20 Rules for Funding Your Ideal Life
Legendary Wall Street Journal columnist Jonathan Clements died recently. Over a long career he moved from profiling the rock-star fund managers of the 1980s to becoming one of the clearest voices for indexing and investor humility. Near the end, he saw his job less as “writes about money” and more as “helps people not ruin their lives with money.”
In his 2016 book How to Think About Money, Clements laid out 20 investor rules. The first ten are what to avoid. The next ten are what to lean into. Together they read like a field guide to getting rich slowly and sleeping well while you do it.
10 things to avoid
1. DON’T aim to outperform
“The goal isn't to beat the market. The goal is to harness the market to achieve your financial goals.”
Funding your life is the point. If you build a sensible portfolio and stick with it, you capture capitalism’s long-term return engine without turning investing into a second job.
2. DON’T buy individual stocks
“Resist the temptation to pick individual stocks. The odds of consistently beating the market are slim — and the risk isn't worth the reward.”
Markets are brutally competitive information machines. By the time you hear a “great idea,” it’s usually already priced in. Owning a diversified slice of everything beats trying to guess tomorrow’s hero stock. Read more here: https://www.loricapartners.com.au/insights/how-to-manage-stockmarket-risk
3. DON’T try to time the market
“Trying to time the market is like playing a game of chance. You might get lucky once, but the odds are never in your favour.”
Whilst tempting to try, market timing requires being right twice: when to get out and when to get back in. Most people miss at least one door. That’s expensive.
4. DON’T use active funds that pick individual stocks
“Avoid the allure of active management. High fees and overconfidence are a toxic combination for your portfolio.”
Active managers charge for skill that’s hard to spot in advance and even harder to keep. After fees and taxes, most underperform the very benchmarks they chase.
5. DON’T use complex products
“The financial industry thrives by creating complexity, but complexity is often the enemy of good investment results.”
If you can’t explain what you own and why it should work, you don’t own an investment, you own a story. Complexity often exists to defend fees, not improve outcomes.
6. DON’T chase performance
“Chasing past performance is a fool's errand. Yesterday's winners are often tomorrow's losers.”
Investors like to buy securities that have recently risen in value and sell those whose value has fallen. This can result in buying high and selling low, the opposite of what investors should do. Statistically, if a managed fund is in the top quartile of performers over the past 5 years, it only has a 23% chance of still being in the top quartile of performers over the next 5 years.
7. DON’T follow your gut
“What feels right is often the wrong choice. Safe investments can lead to unsafe retirement outcomes, while risky investments might be the safest bet.”
Your instincts were designed for avoiding predators, not pricing risk premiums. Investing rewards process, not adrenaline. It is possible to take too much risk, but also possible to take too little risk.
8. DON’T be fazed by uncertainty
“Life is inherently unpredictable, and so is the stock market. Embrace the uncertainty because it's the price we pay for higher returns.”
Uncertainty isn’t a bug. It’s the reason shares pay more than cash. If markets were predictable, the returns would already be gone. Uncertainty is an investor’s friend: https://www.loricapartners.com.au/insights/the-investors-dilemma-managing-biases-risks-and-regrets?rq=uncertainty
9. DON’T focus on the short term
“We're naturally wired to focus on the short term, but the biggest gains come from staying focused on the long term.”
Markets wobble; progress compounds. A long horizon turns scary headlines into background noise.
10. DON’T forget taxes
“Don't underestimate the impact of taxes. Tax efficiency is just as important as low costs when building wealth.”
Fees are obvious. Taxes are stealthy. Both compound, just in the wrong direction. Structure and implementation matter almost as much as allocation.
10 things to do
11. DO prioritise saving and investing
“The more you save today, the greater your future freedom.”
Returns are nice, but your savings rate is the lever you control. Most wealth is built by the boring consistency of making 1,000 small, sensible decisions, and avoiding that one heroic call that fails.
12. DO keep your strategy simple
“The simpler your investment strategy, the greater your odds of success.”
Complex plans fail in real life because people abandon them. Simple plans survive contact with markets and humans. Simple does not always mean easy.
13. DO keep your costs low
“Every dollar you pay in expenses is a dollar less in returns. Costs aren't just a drag on performance; they're the enemy of wealth building.”
Costs are guaranteed. Performance isn’t. In a world of uncertainty, reducing certainty-level headwinds is a free win. Lorica Partners’ preferred Australian equity strategy costs 0.30% and it has outperformed the ASX 300 by over 0.6% per annum after costs for the past 10 years. The Perpetual Australian share fund, which actively pick stocks, charges 0.99% per annum and has underperformed the ASX 300 by -2.2% per annum over the past 10 years.
14. DO stay broadly diversified
“By diversifying globally, you don't just spread your risk — you also increase your chances of capturing returns from different corners of the market.”
Diversification isn’t about avoiding every downturn. It’s about avoiding the one mistake that permanently dents your future. Australia is only 2% of the global stockmarket.
15. DO focus on avoiding mistakes
“Good investing isn't about making brilliant decisions. It's about avoiding terrible mistakes.”
You don’t need to be a genius. You just need to avoid the big, irreversible errors: panic selling, leverage blow-ups, concentration risks, and constant tinkering.
16. DO resist the urge to act
“The less you tinker with your portfolio, the better your results are likely to be.”
Activity feels productive. In investing it often means swapping long-term compounding for short-term anxiety. Don’t just do something, stand there.
17. DO recognise your behavioural biases
“Every time you make an investment decision, ask yourself: Am I acting rationally?”
The biggest threat to your plan usually isn’t markets, it’s you. Name the bias, then design systems to stop it from driving.
18. DO keep your emotions in check
“Investing success isn't just about what you know; it's about controlling what you feel.”
Fear and greed are natural and are the two emotions the media preys on. Pick any article and you can read it through either lens. Great investors are calm, not clairvoyant, and often have a financial adviser in their corner acting as the behaviour coach.
19. DO remember what the goal is
“The ultimate goal isn't to have the most money when you die, but rather to lead the happiest life you can.”
I always tell clients Money is an enabler, it is never the scoreboard. A good plan funds what matters and ignores what doesn’t. Do you have clarity of why money is important to you?
20. DO live for today
“Plan for the future but live for today. Striking that balance is one of life's great challenges.”
Clements’ closing message was simple: don’t sacrifice your whole present to buy a future that might never arrive. As I tell clients, I don’t want you to be a rich 85-year-old thinking I could have done more with my money for myself or family. Plan prudently, then actually use the life you’re funding.
Author: Rick Walker
Thanks to IFA for the inspiration for this article - https://www.ifa.com/articles/final_lesson-_what_jonathan_clements_learned_from_death_about_money_life