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The Resilient Investor

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If you want to build a better life and a better world—and really be prepared for any possible future in these turbulent times—you need to become a resilient investor! This trailblazing guide will expand your ideas of investing way beyond Wall Street. Your time, your energy, and the things you own are investments too, and you'll learn to diversify them in ways that move you toward your life goals.

The Resilient Investment Map lays out all your assets—personal and physical as well as financial—and then provides three essential, timely strategies (Close to Home, Sustainable Global Economy, and Evolutionary Investing) that will help you grow each of them. The goal is to become more resilient: able to anticipate disturbance, rebuild as necessary, and improve when possible. You'll discover that the choices making you more resilient also enhance our communities, our economy, and the planet—building real wealth for all.

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14 Chapters

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Introduction: Standing Up to Uncertainty

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DOES THE CHALLENGE OF MAKING INFORMED DECISIONS ABOUT YOUR life seem far more complex today than it did even a short time ago? Does the future—your own and that of the world—feel highly uncertain, perhaps even precarious?

We can sense you there, nodding in agreement. We would also wager that you would love to have a crystal ball that could tell you how the future will unfold, enabling you to make prescient decisions as you glide through life. Indeed much of today’s media aims to quench that thirst for guidance, projecting a steady stream of “experts” onto our screens, each of whom is rife with insight to help us understand how things will unfold. And we lap it up, even though we have seen all too often how their predictions are mocked by the actual turn of events.

So we need to say right at the outset that you’ve just picked up a book that is not going to tell you what’s going to happen this year or next. It would certainly be much easier to market a book that reveals our “three smart money secrets”—everyone’s a winner! Once in a great while, those sorts of books guess right—but we cannot in good conscience make that pitch for one simple reason: the future has yet to be written. There are no simple formulas that can be relied on in this complex and unpredictable world.

 

Chapter 1: Facing the Future

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Why We Are Expanding Your View of Investing

WE HAVE LAID OUT A RADICAL NEW MAP OF THE INVESTING universe, and we are inviting you to navigate your own path across this vast terrain. But before we start exploring the nooks and crannies, let’s take a moment to ask the fundamental question: why invest?

Some would say this is obvious—we invest to build wealth. And what’s the point of building wealth? To be secure? To then build even more security and more wealth? Isn’t that what we all want? Well, no, at least not in the way it is usually presented. While we take it as a given that most people want to increase their financial assets (at least up to a point) and have some nice things, traditional measurements of personal wealth are inadequate, often ignoring that which gives us the most satisfaction. Economists measure our “standard of living,” but what we are really after is a higher “quality of life”—and while there is overlap, those two are not the same thing! The point of investing, we would suggest, is not just about having more but about being happy in a full, classical sense.

 

Chapter 2: More Than Money: Recognizing Your Real Net Worth

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Personal, Tangible, and Financial Assets

THE RESILIENT INVESTING MAP INVITES YOU TO INVEST IN YOUR LIFE in a way that recognizes and grows all of your assets. Indeed the goal of resilient investing is to consciously and methodically spread your time and money around the full RIM to nourish all the elements of your complete “net worth.” This will include prudence with your money (financial assets), appreciation of your possessions and the built and natural world (tangible assets), and nourishing your relationships and inner growth (personal assets). SEE FIGURE 2

It may feel a little strange to think of, say, the ways you prioritize activities that enhance your child’s well-being and the strategies you are using to manage a brokerage account as being parts of a unified investment system. We’re trained to think of these as very different kinds of decisions, but they are indeed related, as both are investments you make to bring about a desired result in the future.

 

Chapter 3: Weaning off Wall Street

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The Three Investment Strategies:
Close to Home, Sustainable Global Economy, and Evolutionary

AS WE TURN OUR FOCUS TOWARD THE COLUMNS OF THE RESILIENT Investing Map, it is time to recall our quick survey of the VUCA world—volatile, uncertain, complex, and ambiguous—in which we live. There’s an unfathomable intertwining of relationships that underlies the global economy and the physical world, making predictions virtually impossible. As financial advisors it has not been easy for us to overcome our desire for certainty about where the world is heading. But once we acknowledged that the world as it is may not be sitting on the most solid of foundations—and that our clients hold a range of views about our possible futures—it became essential to explore strategies that speak to both emerging innovations and local resilience.

Even a few years ago, such a multifaceted approach would have been impractical, as there were few opportunities to invest our money in either the close-to-home or evolutionary strategy. Now we are energized by the explosion of creativity taking place in virtually all the RIM zones—particularly for one’s financial assets, where it is increasingly possible to select options that do not come from Wall Street. In recent years formerly obscure niches, such as international microfinance, local food systems, and “social purpose bonds,” have catapulted into categories recognized by institutional investors. The World Economic Forum describes these outside-the-box approaches as moving “from the margins to the mainstream.”1 And while some of the ways to invest in personal and tangible assets are timeless, here too there have been exciting innovations, many of which—such as the sharing economy—have been empowered by technological advances.

