Can your active investing skills be transferred to family members?

There are days when you get to a certain age, things you used to not think about starts surfacing.

Planning for life after an investor pass away does not get explored often enough. 

Lee Chin Wai writes a very good blog at Boring Investor. Doesn’t delve deep into individual active management stuff but from a building  wealth basis, it’s a very good blog to follow. You can tell he is a good writer and a clear thinker.

In his recent articles, he explores this dilemma and still looking for answers.

One may argue that regular dividends and rental income require minimal efforts to achieve. However, one still has to watch over the performance of the companies to make sure that the regular dividends can continue uninterrupted.

History is full of examples of excellent, high dividend-paying companies that have failed. Rental income also requires one to look for new tenants when the lease expires and to carry out repairs to upkeep the property. So, efforts are required to maintain the regular income.

Nevertheless, this post is not to belittle the financial independence that some have achieved. Being financially free is a great achievement that takes many years of hard work and financial prudence to achieve. Rather, this post is to allow one to ponder how much one’s hard-won financial independence is dependent on one’s health.

If one’s financial independence is not dependent on one’s health, then that financial independence could also be transferred to one’s loved ones so that they too could be financially free.

In the paths we take to accumulate wealth, it seldom occurs to you that most of the time it is an entrepreneurship, that you as the sole proprietor can’t be sick as you are the only one to plan, manage and execute as well as monitor and control your wealth. (Read the passive nature of different wealth building techniques)

And it seems more pronounced on a local context that good companies for 5 years may not be well operated after that.

It would mean that the person taking over the active management needs to have that same level of competency.

Its achievable but it will require some effort.

Andrew Hallam encounter this problem around a few years near my current age, when he was diagnosed with cancer.

He wrote about it here:

When I was diagnosed with cancer, my wife and I had a relatively complex investing portfolio shaped by my investing enthusiasm. But she wasn’t interested in the stock market. If I did have a magic formula for investing (something I seriously doubt) she wasn’t keen on learning it.

Recognizing that she might outlive me, I sold $700,000 worth of individual stocks and added the proceeds to the exchange-traded index funds I already owned. Then I taught her how to rebalance the portfolio in a few minutes once a year. If I die before my wife, I’ll rest better knowing that she won’t be paying somebody to underperform the market.

Three years after my surgery, my MRI scans continue to look clear. My weight has (finally) climbed back to its pre-surgical level and my strength is back. I can break a five-minute mile, do 33 pull-ups and dispassionately rebalance a portfolio of index funds. Following a couple of evidence-based strategies for health and money, I’m hoping for longevity – and bucket loads of wealth.

A trader can probably be the best trader in the world and accumulated 1 mil. When unforeseen circumstances struck, would the family member have that competency to carry on building wealth further?

In case you think 1 mil is a lot, inflation is still carrying on and you will need to manage it well to keep your spending power.

There is probably 30 years of management still required and many retirees do spend part of their time fretting how to get the necessary yield, which companies fails to live up to the requirements and which to rotate into in a time when their brain starts slowing down massively.

Perhaps that is why variable annuity plans are getting so popular to resolve this issue.

It gets worse when your spouse or family members are really bad money managers for starters and would want nothing to do with calculation.

There probably needs some proven methods that are truly passive in nature.