Amassing great wealth requires having a great understanding of what financial principles work. Brian Portnoy shows us a blueprint on the geometry of wealth. This gives us an insight into the easiest ways to build lasting wealth.
I’ve read a lot of personal finance books, and I’ve noticed that most of them focus on one specific aspect of personal finance. Some are based on historical events, while others are based on a successful investor such as Warren Buffett or a key financial concept such as value investing.
However, most finance books can be divided into three categories: investing (technical), behavior (emotional), and planning (coaching).
Investing encompasses everything from strategy to specific investments, while behavior examines human flaws and the psychology of money, and planning lays out the framework for achieving a financial goal.
This gives us an insight into the easiest ways to build lasting wealth.
Let’s get started on this journey.
The Geometry of Wealth: A look into the theory of wealth creation
There are three paths to making skilled investment decisions beneath the expansive sky of behavior, on the broad terrain of traditional finance: choosing the right markets, choosing the right components within those markets, and choosing the right times to enter and exit those markets. Asset allocation, security selection, and market timing are the more technical terms for these.
Allow me to quickly dismiss the third point by emphasizing that market timing is impossible. Period. Correctly guessing whether markets will move higher or lower on occasion is not a sign of market timing ability. There are a few professional traders or speculators who can make good tactical buy and sell decisions at the very least. That’s not the game individual investors or financial advisors are playing or should be playing. Market timing is a fool’s errand beyond that qualifier.
That leaves two more ways to invest wisely: properly allocating assets and picking individual securities. The importance of asset allocation is primarily due to one factor: dispersion. This statistical concept examines how much leeway one has when making a decision of any kind. It is defined as the degree of differentiation between the various options on a menu. When a large number of options are available, it is possible to use skill to select the “best” option. That opportunity is limited because there are fewer options.
A food court at an airport or a local mall can teach you about asset allocation and security selection in an unusual but effective way. McDonald’s, Burrito Beach, Dunkin’ Donuts, Reggio’s Pizza, O’Brien’s, Manchu Wok, B-Smooth Smoothies, Prairie Tap, and Tortas Frontera are among the restaurants in the Terminal 3 food court where I frequently travel. The focus of these nine restaurants varies greatly: burgers, Chinese, Mexican, pizza, deli sandwiches, salads, and so on.
What is the Geometry of Wealth and who is it for?
The Geometry of Wealth is a financial and investment written and launched in 2018 by Brian Portnoy. The book uses three strategies to teach you how to make money and have it work for you.
The first is adaptation. The second is prioritization. The third is simplification.
Basically, It’s simple enough for children to understand while also being sophisticated enough for professional investors.
It’s a book for those who are interested in investment books that blend psychology, neurology, and behavior to provide useful investment analysis as well as personal inspiration into money and behavior. Anyone interested in learning more about how money affects their emotions.
What is the Key Investment Insight of the Geometry of Wealth?
The stock market’s list of winners is extremely short. In fact, only 4% of companies explain the net gain for the entire US stock market over a 90-year period.
What Are The Surprising Factors in this book?
This book is incredibly philosophical, with contributions from De La Soul, Dufresne, Dostoevsky, Marx, Marks, Munger, and many others. Portnoy demonstrates how addressing the big questions about living a happy life and making financial decisions are complementary, not mutually exclusive tasks.
Some Important Quotes:
1. “It’s all about beating the market.” That is a pointless and futile game. It has nothing to do with your actual requirements. It’s bound up with your ego.”
2. “Most people consider their life experiences to be more self-defining. What we ‘do’ is more closely related to who we are than what we possess.”
3. “At best, the long-term picture is hazy. It may or may not exist in practice. “All we have is an infinite series of short terms stapled together by circumstance and choice,” says the author.
Why Do We Appreciate this Book?
It’s a thought-provoking book that asks the reader to consider and feel about the role of wealth in one’s own sense of self-worth. Portnoy accomplishes this by explaining behavioral economics and biases in a step-by-step system that the average person can grasp. He also provides strategies for overcoming these biases.
Are There Any Key Ideas?
Yes, he uses geometrical motifs to explain his theories and concepts throughout the book. The Circle, for example, connects money and happiness; the Triangle, for prioritizing money; and the Square, for demonstrating that simple is better, but not easy.
Key Concept: Portnoy challenges us to think about wealth in terms of “fundamental contentment,” which is unique to each person’s circumstances, wants, and desires. It answers the question, “How do you strike a balance between striving for more while being content with enough?” in a nutshell.
Pragmatic Takeaway: Portnoy demonstrates how to think about what matters in life, how to set priorities, make meaningful decisions, think in probabilities, and strike a balance between more and enough. “What are the touchstones of a meaningful life, and are they affordable?” it encourages us to ask.
The author concludes The Geometry Of Wealth with a nice cocktail party summary:
Is it true that money can buy happiness? The distinction between being wealthy and being rich is crucial to the answer to this age-old question. The quest for more money is one thing, but funded contentment is another. The quest for more is an unsatisfying treadmill, according to both modern neuroscience and ancient philosophy.
Meanwhile, anyone with the right mindset and the right plan can underwrite a meaningful life.
The Geometry of Wealth outlines three steps to accomplishing this, focusing on adaptation, prioritization, and simplification: flexibility in defining one’s purpose, employing the strategy, and concentrating on the decision.
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