tshepisosishuba About Author
Warren Ingram is a South African businessman, author and holds a B.Soc Sc (Economics) and a postgraduate Diploma in Financial Planning Institute’s and he’s a CFP professional. Warren is an Executive Director of Galileo Capital and he has been in the private client financial services industry since 1996.
Warren Ingram is an award-winning financial planner and respected personal finance commentator in the media. He was the South African Financial Planning Institute’s Financial Planner of the Year in 2011 and won their media award in 2013. Warren is a regular guest on 702 Radio and Cape Talk’s The Money Show with Bruce Whitfield.
He is the author of How To Make Your First Million and Become Your Own Financial advisor. He is now back with a new read called Global Investing Made Easy.
Book
The book was released in 2021, it covers all the main aspects that a non-financial person should know before embarking on a global investment journey and will be helpful to investors across the globe. People of all ages and levels of wealth will benefit from the practical, easy-to-understand, jargon-free information required to invest in the international markets, proving that financial freedom is possible for everyone. The book is relatively short having around 163 pages only.
Warren wrote this book during the Covid-19 pandemic, he says the reasons for writing this book were inspired by how “Donald trump made bad decisions in the USA’s early handling of the pandemic and the European Parliament’s dallying in securing vaccines for the citizens of its member states”.
Plot
This book layout is the same as the one of How To Make Your First Million, so if you enjoyed it you will enjoy this one too.
Here is a breakdown of the book or should I say a summary of it:
Chapter 1 to 4
What is your dream and vision?
In order to achieve financial freedom you need to make sacrifices now in order to reap the rewards in the future. This is what we call delayed gratification. It can be hard and tempting to stay on course which is why you need to have a dream and a vision. This will help you put things into perspective.
People who achieve financial freedom have an even clearer picture than a dream. They would have a very clear vision of exactly what they want from their financial goals. In the book, Warren highlights how you can create your own vision. When creating a vision for yourself, you need to try to make it real, attainable and detailed as possible.
Try to picture where you want to live? What type of how do you want? How often do you want to travel and which places do you want to visit? What type of car do you want to drive? When do you want to be in a position where you no longer need to work for a living? Do you see yourself working once you reach your financial goal? Having this type clarity will help you with planning your portfolio especially in international markets.
Finding your passion
Having a strong vision for your future is a powerful motivator but you also need a suitable vehicle to get there. That vehicle is your job or career that earns the money to achieve your financial goals. You need a balance between passion, skill and earning potential. Working on your passion with poor earning potential is not going to achieve your dreams. Working in a job you hate is going to make life miserable and won’t deliver your best work. You need to find that sweet spot in between.
Instead of finding your passion rather find something that you are passionate about and that you are good at. You can find this by a process of elimination.
This sage advice came from none other than Charlie Munger. When asked by a young investor how he could find his passion for a career. Munger said that you should start by excluding those jobs for which you have no talent or natural ability. This narrows the options, from there select what interests you and then finally considering which of them will suit your strengths. If you consider earning potential then you have another filter to narrow the choice.
Financial Freedom
He highlights that people are living longer compared to 100 years ago. He emphasizes that the retirement age of 65 makes no sense anymore. People are living longer and they are much healthier at age 65 than our grandparents were. He continues to make an example that Warren Buffet and Charlie Munger, who ran Berkshire Hathaway continued to work till their 90s. What’s stopping you?
In order to achieve financial freedom you need to take care of certain things such as getting out of debt, having an emergency fund and build an income generating assets that will pay for your lifestyle. For you to achieve financial freedom you don’t need to have tons of millions of money. Financial freeom and being wealth is not the same.
Financial freedom is when your income exceed your expenses. Financial freedom does not happen by accident. It is the result of a well-thought-out and executed plan.
Chapter 5 to 8
Investing 101
“The key to good investment decisions is to focus on factors that you can control. A sound understanding of how investments work is a good start.”
The basics of investing starts with building a sound foundation. That means that you eliminate debt and have an emergency fund. Without these, you may have the best investment plan but it comes crashing down when you have to sell everything to pay off your debt or cover an emergency.
“There are many similarities between building financial freedom and building a house: if you do not build your house in the right order, it will eventually collapse”
When you start building your investment portfolio, it is worth following these steps:
Step 1: Define your investment objective.
Step 2: Establish how much you can put away each month.
Step 3: Decide what assets to buy.
Step 4: Get started.
Step 5: Keep going!
He continues to share the basics of investing and breaking them down for us in a langue we can understand.
