How to Protect Your Money from the Whims of Central Bankers

So how do you go about managing wealth in a world pushed and pulled by the whims of central bankers? And how do you ensure the fruits of your labour pass successfully from one generation to the next?

It’s a topic that consumes Vern Gowdie, our Family Wealth expert. The easy part, according to Vern, is the retaining of wealth. If you have enough now, he reckons, you don’t need to do anything stupid. You simply wait for the bear market (which he says is inevitable) to bring prices back down to reasonable levels before putting your capital to work again. (See Vern’s essay below, ‘Take Care to Never Follow the Herd’)

But the hard part is passing your money on in a way that is productive and beneficial for your children. In a discussion panel at the World War D conference, Vern was joined by Will Bonner, son of Bill Bonner, founder of The Daily Reckoning and Agora Financial. Bill has amassed significant wealth as his business has grown, and is very determined to pass not only his wealth on to his children, but to pass on the lessons of wealth creation too.

Will nominated two challenges for those building and managing ‘family wealth’. The first one is actually recognising it as a necessary project, rather than thinking it will just take care of itself. As Will said (we’re paraphrasing):

‘Wealth creators tend to be Alpha personalities. This personality type is at odds with diverting time from chasing profits to educating kids and building sound family wealth. In addition, it’s vital to show your kids that you are capable of mistakes — and that you are capable of learning from those mistakes…’

The biggest challenge though is instilling the drive in your children to make it on their own, despite the generational wealth that they know is on the way. Says Will:

‘You should structure your estate to make the next generation work for their wealth even if they do have certain financial benefits. You don’t want a Paris Hilton-type child who grows up with no respect for money. Studies show that people who inherit $150,000 or more tend to do worse in education, career, etc. In the back of their mind they think they don’t need to battle to achieve.’

There are very few successful family dynasties in history, which points to the difficulty of maintaining financial discipline through more than a couple of generations. The Rothschilds come to mind, but not many others.

You can read Vern’s essay about financial advice here.


Greg Canavan+
for Markets and Money

Join Markets and Money on Google+

Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money