Investing 1.0.1 with Purpose: Taking the Mystery out of Investing

By Jack Sutherland

Investing 1.0.1 with Purpose is the little book that can make a big difference in your financial future.

Funding a 401(k) and IRAs is the single most important thing you can do to prepare for retirement. However, it will not be enough.

Around 1993, Crosby, Stills & Nash—the vocal folk, rock group—produced a hit song called “Teach Your Children,” which was about life, the power of influence, and moral behavior. They highlighted the need for having acceptable standards of conduct known as a code of the road. “You who are on the road must have a code that you can live by / And so become yourself / Because the past is just a goodbye. / Teach your children well.”

In your career and in your day-to-day living activities, we all need a code of the road. This book offers new perspectives and ideas about investing for purpose to build wealth for the future. This book offers a series of coaching tips, specific examples, and a code of the road to help you achieve your long-term financial goals. I hope you will make Investing 1.0.1 with Purpose your code of the road in taking the mystery out of investing.

To save is not enough! The management of money may be as important as the earning of it. Learn to control your financial future through proven money-management techniques and avoid being controlled by life’s constantly changing circumstances.

It is time to put your money where your mouth is if you believe in the future, long-term growth of the economy in the USA as well as globally. The stock market is one of the best ways to participate in this future growth. Future rates of return are unpredictable, but aging is guaranteed.

Humans are the only species that can shape our own financial future. Get started by putting together a plan for the future you want. Taking action to control your future through wealth building is so much more rewarding than being controlled by life’s rise and fall of unrelated events. Our best years are still ahead of us!

• Language: English
• Publisher: iUniverse
• Release date: Sep 22, 2018
• ISBN: 9781532057021

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Copyright © 2018 Jack Sutherland.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

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Any people depicted in stock imagery provided by Getty Images are models, and such images are being used for illustrative purposes only.

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ISBN: 978-1-5320-5701-4 (sc)

ISBN: 978-1-5320-5702-1 (e)

Library of Congress Control Number: 2018911234

iUniverse rev. date: 09/21/2018

CONTENTS

The Great Seduction

Introduction

PART I: BACKGROUND

Chapter 1 Fear of Investing

Chapter 2 Legend of the Gordian Knot

Chapter 3 Why Invest

Chapter 4 Choices

PART II: FUNDAMENTALS

Chapter 5 Priorities

Chapter 6 Debt Anchor

Chapter 7 Money Buckets

Chapter 8 Investment Strategy Overload

PART III: SOLVING LIFE’S BIGGEST FINANCIAL PROBLEMS

Chapter 9 Simplify – Simplify – Simplify

Chapter 10 Solve the Retirement Conundrum

Chapter 11 Avoid Common Investment Mistakes

Chapter 12 The Long View

PART IV: NO MORE FINANCIAL WORRIES

Chapter 13 Financial Advisors

Chapter 14 W-I-I-F-M

Chapter 15 The Power of Ideas

Chapter 16 Recipe for Success

Resource List

Glossary

Notes

About the Author

Investing 1.0.1 With Purpose

is

Dedicated to

Our son

Mark

For his insightful questions about

how to make long-term investment decisions.

THE GREAT SEDUCTION

¹

The people who created this country built a moral structure around money. The Puritan legacy inhibited luxury and self-indulgence. Benjamin Franklin spread a practical gospel that emphasized hard work, temperance, and frugality. Millions of parents, preachers, newspaper editors, and teachers expounded the message. The result was quite remarkable.

The United States has been an affluent nation since its founding. But the country was, by and large, not corrupted by wealth. For centuries, it remained industrious, ambitious, and frugal.

Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. The country’s moral guardians are forever looking for decadence out of Hollywood and reality TV. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.

                                                                        David Brooks

                                                                        THE NEW YORK TIMES

                                                                        June 10, 2008

INTRODUCTION

Congratulations on acquiring your personal copy of Investing 1.0.1 with Purpose! Statistically, you belong to a relatively small group of individuals who either want to get started investing or who want to improve on their existing poor investment discipline and performance. You are looking for some new perspectives and ideas by reading this book. To be a successful investor, it starts with taking the mystery out of investing.

My entire career has involved working in finance. As a banker, I worked with small businesses and their owner families in helping them achieve their financial goals. This work included structuring loans to provide acquisition capital or construction loans to expand the business or working capital lines of credit for everyday business cash flow needs. It usually involved getting the owner families to work with our banks’ wealth management team to assist them in succession planning, retirement and estate planning and employee benefit plan design. My lifetime of financial experience, combined with my Masters of Business Administration (MBA), private business ownership and personal retirement planning development can benefit everyday investors by bringing a unique focus to the strategies outlined in this book. I can assist you in achieving a secure retirement plan.

In some of my presentations I ask people when was the last time they read a book about investing and if they can remember the title? Fewer than 20 percent usually respond affirmatively to both questions. You are a unique individual by having taken the initiative to pursue some of the action steps necessary to create success in investing. You are a member of the elite, top one-fifth, twentieth percent (20%), of individual investors!

The American dream of owning a home, being financially capable of sending your children to college and retiring with a comfortable lifestyle are at risk. This risk has been magnified by the dramatic paradigm shift of who is responsible for your personal retirement plan. The days of your employer providing a fully funded pension plan that gave assurances of a lifetime income are a relic of the past for most Americans. Company provided 401(k) plans (called defined contribution plans) have replaced those defined benefit pension plans of old. Each individual has now assumed the responsibility for his or her own retirement plans. Ignoring this reality will create a looming retirement crisis.