 

Chapter 4: A Field Guide to Resilient Investing

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A Tour of the Nine Zones of the Resilient Investing Map

NOW THAT YOU ARE ORIENTED TO THE ROWS AND COLUMNS OF THE RIM, you are probably eager to see the colorful variety of investments that are blossoming all across this expanded territory. What do you find in the place where tangible assets chart an evolutionary course, or financial assets come close to home? This section is designed as a field guide, one that will help you recognize some of the species that you will encounter in each of the nine investment zones.

Here is where you’ll experience just how rich and vibrant resilient investing can be; the write-ups are packed with detail, providing a solid introduction to the diversity of options available in each zone. As with any field guide, this detail is fascinating but perhaps best taken in small doses; digging in to a couple of these zones in a sitting may give you more than enough to chew on. If so, we suggest that you return to this section periodically. Of course, the book’s website fills out every zone in ways we can’t fit into a book.

 

Chapter 5: Find Yourself on the Map

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What You Are Already Doing: Self-Assessment

NOW THAT YOU HAVE A FULL PICTURE OF THE RESILIENT INVESTING framework, it’s time to learn how to put these concepts to work in your life. In this chapter you’ll be assessing where your current actions fit on the Resilient Investing Map and begin thinking about how your own priorities and life situation can find expression within our expanded view of investing. While the RIM may seem fundamentally new, you have undoubtedly been making investments for many years that can be plugged right into your personal map.

For example, we are guessing that you already devote time each week to your familial, social, and community relationships. Great! You’re investing in zone 1. Do you periodically plug in to online social networks or take personal or professional training courses? Check, zone 3. We know you buy stuff, from cereal to cell phones: zone 5. Gardening? Zone 4. Have you supported an interesting new project on Kickstarter or Kiva? Hip hip, you’re at work in zone 9! If you chose your job or career in part because it makes a positive contribution to the world, then zone 2 is in play, too.

 

Chapter 6: Be Ready for Anything

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Qualities of the Resilient Investor, Scenario Planning, and Plausible Futures

READY FOR ANYTHING. TO SOME THAT MAY SOUND DAUNTING, WHILE others hear a clarion call to great adventure. It is a bit of both, harkening to the old saying (some say curse), May you live in interesting times. Clearly, the complexity and the uncertainty of our times are handing this to us in spades!

While the preliminary work you just completed is a good start, cultivating resilience requires much more than simply marching ahead with slight tweaks to what you’re already doing. This chapter asks you to pause for a moment and prepare for the work at hand by enhancing your internal and external perspectives in ways that allow you to be open and responsive to whatever may come. We are not suggesting that you need a totally clean slate, but you do have the opportunity to take a fresh look at your life, your worldview, and your investments.

 

Chapter 7: Dancing with the Future

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Resilient Investor Profiles:
What Is Your D-Type?

CHAPTER 6 OPENED SOME PRETTY BIG WINDOWS, LOOKING BOTH inward and outward. With a view in each direction, the panorama invites you into the vast potential and freedom that resilient investing offers. You can see how to embrace the qualities of the martial artist, gracefully moving across the landscape of our future, engaging its unlimited potential, and aware of its unprecedented challenges.

In this chapter we see how your assessment of future scenarios helps shape the ways you direct your investments across the RIM. We will have a bit of fun with this, introducing some characters that represent various perspectives on the scenarios. They provide a playful and practical way to ensure that your resilient investing plan reflects your best thinking about what the future will ask of us. You will undoubtedly see some of yourself in one or more of these archetypes, and you’ll draw on the insights you find here when you design your new RIM in chapter 8.

 

Chapter 8: Your Resilient Investing Plan

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Designing, Implementing, and Evaluating Your Resilient Investing Plan

WE HAVE COME A LONG WAY TOGETHER, AND YOU’VE BUILT UP A clear understanding of the resilient investing landscape—the new framework of the RIM along with your own worldview and priorities. You are indeed ready to face the uncertainty of tomorrow by having a future-proof portfolio in hand. Now it’s time for the rubber to meet the road.

There are many kinds of travelers. Whether you do comprehensive research and decision making on your own, or tend to collaborate with professionals, or follow an inner compass that points you toward your next destination, we want to help you find a path that will enhance your life while making the world a better place. However you make your decisions, you will want to do all you can to ensure that your choices fully reflect your sense of purpose and long-term goals.

In the pages that follow, we outline a step-by-step process that will help you map your route forward. Of course this is just the skeleton of how it would look in practice—the flesh and blood come from your own reflections and conversations. Whether you follow the structure we lay out here or take a different approach to the process of personal change, you will want to carry these questions with you—to a personal retreat, in conversation with loved ones, on long quiet hikes, or as part of your consultations with trusted advisors. As you do, you are likely to find that the resilient perspective has become integrated into the ways you process new experiences and contemplate the future.

