{"id":22813,"date":"2008-02-25T10:31:00","date_gmt":"2008-02-25T10:31:00","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=537"},"modified":"2008-02-25T10:31:00","modified_gmt":"2008-02-25T10:31:00","slug":"benchmark-personal-y-pgr","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/benchmark-personal-y-pgr\/","title":{"rendered":"Benchmark Personal and the Attorney General\u2019s Office."},"content":{"rendered":"<div style=\"text-align: justify;\">Before you start booing me, I promise you that my colleague <a style=\"font-weight: bold;\" href=\"http:\/\/www.blogger.com\/profile\/05574900104665069082\" target=\"_blank\" rel=\"noopener\">gfo<\/a> will publish the reply to the <a href=\"http:\/\/www.rankia.com\/blog\/familyoffice\/2008\/02\/os-propongo-un-acertijo.html\" target=\"_blank\" rel=\"noopener\">riddle<\/a> in a couple of days. By the way, there are over thirty comments, and they\u2019re all brilliant. That said, let\u2019s move on to something else.<\/p>\n<p>I\u2019m sure you\u2019ve all read the <a href=\"http:\/\/www.rankia.com\/blog\/toros-osos-y-borricos\/2008\/02\/benchmark-personal.html\" target=\"_blank\" rel=\"noopener\">article by Jos\u00e9 M\u00aa D\u00edaz Vallejo<\/a> in which he discusses a topic that is as little-known as it is unpopular: considering and setting the return target for our investments in the markets over the course of our lives. He very aptly calls it <span style=\"font-weight: bold; font-style: italic;\">Personal Benchmark<\/span>, and defines it as \u00ab<span style=\"font-style: italic; font-weight: bold;\">the annual return target based on a longer-term target<\/span>\u00ab. Simple, yet vital and by no means obvious. As this issue relates to the evolution of a person\u2019s wealth throughout their lifetime, it forms part of the standard analysis we carry out as a Multi-Family Office. Jos\u00e9 M\u00aa, would you mind if we ran a few thought experiments based on your concept? Here we go:<\/div>\n<div style=\"text-align: justify;\"><a onblur=\"try {parent.deselectBloggerImageGracefully();} catch(e) {}\" href=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/laboratorio-702057.jpg\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" style=\"margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 340px; height: 225px;\" src=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/laboratorio-702053.jpg\" alt=\"\" border=\"0\" \/><\/a>We usually hear the word <a href=\"http:\/\/es.wikipedia.org\/wiki\/Benchmark\" target=\"_blank\" rel=\"noopener\"><span style=\"font-style: italic;\">benchmark<\/span><\/a> associated with fund managers, indices, charts, etc., and we equate this with <span style=\"font-style: italic;\">target<\/span> a target to reach or exceed. But JMDV applies this wisely to his own investment profile:<\/p>\n<ul>\n<li>Beating inflation in the long term (4%)<\/li>\n<li>Developing a pension plan with a 40-year time horizon<\/li>\n<li>Start-up capital<\/li>\n<li>Time remaining (40 years)<\/li>\n<li>Dividends<\/li>\n<li>New regular contributions<\/li>\n<\/ul>\n<p>Based on these variables \u2013 which only he himself and the passage of time can clarify and refine \u2013 he estimates that he will need an annual return of 8\u20139% over 40 years to reach his <span style=\"font-style: italic;\">Personal Benchmark<\/span> desired. Let us consider this benchmark as an example <span style=\"font-style: italic;\">type<\/span> of a 25-year-old, but which could be extrapolated \u2013 with a few adjustments \u2013 to any of us if we imagine it in our own terms.<\/p>\n<p>Let\u2019s move on to the experiments now and explore this concept of <span style=\"font-style: italic;\">personal benchmark<\/span>: First of all, let us consider that regular contributions not only can, but <span style=\"font-weight: bold;\">must<\/span> to grow at an accelerating rate in line with our professional and career development, or even our potential future inheritance, if any. We must also bear in mind that our personal development will likely mean we are unable to maximise our contributions. In other words, over the years we will probably share our lives with partners, buy property, possibly support children\u2026 and perhaps even become parents ourselves.<\/p>\n<p><a onblur=\"try {parent.deselectBloggerImageGracefully();} catch(e) {}\" href=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/Multi-family-WealthCo-775441.jpg\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" style=\"margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 315px; height: 133px;\" src=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/Multi-family-WealthCo-775404.jpg\" alt=\"\" border=\"0\" \/><\/a>We do not know what the future holds. Perhaps our career progression will be meteoric or mediocre, or perhaps our health will be poor. Family circumstances will also affect the growth of our wealth: for example, we may need to set aside substantial sums of money for personal and\/or healthcare for elderly relatives. Or we may have to rescue our nieces and nephews from destitution because of the foolishness of our dim-witted brother-in-law. All these variables \u2013 which also change over time \u2013 force us to constantly adapt our <span style=\"font-style: italic;\">personal benchmark<\/span>.