In this section he explains the importance of diversifying your investments not only in different asset classes but in different geographies. He further talks about managing your risk appetite and h
Inflation, Risk and Asset mix
He shares ways you can have your investment beat inflation. Best way to make sure your investments grow is by ensuring you invest in asset that are proven to have outperformed inflation in the past. What’s the use of keeping your money in a savings account if it’s just going to lose it’s buying power. He illustrates that coffee in 1970 was worth $0.25 and in 2020 was about $1.79. That means $0.25 has no purchase value that’s what inflation does.
This is why people need to invest so that their money can keep up with inflation and have the opportunity to enjoy life.
In order to have a fruitful investment you need to know that in your investment career you will experience some loses. That is way you need to manage your risk. He goes into detail on which questions to ask yourself to ensure that your investment does not only beat inflation but minimize your loses. Do you have a lump sump on money and you want to invest? He share how you can do that. Instead of putting it all of it in the market he suggest you phase it in, in order to minimize your risk.
Investing locally and internationally
International Investing
As I mentioned earlier this book is about global investing made easy yet most of it is about “normal” investing. I hope you can understand why this is so. Global investing is just one aspect of investing and not something that stands alone or is done in isolation. It all needs to be part of a well-thought-out strategy and plan to achieve your investment objectives. By not understanding the big picture you are setting yourself up for making some bad investment decisions.
International investing is always important but especially so when you live in a small country. The strange thing is investors always prefer to invest in their own market rather than take a global view. This behavior is called home bias and is common in all countries. Consider that the total world stock market size is 95 trillion dollars, South Africa is 1 trillion dollars. So only investing in SA means you are only exposed to 1% of the market. Being in the US you will be exposed to about 50% of the world market, still a clear bias.
Global Diversification
The main reason for home bias is that we always tend to invest in what we know. This is a good thing but it is not good for diversification and spreading risk or maximising growth opportunities.
Some of the reasons you would want to invest in international markets are
- Avoid political risk
- Access industries not present in your home market eg big pharma not in SA
- Access markets that are different to your home market eg Japan vs US market correlation
- Access higher growth economic regions eg emerging markets
- Increase exposure to innovation
- Access markets with more favourable valuations
Some other factors to consider that could go either way
- Interest rate
- Currency risks
- Taxation
“Every investor should have a clear method for determining the ideal international proportion of their assets”
You will need to balance all these risks and consider how they will affect your portfolio over the long term. The worst thing to do is to let the short term volatility of these factors drive your decision. Instead you should have a proper plan and strategy.
Global Portfolio
So in the end international investing is another form of diversification. You would use the same asset classes like equities, bonds and property but they would be internationally based. You would need to consider the inherent risks and benefits of the asset classes and then the country or region risks and opportunities on top of that.
One of the best ways to do this is a Global World Market ETF. These ETFs cover the entire world so you get exactly the diversification you are looking for. The worldwide ETFs also have the biggest global companies in them. You don’t have to worry about knowing the dynamics of each country. You can buy these ETFs in your own country or via international brokers.
He share’s with us what his portfolio consists of. He had a significant portion of his portfolio in international investments. They were made up of MSCI World Index ETFs, emerging market ETFs and some global investment management companies.
Key lessons from the book:
- Have a dream and vision: create a stepladder to achieve your goals
- You don’t need a lot of money to achieve financial freedom
- Before investing, pay off your debts, build an emergency fund then have your assets pay for your lifestyle.
- Take advantage of the time, let compound interest do the work for you.
- Your portfolio needs to be diversified, locally and internationally and in different assets.
- Have a clear communication with your partner about your future plans
- ETFs are the way to go.
This book consists of 14 chapters and I only share with you what stood out for me. From chapter 9 to 14, he shares two scenarios of how to retire with enough money and how to build generational wealth. He also discuses the dynamics of owning property for yourself and creating wealth from it.
He continues to talk about discussing finances with your partner and how to handle your relationship with money.
Do you need some motivation? He shares some wisdom of those who have done it before you. And explains some finance jargons for you.`
My Thoughts
Warren did it again, he gave us a banger of a book. He opened my eyes to new possibilities. Things to take into consideration when investing globally. I like how he highlighted inheritance tax and how to maneuver it.
The book also shows the importance of not only investing for yourself but for your loved ones also. He breaks down each chapter and goes into detail on how to implement his suggestions.
I think this book appeals to every person that wants to take their investing to another level. Keeping all your investments in one country no longer makes senses to me. It’s time we started diversifying our investments globally.
This book gives you an insight of what to expect when you invest globally,
What I did not like about the book is that it is structured like his other book, How To Make your First Million. However, the information he provided in those chapters do apply to global investing. Once you have read the book all together everything will fall into place
This is a book that deserves a place on your bookshelf! I enjoyed it and I hope you will enjoy it to.
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Thank you for reading.
