Prologue

This is a different kind of book about money. We want it to be a trusted resource for investors who have graduated from Investing 101. Invest Your Way is for investors who know what a share and an ETF are but are struggling to put it all together to get on the pathway to financial independence.

It isn't a series of definitions of investment products. It isn't a set of tricks to save money or a formula to follow to get rich. It doesn't endorse a specific type of investment product. Rather, it is a conversation about financial independence between two friends and colleagues who happen to be experienced personal finance experts.

We have different backgrounds. We come from different generations. While we share a belief in a set of underlying principles, we've followed different approaches based on our unique circumstances and outlooks. This isn't a book that tells you what to do. It's a book that teaches you how to think - and how to draw on your experiences, goals and circumstances to develop your own unique philosophy to achieve the life you want.

Too much financial commentary focuses on investments rather than on the people investing. We believe investors are hungry for a new perspective. The investors we talk to tell us they are tired of aspirational messages that lack the practical steps to put a plan into action. They don't want bewildering and unrelatable jargon and complexity. They want the focus to be on the only thing that truly matters - creating a better life for themselves and their loved ones.

We believe that successful investing depends in large part on self-reflection, on understanding yourself and what you want from life. We spend a fair amount of the book talking about ourselves. Not because we think everyone, or anyone, should follow our approaches. Investing is deeply personal. Far too many investing commentators ignore this. Our personal experiences illustrate the process every successful investor needs to go through, which is thinking about the best approach to meet a unique goal. It's not a call to copy our approach; it's a call to reject the notion that conventional wisdom should be followed blindly.

Warren Buffett famously said investing is 'simple, but not easy'. The part that's not easy is the personal part. It's overcoming our emotional conditioning as humans and a lifetime of ingrained views about how the world works and what is needed to achieve success. Successful investing involves looking inward because you can't separate investing from the investor.

We've designed this book to meet you wherever you are on your journey to financial independence. We want to remind you of things you may have lost sight of in the relentless churn of daily life. We want to teach you new things. We want to inspire you to become more introspective, to get to know yourself a little better. More than anything we want you to gain confidence that you are on the right path. This book is one part theory and one part practical exercises to help you create a plan to achieve financial independence. This is your blueprint to take the next step with your finances and to get everything you want out of life.

Meet Shani and Mark

So who are we? On paper we couldn't be more different. Shani is a 32-year-old millennial. Mark reluctantly admits he is in his mid-forties, because once you hit 46 it's hard to argue otherwise.

Shani migrated from Sri Lanka with her family to Sydney's western suburbs when she was a child. Her family made sacrifices to give Shani opportunities, and she stretched herself to take advantage of them.

Investing wasn't a topic of conversation when she was growing up, and it wasn't until she was an adult that she started to think of investing as a means of transforming her life. She learned this early in her career by observing clients of the prestigious fund manager where she worked. As she gained confidence and knowledge she decided she didn't want to be the only beneficiary of the insights she was accumulating. She wanted to help the people who didn't know the pathway she was on even existed. People who didn't think investing was for them. Shani made her first investment at 23.

His father's banking career meant Mark moved around a lot as a child, from Taiwan, Hong Kong and San Francisco to Sydney's eastern suburbs. He spent his high-school years in a suburb of New York. From an early age, he saw investing as just something people did. He was gifted his first shares when he was ten and bought his first shares as a young teenager. He thought it was natural that people understood how to invest and were comfortable doing it. This worldview was challenged in early adulthood after his parents divorced and his highly educated and accomplished mother was consumed by fear and confusion about what to do with her money and whom to trust.

The start of our conversation about investing

Most people play it safe on their first day at a new job. On Shani's first day, she overheard a conversation about franking credits. Finding she didn't agree with the opinion expressed, she crossed the room to say so to the speaker. That speaker was Mark. Our conversation about investing started that day, and it hasn't stopped since.

Along the way we learned that we shared much more than a cursory view of our different backgrounds would suggest. Above all, we both came to Morningstar to work with individual investors because we wanted our careers to mean more than simply collecting a regular pay cheque.

We view investing as a mechanism to provide our community with the financial security and independence we all seek. Far too many people don't know where to start. Others don't have a clear picture of what success looks like or how to achieve better results. Our jobs, and this book, are our way of helping people start and progress on their journey to financial freedom.

To ignore the influence of each person's unique views on how they approach their finances is a pathway to failure. Our experiences shape the philosophy we bring to dealing with money and the way we invest. Acknowledging how our backgrounds and circumstances impact the way we approach money is not a weakness - it's a strength. And it fundamentally changes the outcomes we achieve.

Far too many conversations about investing rely on conventional wisdom and rules that few people take the time to understand. This isn't surprising, because we are told that what matters is what investment products we buy and sell. Most of us don't notice that more often than not, the people advising us are the ones selling us those products.

We believe in several fundamental principles of investing that don't tell you what to do but act as ballast when you are trying to navigate the challenging day-to-day management of your finances. They are the foundation for our own personal approaches to our own finances and investing, and they help to form a philosophical underpinning for our own particular plans and strategies.

Many of us are familiar with the work of Warren Buffett. Fewer of us know his investment partner Charlie Munger. Buffett has said of Munger that when it came to managing money, no-one better had come along for many, many decades. Perhaps Charlie Munger best summed up the importance of an underlying philosophy to guide actions when he said, 'You can't really know anything if you just remember isolated facts and bang 'em back. If the facts don't hang together on a latticework of theory, you don't have them in a usable form.' This book is the latticework on which we hang our investing approaches.

We occupy a unique position in the financial services industry. We work for an investment research house where the emphasis is on coming up with opinions on shares, ETFs and funds. Yet our roles involve engaging with individual investors. Listening to the Morningstar community, it is obvious that their main struggle is how to go about the process of investing. This is very different from what we hear from most market commentators, who focus almost exclusively on investments or what is held in portfolios.

Sitting, as we do, at the nexus of the financial services industry and investors trying to reach their goals, it is clear to us that the approach most people take just doesn't work. We've developed an approach based on the only thing that really matters - using investing as a mechanism to achieve the life you want, which is why this book is your essential guide to achieving financial independence.

Investing your way

Star Wars director George Lucas once observed that we are all living in a cage with the door wide open. A conjurer of space fantasy seems like an odd person to draw on at the start of a book on investing, yet this quote perfectly encapsulates how many people handle their finances. The series of financial decisions the average person makes doesn't stray far from a deliberate plan to create financial dependence.

Charlie Munger was a proponent of inversion, a mental model that helps break down the barriers to success in any endeavour. The goal of inversion is to think about a problem backwards as well as forwards. By also considering how to make something worse, you can break down some of the ingrained biases that are holding you back from identifying a...