<\/p>\n<p>Another factor to bear in mind is happiness: in other words, it is not only our personal development that will prevent us from maximising our regular contributions to wealth growth. We must also find happiness along the way. After all, it will be of little use to us to be the wealthiest yet most embittered pensioners in our circle, however eager our descendants and heirs may be, hungry for property and fresh cash. Our financial and wealth growth throughout our lives must allow us to strike a balance between financial optimisation, happiness and well-being \u2013 a balance that only we are capable of intuiting and shaping.<\/p>\n<p><a onblur=\"try {parent.deselectBloggerImageGracefully();} catch(e) {}\" href=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/Experiment-731440.jpg\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" style=\"margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 205px; height: 185px;\" src=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/Experiment-731435.jpg\" alt=\"\" border=\"0\" \/><\/a>Savings\/Investment and Happiness\/Well-being are not always interconnected, as one might think. It is true that most of us tend to go to extremes when allocating resources in the pursuit of happiness and well-being. Such excesses often result in our financial progress becoming increasingly mediocre over time. And because of this mediocrity, as the years go by, we will be forced to recklessly increase our <span style=\"font-style: italic;\">personal benchmark<\/span>. The consequence of this is that we take on fatal risks, which, at best, will cause us to build up and lose wealth cyclically throughout our lives, thereby turning our lifetime financial progress into a financial rollercoaster. But at the other extreme, sometimes the massive concentration of resources for reinvestment and the pursuit of our <span style=\"font-style: italic;\">benchmark<\/span>, causes us such distress and unhappiness that we will be unable to achieve a stable personal life. This personal, family and social unhappiness will also have a negative impact on our ability to create wealth, thereby also hindering the <span style=\"font-style: italic;\">personal benchmark<\/span> designed.<\/p>\n<p>The ideal balance is personal and unique to each individual, and can only be achieved by <span style=\"font-weight: bold;\">masters of life<\/span>. Furthermore, only the final result determines whether we succeed or fail, and during our youth we will have no indication that would allow us to make adjustments based on interim results. As my favourite quote on the sidebar of our blog says: <span style=\"font-weight: bold;\">\u00ab\u2026we don\u2019t learn to live until life is gone\u00bb.<\/span><\/p>\n<p>We are also going to introduce other types of assets, such as property and businesses, into our experiment with the <span style=\"font-style: italic;\">personal benchmark<\/span>, as clearly defined by JMDV. It is evident that if we only take our cash holdings into account, the 8-9% set as a long-term target will deviate significantly \u2013 either by falling short of or exceeding \u2013 the <span style=\"font-style: italic;\">personal benchmark<\/span> that we will need throughout our lives. All our assets, in every possible form, will influence the definition and development of our <span style=\"font-style: italic;\">benchmark<\/span>.<\/p>\n<p><a onblur=\"try {parent.deselectBloggerImageGracefully();} catch(e) {}\" href=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/balanza1-777127.jpg\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" style=\"margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 189px; height: 247px;\" src=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/balanza1-777119.jpg\" alt=\"\" border=\"0\" \/><\/a>Let\u2019s carry on with the experiment. Let\u2019s try to balance this <span style=\"font-style: italic;\">benchmark<\/span> as if it were an accounting balance sheet with its classic formula: <span style=\"font-style: italic;\">Assets = Liabilities + Equity<\/span>, but adapting it to our financial situation. Taking into account all our assets (cash, businesses, property, etc.) and all our liabilities (debts, mortgages, etc.). But we will also add to the liabilities our cost of living \u2013 that is, the amount of money we spend (for those with small estates) and the amount we would like to spend (for those with medium or larger estates) \u2013 including the cost of repaying any mortgages we wish to take out. What our Multi-Family Office once dubbed <span style=\"font-style: italic; font-weight: bold;\">Vital Balance<\/span>, which includes our <span style=\"font-weight: bold;\">Wish List<\/span> or wish<span style=\"font-style: italic;\"> <\/span>list<span style=\"font-style: italic;\">.