 

Chapter 9: Tales of Resilient Living

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The Authors’ Stories

NOW THAT YOU HAVE LEARNED TO DANCE AND DESIGNED YOUR RIM, perhaps your head is spinning as you consider the multitude of destinations that you could choose to visit. We have asked you to do some challenging work, but now you can put away your colored pencils and sketches. This chapter offers a change of pace and provides a more personal perspective on the journey.

Travelers have always gathered together, around watering holes and in roadhouses, to unwind, share stories, and tell tales. Swapping travel guides and poring over tattered maps is half the fun of it all! More importantly, it helps us remember that the map is not the territory; even a big map can convey only a fraction of what you will find once you get started.

In this spirit, here are three snippets about how we are personally using the Resilient Investing Map. Of course we don’t hold ourselves up as role models; each of us has banged his head against many hard objects, juggled too many balls in the name of wanting it all, or found his own bad habits getting him into trouble. And we are not the most diverse collection—three college-educated white guys who all co-own a specialty investment company. Yet we’ve earned our gray hairs by practicing what we preach, particularly in the investment realm; we hope that our experience and expertise offer some lessons that have value to others.

 

Chapter 10: The Invisible Heart of Resilience

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How Becoming Personally Resilient Helps Create a Resilient World

YOU MAY RECALL THAT WE MADE A RATHER BOLD CLAIM IN THE introduction, stating, “the strategies that best prepare you and your family for a range of future scenarios are inherently beneficial to the systems upon which civilization and all life depend.” In this final chapter, we explore the roots and the far-reaching consequences of this idea. We conclude by envisioning how a brighter future could take shape as more people begin using the lens of resilience to guide their decisions.

For those with even a cursory interest in economics, there is likely a familiar ring to the idea that pursuit of personal interests yields societal benefits. We touched on this in chapter 3 when we laid out the show me the money strategy, a values-neutral approach to asset allocation derived from Adam Smith’s “invisible hand of the market.” Unfortunately, it has become all too evident that a civilization based solely on competition and maximizing self-interest does not always create the desired benefits or distribute them equitably. In fact, it can frequently cause great harm to people and nature.

 

Resource 1: The Case for SRI

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AS CHAMPIONS OF SUSTAINABLE AND RESPONSIBLE INVESTING FOR 25 years, we embrace the goal of bringing your financial investment portfolio into harmony with the choices you are making across the entire Resilient Investing Map. As we noted in chapter 3, we feel that in this time of global challenges, it is crucial for corporations, financial institutions, and investors to take responsibility for the social and environmental consequences of their actions. SRI’s combination of community investing, positive and negative screening (filtering companies based on issues and activities investors wish to support or avoid), and shareholder advocacy (direct engagement with corporate management) has helped reform capitalism while providing investors with an avenue to bring their money and their values into closer alignment.

SRI emerged in the early 1970s as a protest against the Vietnam War and a desire to avoid investing in military contractors; today a wide array of environmental, social, and governance (ESG) factors are assessed by SRI and conventional money managers as metrics that add value to their investment selection process. Environmental and resource-related concerns are increasingly being seen by the financial world as risks to corporate strategy.

 

Resource 2: The Investor’s Eye

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THERE’S A PHRASE WE OFTEN USE: APPLYING THE INVESTOR’S EYE. We use “the eye” to think about, analyze, and put in perspective our financial choices as well as the personal and tangible investments we have outlined in this book. This is of course a very quick introduction to a topic that we have all given a lot of thought to over the years, but we wanted to give you a flavor of the questions that we, as investment advisors, run through when we are looking at new opportunities.

Certainly when buying a home or spending money for a college education or thinking about any big purchase, we all know what it means to think critically about these spending/investing decisions. Now we want to turn this type of thinking toward decisions about our personal, social, and community assets and the tangible things we buy with our money. In general, applying the investor’s eye means being more comprehensive in your thinking: think about the money with some degree of financial sophistication, think about how your decisions affect your family and community, and think about how you are helping or hindering the building of a better world. These elements of your big-picture perspective can be addressed through three aspects of applying the investor’s eye.

 

Resource 3: The Resilient Investor Online Resources

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THE COMPANION WEBSITE TO THIS BOOK, RESILIENTINVESTOR.COM, offers in-depth and up-to-date guidance that can help you build on the ideas we introduce in these pages and apply them successfully in your own life.

While the book serves as a concise introduction to the resilient investing framework, the website builds on this by exploring key themes in more detail and providing current information about potential investments and resources for the nine zones of the Resilient Investing Map.

The website offers several downloadable RIMs, including blank ones for you to use as you work your way through your own inventory and planning, as well as examples of completed maps from a variety of types of investors and from readers of the book.

A central feature of the website is comprehensive resource sections for each of the nine zones of the RIM. You’ll find links to articles and websites that will help with your self-education on new topics, as well as information about companies, projects, and organizations that may be of interest to you as you round out your own resilient investing plan. This material is regularly updated to reflect the best of current thinking and opportunities in each zone.

 

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