The Count of Monte Carlo

An old friend of mine used to tease me about what I do for a living.

One time, he told me, “Dave, when I think of you, all I can think of is ‘numbers, numbers, numbers, numbers'”

Amusing.

Wanna know what’s weird? Only a small bit of what I do is numbers… even though a lot of what people see (and believe to be important) are facts and figures.

While I haven’t publicly taught this yet, a lot of what I teach (covertly) is mindset. Principles. A very specific way of thinking about money and finance.

That’s why I fear not my competitors.

Let me explain:

If you go to a conventional financial planner, here is what you will see:

First, the financial planner will drag out this spreadsheet program. Sometimes the program is simple (like an Excel spreadsheet), but sometimes it’s very complex.

The most complex programs are called “Monte Carlo Simulators.”

What they do is spit out a random set of numbers based on assumptions the financial advisor types into little boxes in the software program.

According to their advertising and marketing department, this highly sophisticated random number generator is supposed to help you predict the future.

Cool huh?

I wish it were that easy.

Anywho, the advisor usually doesn’t explain how it all works because, quite frankly, you’d probably sh*t your pants if you knew… knew your entire future retirement and savings plan was built on a complicated algorithm that was basically just a random number generator.

Now, I’m not saying spreadsheets are bad or that math is useless.

Fact is, I use spreadsheets all the time to demonstrate key principles and concepts for clients.

And that’s what’s so different about the Monegenix Method.

It’s driven by principles, not tactics.

With most advisors, what happens is… you have to rely on tactics or turn sound principles into tactics… like Modern Portfolio Theory, diversification, dollar-cost averaging, “buy and hold,” and Monte Carlo analysis.

Problem is, a tactical approach breaks down under stress and they don’t give you any way whatsoever to figure out whether what you’re doing is the BEST way for you.

Here’s what I mean: The tactic of diversification means you “don’t put all your eggs in one basket.” It sounds logical. It sounds simple. It sounds intuitive.

Most people do it because this is what their financial advisor tells them to do.

Problem is, it doesn’t work (at least not in the way most people think it does). Diversification didn’t help people during 2008 when all asset classes took a hit.

And when that happened, people panicked. Diversification didn’t work.

Now what?

They didn’t know what to do… because they relied entirely on a tactic to protect them, not a principle-based approach.

So, it didn’t matter if you were in stocks, bonds, or real estate. You got hammered.

That tactic doesn’t work so well if all your baskets, so to speak, get crushed. What are you supposed to do then?

Conventional wisdom doesn’t have an answer. They just don’t. They don’t because they don’t think it’s possible for the tactic not to work.

Same thing for Modern Portfolio Theory. Most people don’t really understand MPT, but they do understand the catchphrase behind it: with risk comes reward.

Problem is, MPT was originally designed for big institutional investors like banks, mutual funds, and insurance companies and is only valid for those kinds of institutions (for reasons that are outside the scope of this email).

Yet… nearly every financial advisor tells people to invest in riskier things for the hope of higher returns… OR… “optimize” risk so that you get the best possible return for the least amount of risk.

Let me tell you my friend. It’s not possible.

Not unless you’re a bank.

What’s the alternative?

A principle-based approached.

A principle-based approach would look at things like this:

Instead of using the tactic of diversification, a person would learn basic principles of investing so diversification was not necessary (even though the person might use it strategically or from time to time).

If a person didn’t want to learn principles of investing, then they would learn more basic principles of saving…

…and so on.

Anyway, this is the type of stuff my clients (who stick with me) learn over time. And, it puts them on sure footing… moreso than gimmicky tactics taught by the conventional school of financial planning.

You want to know more?

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David Lewis

This post brought to you by //The Rogue Agent//. David has been a life insurance agent, and worked with some of the oldest and most respected mutual life insurance companies in the U.S., since 2004. Learn more about him and his business, here.

This post brought to you by //The Rogue Agent//. David has been a life insurance agent, and worked with some of the oldest and most respected mutual life insurance companies in the U.S., since 2004. Learn more about him and his business, here.