How To Own The World
Back in twenty thirteen I attended the launch of the first edition of the book in the wood panelled surroundings of the Churchill Room at Dartmouth House in Mayfair. A year later I’d hold my first Wealth summit in that very room, but by twenty fourteen we’d outgrown it and moved round the corner to Harry Selfridge’s old pad – the Lansdowne Club.
One of the day’s highest rated speakers was Andrew Craig, with a long queue forming for signed copies of his book. Soon after he asked me to become chairman* of his company, Plain English Finance, and later this year we’re launching an investment fund that implements the core strategy described in How To Own The World.
Just like Rich Dad, Poor Dad, the power of this book lies in its simplicity. In essence, the message is that there’s always something doing well somewhere in the world, so if you diversify your portfolio to own as many different assets in as many different countries and currencies as possible you’re bound to benefit from growth wherever it happens. It’s a refinement of an idea that’s been around since the nineteen seventies, when Harry Brown launched his Permanent Portfolio. He put twenty five per cent in shares, twenty five per cent in government bonds, twenty five per cent in cash and twenty five per cent in gold. Each year he would rebalance the portfolio by selling what had gone up the most and buying more of what had gone down until the four parts were equal again.
Sounds simple enough? Well, the results beat most other strategies hands down, especially when you look at consistent returns over a long period. And when you compound returns in the nine, ten, eleven per cent range over a decade or two the results become completely life changing. Andrew’s strategy has been back tested by two business school professors in London over the last twenty five years and would have delivered just over ten per cent a year throughout that period.
If you’re holding cash in the bank or an ISA and getting one or two per cent on it, you are losing out big time. Today, we have way more resources available to us than Harry had, with products like exchange traded funds or ETFs providing low cost access to any type of asset, market or index at the click of a mouse. In the UK we have tax free wrappers like ISAs where you will soon be able to shelter twenty thousand pounds a year and SIPPs where you can shelter forty thousand a year. Not many people can save more than that anyway.
The essence of Andy’s book is that today there are no excuses. The investment vehicles are there. The tax wrappers are there. All you need is the discipline of automatic saving. If you take the current tax free ISA limit of fifteen thousand each, a married couple can save thirty thousand a year. Assuming a ten per cent average return, by the end of a decade you’d have almost half a million pounds tax free. After another decade it would be one point seven million pounds.
So if you do nothing else other than save regularly into an ISA and choose well diversified funds giving access to global growth, you will be set up for life within twenty years. Those of you in your forties worrying that you’ve left it too late to start should take great heart from this. You don’t have to join the mediocre majority reaching retirement with thirty thousand in their pension pot. Nor should you rely on the government to be able to bail you out, as Andrew reminds us in How to Own The World.
The ultimate goal at Elite Investor Club is for members to achieve financial independence so they can live life on their terms and not have to rely on an employer or a government to do so. How to Own the World by Andrew Craig has become required reading for our members and I suggest it goes to the top of your own must read list. The book has been heavily revised this year and Andy has created some tutorial videos at the plainenglishfinance.com website to help you not only put the basics of automatic wealth in place but also to take things further and become a more active manager of your investment funds if you fancy getting more involved.
The fact you’re watching this means you’re probably a sophisticated or high net worth investor already. But please don’t think you have nothing to learn from this book. When I look back on my own investment track record I’d be hard pushed to match the results of this simple diversification strategy. Use it as the bedrock of your portfolio then experiment with more exotic stuff knowing that you’ll be compounding double digit returns year on year with a big chunk of your net worth. Thanks for watching.
- Please note I am no longer chairman of Plain English Finance Limited but, in the interests of full disclosure, I have a small shareholding in the company