Yes, the model is broken! The days of attending college or trade school, graduating and finding a full time job (remember the rise of the new gig economy) that provides a pension benefit at retirement are gone forever. This is why you are the only person accountable and responsible for your retirement planning.

I introduce a concept called financial wellness, as one way to better prepare individuals for one of the largest financial challenges they will face as adults. Financial wellness is more than financial literacy. It encompasses financial literacy as well as the need for learning other basic financial skills about how to manage money, fund emergency savings accounts, develop and follow budgets and reducing debt. I believe attending financial education seminars is a good use of your time. Providing for your retirement should also be an important topic of these financial wellness seminars. Financial wellness should become a lifelong pursuit.

American workers have shown they can carry life’s stresses into the workplace. These various stress levels may affect productivity, ability to maintain focus on critical and time sensitive issues, as well as an employee’s ultimate willingness to retire when offered a buyout package or when normal retirement age occurs.

Both mental and physical health may be affected by money worries. Seek financial wellness as an antidote to these stresses and worries. Some financial wellness instruction may include other topics than those mentioned above. The important thing is to access this training either through your employer or on your own. This is very important for your future.

Investing 1.0.1 with Purpose is a content-rich message of hope for the future. It is a compilation of proven, understandable and workable investing strategies for the everyday investor. These strategies can assist you along the journey toward becoming a believer in, as well as a motivated prophet of, the value of long term investing. I will highlight a low risk investment strategy that may help you achieve many of your personal investment goals. In today’s changed workplace, managing money may be as important as earning it. Make today the day you begin to take charge of your financial future.

In addition to offering a sensible framework to increase the probability of achieving investment success, this book outlines tested investment approaches that can help reduce the personal stress level often encountered by first time, non-seasoned investors. Investing 1.0.1 with Purpose has encompassed and transcended both goals, almost beyond definition.

Over the course of your working years, building wealth to achieve long-term goals can be segmented into three phases. Phase I is basic savings and investing. Phase II involves being able to hold on to these investments while competing interests from self gratification purchases pummel you on a regular basis. Finally, Phase III is the retirement phase when you will need to develop a plan for spending wisely to make your nest egg last. This is all about managing your withdrawal rate and other major expenditures. Most of us need assistance to perform well in all three phases of wealth building.

With baby boomers now swelling the ranks of the retired, or soon to be retired, the market for financial advice is booming. Do you need to pay for this advice or is it possible for everyday investors to develop an individual plan on their own for a secure retirement? I will help you answer these questions.

I have formatted this book in four easy to read sections. Part I shares the background you need to prepare for some changes you will need to make to move forward with this life changing activity. Part II covers the fundamentals of successful investing. Part III will help you overcome some of the major obstacles standing between you and committing to long term investing. Finally, Part IV showcases some of the lifelong benefits you can expect from having implemented these investment strategies.

Like many readers, some early mistakes and misguided ideas about the process of building wealth for the future may be the cause of your deferred action on the idea of getting started in providing for your retirement. It is never too late to recover from prior, financial setbacks!

I am attempting to change human behavior. It is a difficult task and efforts to modify behavior always run the risk of failure. The powerful human trait of inertia remains one of the most influential forces in financial decision-making. Inertia holds you back from moving forward. Break the restraints of inertia! If you are willing to work, spend time learning about a few investment strategies, mold them to your unique circumstances while maintaining financial discipline, this can be your lifelong financial guidebook to achieving financial independence.

My over riding principle in writing Investing 1.0.1 with Purpose is based on following the basic rules of commonsense. One of the key factors in getting everyday investors to save more for retirement and other financial goals is to make the process as easy as possible. More than half of American workers may not have enough in retirement savings to maintain their standard of living later in life, according to an estimate from the Center for Retirement Research at Boston College. This needs to change.

The best time to get started is now. Investing 1.0.1 with Purpose was written for you.

The only person you can trust to secure a well-funded retirement plan is yourself. No one really cares if you fail at retirement but you will be delighted with your success.

As Americans, we all enjoy many freedoms that come with our citizenship. The ability to enjoy freedom of choice can be both a burden and a blessing. It forces us to take responsibility for our individual actions. We have no one else to blame for our inaction. The choice is yours!

I hope, as an everyday investor, you do not fall victim to the statement I wish I had read this book earlier in my career. You can avoid this result for others by reading Investing1.0.1 with Purpose now and using it as a call to action on how to improve on building wealth for the future. After you have read this book, pass it along to someone who might benefit from the same advice.

You may be curious why the title of this book includes the numbers 1.0.1. These numbers are used for a very specific reason. Just like many software updates and upgrades use a similar numbering system, Investing 1.0.1 with Purpose represents a major upgrade to each everyday investors approach to building wealth for the future. Within Investing 1.0.1 with Purpose, each number delineated by a period represents a single, separate component of a plan to achieve your various pre-determined investment purposes. A focus on long-term investing, low costs and a broad, diversified portfolio will ultimately be the keys to your success.

Advice is one of those things that is easier to give than to receive. If you can accept the basic concept that you are openly seeking help in understanding and improving your investment returns, then the essence of the advice within this book will have been received. I hope you will refer to these recommendations often as you travel the road of taking the mystery out of investing.

"The investor’s chief problem –

and even his worst enemy –

is likely to be himself."

Benjamin Graham

The Father of Value Investing

PART I

BACKGROUND

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CHAPTER 1

FEAR OF INVESTING

Some 30 years ago, my friend, I will call her Maria, asked my financial advice about starting a retirement plan. I introduced her to several investment concepts and recommended she begin her initial stock market experience with a few conservative investment selections. After our first consultation, Maria told