Don’t Teach Your Man to Fish.
‘Give a man a fish and he wants chips. Teach a man to fish and he’ll complain about how boring fishing is. But build a fish trap and you can both laze about all day long in retirement.’
Those monks from St Dogmael’s Abbey understood wealth better than your financial advisor. They lived near the river Teifi in England 1000 years ago. And were faced with two problems. They had to feed a bunch of monks with fish, because that was the only meat they were allowed to eat.
But they had better things to do than stand on the beach or river bank all day long. We’re not sure what they did spend their time doing, but the important thing is that they managed to do something other than desperately try and make ends meet.
So how did they do it? They built a giant fish trap. It’s more than 250 meters long and was discovered by Google Earth.
If that seems like an odd spot to put a fish trap, that’s because the river and coast have moved in the last 1000 years. Blame it on climate change.
Anyway, the point of this fish trap is that the owners could use its passive income to generate free time. Passive income is income you don’t have to earn with your labour. Picking up fish still takes a bit of work, but it beats other methods in terms of time.
Notice how the trap is V shaped? That’s so the fish would collect in the same spot and not all over the trap. It’s easier to pick up the fish when they’re all in the same spot. Crafty monks, weren’t they? If only you could hire them as your investment advisor today. Sadly, Henry the VIII’s thugs got there first.
Still, you can learn from the monks and their fish trap when it comes to paying for your retirement. Assuming you want to give up work in favour of leisure at some point, you have several options. Scrounge off your kids or the government (everyone else’s taxpaying kids).
Slowly sell down your assets over time, gradually becoming poorer and more worried about whether your assets will last. Or, you can use the St Dogmael’s Abbey investment strategy: Generate enough passive income to pay for your retirement.
That’s the kind of retirement you want. The monks probably took to gardening with the free time their fish trap gave them. They did it out of need, but you might want to do the very same thing in your retirement. Or perhaps you could go traveling to Europe. It’s entirely up to you.
The key is to look for investments that generate income, not capital gains. If that doesn’t sound sexy enough for you, consider this:
It’s the same with certain types of investments. They don’t expire or disappear while they generate the cash you need. Even long after you’re gone, someone could be benefiting. That makes you rather attractive. It means a steady stream of new clothes, cars and holidays. Not the slowly worsening state of your lifestyle along with your finances.
‘What the Rich Have That Everyone Else Doesn’t…‘Wednesday, October 3, 2012
‘Today, I want to return to a core family office concept: capital. Having capital — wealth that you don’t spend — is what distinguishes the rich from everyone else.
‘That might sound obvious. But having capital…especially family capital…is different from just having money. Money comes and goes. Money can be spent and wasted. Capital cannot.
‘You invest capital carefully, deliberately and as part of a larger plan. It’s deployed in ventures that have the highest chance of success — such as a family business ¬— where you have a clear competitive advantage and intimate knowledge of the business niche.’
You get capital by saving and investing. But the kind of investing you should be doing is very different to betting on the stock market going up. That’s an immediate gratification or loss. You don’t know which you’ll get. Instead, investing should be about steady investment in assets that provide a steady stream of income beginning at some point in the future. You’ve got to build a fish trap one rock at a time. Only when you’re done does it really work. Then you sit back and relax.
But our bet is that the fish trap fed dozens of monks at a time for hundreds of years. Not bad for a pile of rocks.
So what’s the equivalent to a pile of rocks in the ocean in today’s term? How do you generate income that pays for retirement? There are a couple of options. We’ll be revealing how a $10,000 dollar investment became a $20,000 a year income stream when our newsletter hits the online presses. And that was off a household name business about a quarter of Australians use every day. Subscribers will find out which four investments might manage the same feat in the future. The trick is one page of paperwork.
Contributing Editor, Money Morning
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