What is Lifetime Investing?

This blog is mainly about lifetime investing.

But what is lifetime investing exactly? It’s the mechanism by which you build wealth over the course of your lifetime. How can you do lifetime wealth accumulation? The answer is lifetime investing.

This definition, although useful in giving us an initial understanding, raises more questions. It appears simple on the face of it but needs to be defined in more detail in order to fully illuminate the problem.

How long is a “lifetime”?

A lifetime is, well, now until the day you die. It’s the ultimate investment horizon. You may be saying “ok…but I don’t know how long this is going to be…”. This is true (and I would be worried if this wasn’t the case). This adds an additional layer of uncertainty to this approach compared to others. Having some fixed date to work towards (retirement, for example), can be easier both psychologically and strategically. Alas, life is complex. It is better to learn to work with this uncertainty than to ignore it or try to correct it.

What counts as “investing”?

This question is harder to answer than you may think. Some think of investing only as the buying and selling of financial assets. Some extend this definition to any act that involves using cash now in the hope of receiving more cash later. 

My definition of an investment is the following: anything that you purchase primarily to either maintain or grow your wealth.

Note the reason for your purchase is important in this definition. If you purchase a vintage Rolex Submariner for pleasure, that’s not an investment. However, if you purchase that very same watch and store it in a safe with the hope that it will be worth more in 20 years time, that is an investment.

Things that aren’t an investment: some short-term stock trading (retail), most sports betting, visits to the casino, buying new cars, most purchases of clothes, etc.

Things are investments: some art, some wine, some watches, cash under your mattress, money in your savings account that is currently yielding 0.01%, bitcoin (sometimes), Easyjet PLC, FTSE 100 ETFs, non-index-linked GILTS, etc.

Can you invest in yourself? Purchasing a course on Gumroad with the primary motivation to use this course to increase your salary would seem to be ‘investing’ by our definition. Not quite. You see, this act would increase your income which then, in turn, would increase your wealth. It’s a second-order effect. It’s not investing. At least not by our definition.

Ok, I’ve got it now. How do I do lifetime investing and why is it important?

So, how do you actually do lifetime investing? It’s not about maximising your potential for wealth growth. It’s not about maximising your expected terminal or lifetime total wealth. It’s much more complicated than that. We are looking for a way to assess most of our available investment options, picture most of the possible outcomes, and act in such a way as to reduce as much as possible the chance of an unacceptable outcome.

I consider health, wealth and happiness to be the fundamental components of life. Lifetime investing a huuuge part of that wealth component. As discussed before, you can accumulate all the wealth you want but if it’s invested incorrectly it’s going to evaporate rather quickly. Lifetime investing is one of the most important things you will do in your life so you better figure out how to do it properly.