stock picks are going to be winners. In the investing journey, you will have winners and losers – even the great Warren Buffett and Charlie Munger made their share of mistakes. But the key is to have more winners than losers.

As investors, we need to understand and figure out how not to lose money first. When the probability of losing money is a lot less than the probability of making money, that’s the right time to invest your hard-earned money. Now, there’s probably no way you can time it perfectly, so it’s important to take advantage of the power of dollar cost averaging and invest new capital regularly. 

For example, take the market drop in early April, your odds of making money would certainly be higher if you had deployed some cash between April 3rd and 8th. 

Instead of asking “Is it going to be wonderful?”, ask “Is this going to be a disaster?”

Too many of us only think about the upside of any investment opportunity. But not many of us think about the downside of the investment opportunity. Rather than focus on the upside and how wonderful the investment is going to be, ask yourself, what if this investment is going to be a disaster? How can you mitigate it? 

More importantly, can you live with it if the investment turned out to be a complete disaster? Are you going to get yourself into trouble? 

Finding out what’s wrong and trying to avoid it is different from finding out what’s good and trying to get it. Examining the potential messes and trying to avoid them will keep you out of a lot of problems. 

You can’t predict or control the future 

Howard Marks, the founder and co-chairman of Oaktree Capital Management, believes the future is influenced by an almost infinite number of factors, and so much randomness is involved that it’s impossible to predict future events with any consistency and/or accuracy. And since you can’t predict the future, it is therefore not possible to control it either. 

Rather than seeing this as a limitation, it’s actually an advantage to acknowledge our limitations and operate within the boundaries of what’s possible. Use our weakness as a strength.

Therefore, there’s no point in forecasting the interest rate, the unemployment rate, or the pace of economic growth. More importantly, there’s no way for us to predict market lows and market highs, so timing the market is simply impossible. 

Make your mistake nonfatal

As mentioned, as investors, we all will make mistakes. I certainly have had my share of mistakes. It’s OK to make mistakes but what many people don’t realize is that it’s critical to ensure the mistakes are nonfatal. And also that you learn from them.

What do I mean by that? 

Ensure that if a mistake happens, it doesn’t wipe out your portfolio. More importantly, if there are multiple mistakes that happen at the same time, ensure they do not compound and completely wipe you out. 

Build your portfolio to last!

Never use leverage

When it comes to investing in the stock market, leverage is a double-edged sword. Leverage is great when things are going well but it’s terrible when things aren’t going well. 

For that reason, invest with only the money you have. Don’t borrow money to invest; borrowing money to invest is highly likely to ensure you will lose more than you can make. Similarly, don’t use leveraged investment products. 

It’s critical to always keep enough cash in reserve so we aren’t forced to sell stocks or any other assets in a downturn. 

Don’t operate like a heat-seeking missile if your goal is resilient wealth creation

In the last ten years, we’ve seen those “hot stocks” or “hot sectors.”

• Cannabis stocks/ETFs
• ARK ETFs 
• Social media stocks
• Electric car stocks

When you invest in these stocks or sectors of the moment and make fashionable bets, what you’re essentially doing is bumping up the valuation even higher. You’re simply buying on momentum and not on fundamentals. The widespread expectations (whether they’re realistic or unrealistic) will only lead to inflated prices and reduce the margin of safety for investors. 

Build wealth slowly. It’s not a sprint; it most definitely is a marathon. 

The importance of having a long term investment strategy

Having an investment strategy is great but it’s critical to have a simple and consistent investment strategy for the long term. 

The strategy needs to work well over time. It needs to be simple enough for you to understand it  and you need to strongly believe in it so you will adhere to it faithfully through good times and bad. 

Essentially, build wealth with a long-term investment strategy. Don’t just go back and forth between different strategies; you will get burned by doing that. The same logic can be applied for health and well-being too – don’t chase the fads, stick to a nutritious eating regimen and an exercise program that you can maintain over the long term.

Buy good businesses cheap

It’s great to buy stocks cheap, but it’s even better to buy good businesses cheaply. Buying good businesses at bargain prices will give you the best bang for your buck. And remember, stocks will follow earnings. 

What does that mean? 

The stock price is eventually going to follow the earnings. If earnings continue to grow, the stock price will eventually grow too. But if the stock price keeps climbing but earnings decline, the price will eventually tumble. That’s buy great businesses have many common characteristics: clean balance sheets, growing EPS, increasing cash flow/.revenue/dividend, management with integrity.

Stocks are ownership shares of businesses, which must be valued. In the long run, the market is rational and will (more or less) reflect the fair value of these businesses. 

Valuation matters over the long term! 

Delay gratification

In today’s society, it is easy to get what you desire – food, entertainment, information, things, etc. Instant gratification is the game. It is more and more difficult to delay gratification. Furthermore, we are constantly bombarded by emails, text messages, social media posts, DMs, and phone notifications. We can easily check the latest news and the stock market performance with our mobile phones or computers. 

In essence, the world is increasingly geared toward short-termish and instant gratification. We no longer have the patience to hold investments for the long term. 

As you can see from the chart below, the average holding period for an individual stock in the US went from five years in the 1970s to less than 10 months.

In fact, in recent studies, the average stock holding period has dropped to 5.5 months! The shorter and shorter holding period is probably a result, in part, of all the free commission trades available from discount brokers, which encourages people to buy and sell quickly.

Anyway, the short holding period certainly doesn’t allow for enough time for multi-baggers to materialize! Take one of the first stocks we bought, ING (now called Intact Financial). We bought the shares at $49 around 2008 and it almost crossed $300 this year, a six-bagger! If we didn’t hold this stock for as long as we have and collected dividends along the way, we would have never gotten this kind of result. As I said before, you want to buy quality business at reasonable prices. Further to that, the very best stocks are ‘compounders’ – ones that will grow exponentially over time for a number of reasons:  their quality, their innovation, their management, their moat, etc.

As Howard Marks mentioned in the book, “Our performance doesn’t come from what we buy or sell. It comes from what we hold. So the main activity is holding, not buying and selling.”

What a powerful statement! 

 In other words, often in investing, the optimal action is no action.

Admit your mistakes 

We have a tendency to hide our mistakes from the public and only boast about our successes. Through interviews, Green believes that we should be more transparent with our mistakes and review them (Charlie Munger strongly emphasized this point). 

Why? 

We tend to actually improve and perform better when we look at our mistakes out in the open rather than burying them and pretending we didn’t do anything wrong. By examining and reviewing our mistakes, it is less likely that we will repeat them.

Knowing what matters more in life

The overarching theme of the book, after interviewing all the legendary investors is this –  Don’t get seduced by the fantasy that you’d become happier if you could amass more money, more houses, more cars, more everything. Rather, friendship, family, and time spent with people you love are far more important. 

How to live a rich and rewarding life? Focus on family, friendship, life-time learning, and useful work to improve your community. 

I’ll end this post with a Charlie Munger quote from the book that I really enjoyed. I read the quote multiple times and reflected on it for a long time:

If you’re going to be in this game for the long haul, which is the way to do, you better be able to handle a fifty percent decline without fussing too much about it. And so my lesson to all of you is, conduct your life so that you can handle the fifty percent decline with aplomb and grace. Don’t try to avoid it. It will come. In fact, I would say if it doesn’t come, you’re not being aggressive enough.

If you haven’t read “Richer, Wiser, Happier,” I’d highly recommend reading it!