In our last post, we looked at the foundational laws of money: spending less than you earn, insuring your risks, and respecting the erosive power of inflation.
These are the defensive structures of a good plan. But defence alone doesn’t build the life you want. You also need to move forward.
Today, we look at another three “unchangeable rules”, the principles that drive growth, manage uncertainty, and keep you sane in a crazy world.
- The only free lunch is diversification
We love certainty. We want to find the one investment that will make us rich. We want to bet on the winning horse. We want to know timelines and outcomes.
But the hard truth is that nobody knows what the future holds. Not us, not the economists, and certainly not the media. Acknowledging this isn’t a weakness; it is a strategy. Diversification is simply the humble admission that we don’t have a crystal ball.
By spreading your wealth across different asset classes (shares, bonds, property, cash) and different geographies, you lower your risk without necessarily lowering your expected return. It is the only “free lunch” in finance.
We don’t bet on the needle; we buy the haystack (famously associated with the philosophy of investor John Bogle, the founder of Vanguard Group).
- Patience as an asset class
In a time of instant gratification, patience feels like a passive trait. In investing, it is an aggressive superpower.
The most powerful variable in the compounding formula is not the rate of return; it is time.
Mediocre returns sustained for a long time will almost always beat excellent returns that are interrupted. The hardest work in investing is often doing nothing when your emotions are screaming at you to do something.
If you can extend your time horizon—if you can think in decades rather than months—you have an advantage that no algorithm can replicate. Compound interest is the eighth wonder of the world, but it requires the patience of a saint.
- The perfect plan does not exist
Finally, beware the lure of perfection.
We often see people paralysed, waiting for the perfect time to invest, or trying to craft the perfect portfolio. But life is not linear. You will change. Your goals will change. The economy will change.
A financial plan should not be treated like a static document filed away in a drawer. It aids us best when we view it as a living, breathing strategy. A “good enough” plan that you can stick to is infinitely better than a “perfect” plan that you abandon at the first sign of trouble.
These six guidelines—the gap, the floor, inflation, diversification, patience, and flexibility—are deeply valuable infrastructure to bring purpose and direction.
Sure, they aren’t exciting. They won’t make for good dinner party conversation. But they work.
If you respect these laws, you stop fighting the current and start swimming with it. You stop worrying about the things you can’t control (the markets) and start mastering the things you can (your behaviour).
Peace of mind isn’t found in predicting the future. It’s found in preparing for it.
