Being a Purpose-Based Investor: A Strategy for Modern Times
Often, what’s on my mind or heart connects to my purpose of building wealth. Today, I want to discuss why you should consider a purpose-based investment strategy rather than just a goals-based one. Given the world’s current changes, this approach offers both risks and opportunities. Getting on the right side of what’s happening depends on your strategy—whether it’s goals-based or purpose-based.
Before we get into that though, I’d like you to consider doing a basic level of due diligence around anyone you follow online. This is especially true when it comes to health, parenting, and wealth matters.
For the record, I started work at the age of 12, working as a dishwasher for $1.50/hour. I learnt early on that if I wanted something, I had to work for it. Later on I started a business that helped fund my way through university. In the end I was making more money than all my friends who already found work after their studies. I couldn’t get a job after I sold that business but once I started my current [financial advice] practice, I used the net proceeds of the business sale to cover the 5% deposit required to purchase our first home. I’m a property investor, I invest in managed funds, crypto, and shares too. I believe in hard work, creativity, and personal responsibility.
I believe I’ve been put on earth for a purpose, and that’s to build wealth. I do that by giving away as much content as I can on social media and through the Everyday Investor podcast, and one on one with the clients I deal with.
I’ve found my purpose which helps me to adapt easier I believe, to a changing world.
Understanding Goals-Based Investment
As a default strategy that most of us should master at some stage, a goals-based investment strategy should build on specific objectives, such as when you plan to stop working because you need to and continue working because you want to.
When may also refer to smaller things like – when I get my personal finance sorted, I’ll start investing.
How may refer to – ‘how long’ should I invest for, to get the results I’m after. Generally speaking longer timeframes, return bigger results.
How may also refer to how your collection of investments (your portfolio) is structured. Example: No more than 50% of your wealth is in property, 10% in crypto, 10% in shares and the remainder in managed funds etc.
What, could represent the numbers. What’s the amount you should be investing right now, and what does that number look like in the end?
The issue with a goal-based approach, is that it often traps us in our intellect.
Shifting to a Purpose-Based Investment
A purpose-based investment strategy is more connected to your heart than your mind. Instead of asking when, how, and what, you ask why.
Why are you here?
What sparks joy?
Purpose goes beyond ‘performance’ and ‘return’ and it even beyond nice things like travel, helping the kids into their first home, and even financial freedom!
Purpose is about cause, mission, or reason for living. It’s what you work on, after you’re ‘all sorted’.
Not only does a purpose-based approach rise above the goals you set, it helps you become better prepared in an uncertain world. When you’re objective isn’t simply to make ‘number go up’, you have far more freedom to define wealth according to deeper reasons.
The Context of Change
Recently, I watched a documentary on World War II submarines, showcasing how our ancestors perfected a technology that benefits us even today. We often marvel at our ‘digital tech’, but the base layer it all still rests on came from over 4 generations ago!
As a sidebar, consider the cycle of complacency, angst, war, then renewal. Assuming we’re at late stage angst and starting into the war phase, what comes next is what we should be mindful of. War unleashes all kinds of horror, but throughout, and afterwards, the ‘spoils of war’ present an opportunity we should be preparing for.
There’s risk with goals-based investment strategies because they rely on past trends continuing into the future. Assuming that property and equity markets double every 7-10 years works great for goals-based strategies for example, but what if the world changes? A purpose-based investor thinks beyond that, and considers where they wish to make an impact.
Still not convinced?
The Petrodollar Shift
From the early 70’s to now, the petrodollar agreement significantly influenced global economics. Recently, there was a buzz about the end of this arrangement between Saudi Arabia and the US. This story evolved into a nuanced understanding that the petrodollar system’s importance is waning, as oil can now be traded in multiple currencies.
The petrodollar agreement was a great example of both sides being better, off without an apparent loser. While significant however, it was never a formal treaty—just a practical solution to a complex problem. This agreement may be coming to an end, but it’s not correct to state the end will arrive abruptly. The US has demand for the USD not exclusively because oil is priced in it, but because of the USD denominated debt issued to foreign nations. Today, with the US producing and selling more oil, the petrodollar market doesn’t hold the same weight it once did. Further, actors including the IMF, and considering the magnitude of the Eurodollar market as well, there’s more than enough demand for US dollars outside of oil. The end of the petrodollar era hasn’t just happened and isn’t catastrophic, but it is a sign of changing global dynamics.
Linking Back to Purpose-Based Investment
My belief is that the current changes present opportunities for both loss and gain. If demand for US treasuries falls, we might face higher interest rates or even a collapse of the debt-based, fiat financial system. That’s extreme though and shouldn’t be one’s base case – just a probability. When there’s any risk of the actual dollars used to denominate your investments collapsing, using a goals-based, ‘number go up’ strategy can be dangerous. A Purpose-based strategy will optimise for whatever wealth is defined as in the future.
Bringing it home
One of the most crucial investments any parent can make is in their children. In our family, our kids have daily chores and earn money by working on tasks like cleaning cars and gardening. They allocate their earnings into spending, saving, investing, and giving. The get paid when they do stuff and the stuff they do, is all about preparing them for the world to come.
Recently, I involved my boys in converting a disused water tank into a mobile chicken house. This project taught them practical skills like angle-grinding, pre-drilling, and using tools that could cut them real bad! While I had to bribe them with donuts, we completed the project together – they learnt stuff that may help them to succeed, should the world become more analogue in some way. At the very least, I’m working on transferring my skills (although not high in the area of building!) to the next generation. This investment in my kids prepares them for success – no matter what the future holds.
Summary
If you don’t have a purpose-based investment strategy yet, start with your kids. Teaching them how to work and be self-sufficient is crucial. Don’t have kids? Try to get involved with some others (not in a creepy way though please!). If the world shifts from being capital-based to labour-based, investing in your children’s ability to adapt and thrive is the best investment you can make.
True intergenerational wealth transmits resilient and adaptability as base layers to the next generation.