<\/span> You can find further details at: <a style=\"font-weight: bold;\" href=\"http:\/\/www.rankia.com\/blog\/familyoffice\/2007\/09\/su-patrimonio-de-hoy-es-suficiente-para.html\" target=\"_blank\" rel=\"noopener\">His current wealth is enough to turn his life around.<\/a><\/p>\n<p>But let\u2019s take it a step further and have another look at the <span style=\"font-style: italic;\">personal benchmark<\/span> turned into <span style=\"font-style: italic;\">life balance<\/span>. We are now going to introduce intangible assets and liabilities \u2013 that is, those that cannot be easily quantified in monetary terms or valued in the same way as a business or a house. We are referring to values that are just as important \u2013 or even more so \u2013 to our lives, such as family, time, philanthropy, starting up businesses or pursuing long-cherished activities, special trips, and so on.<\/p>\n<p>All of this, tailored precisely to each individual or family, will enable us to design the restructuring required for our assets to cover our liabilities and continue to grow and progress at the desired rate. This growth must, of course, exceed a constant average rate of inflation, which, incidentally, we also estimate at 4%. However, let us clarify that we must consider three types of growth here: cash flow growth, corporate growth and property growth in the form of mortgage repayments. To balance the books, we tend to disregard growth arising from property capital gains, and this is particularly advisable in the current cycle.<\/p>\n<p>As you can see, the <span style=\"font-style: italic; font-weight: bold;\">Personal Benchmark<\/span> as defined for our cash, forms part of this <span style=\"font-style: italic; font-weight: bold;\">Vital Balance<\/span>, in a way. The family\u2019s overall financial situation and how it has developed will give us a clear idea of what we call <span style=\"font-weight: bold;\">PGR: Global Wealth Plan<\/span>.<\/p>\n<p>Therefore, Jos\u00e9 M\u00aa, your very insightful comments on the Personal Benchmark could be included as one of the many components of a <span>PGR.<\/span><span style=\"font-weight: bold;\"> <\/span><span>And I think your article is highly recommended for all investors, regardless of their investment style: fundamental, technical, value, contrarian, <span style=\"font-style: italic;\">sui generis<\/span> and, above all, for the one that is most prevalent: the chaotic one.<\/span><\/p>\n<p><a onblur=\"try {parent.deselectBloggerImageGracefully();} catch(e) {}\" href=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/Cabana-Islander-714243.jpg\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" style=\"margin: 0pt 10px 10px 0pt; float: left; cursor: pointer; width: 173px; height: 138px;\" src=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/Cabana-Islander-714241.jpg\" alt=\"\" border=\"0\" \/><\/a>Although, in our view, the best course of action for any investor is to draw up and periodically adjust their <span style=\"font-weight: bold;\">PGR<\/span>, I think it is extremely dangerous that the vast majority of investors do not even consider at least one <span style=\"font-style: italic; font-weight: bold;\">personal benchmark<\/span>. Those who merely focus their <span style=\"font-style: italic;\">benchmark<\/span> In the annual benchmark index, they are nothing more than small inflatable mats on which their landlubbers splash about, pretending to sail across a vast ocean. When the sea is calm, they move almost in parallel with other vessels, believing themselves to be true sea dogs. But when storms and rough seas strike, only the reliable, powerful and well-skippered vessels stand any chance of surviving until calm returns. The rest will continue to work hard right up until retirement to make up for what they lost on the high seas.<span style=\"font-weight: bold;\"><\/p>\n<p><\/span><a onblur=\"try {parent.deselectBloggerImageGracefully();} catch(e) {}\" href=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/mega-yate-de-lujo-en-ibiza-751038.jpg\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" style=\"margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 386px; height: 255px;\" src=\"http:\/\/www.rankia.com\/blog\/familyoffice\/uploaded_images\/mega-yate-de-lujo-en-ibiza-751035.jpg\" alt=\"\" border=\"0\" \/><\/a><span>Forget the inflatable mats and start thinking about your <span style=\"font-weight: bold; font-style: italic;\">Personal Benchmark and Global Wealth Plan<\/span>. You\u2019ll be glad you did when you\u2019re older.<\/span><span style=\"font-weight: bold;\"><br \/><\/span><\/div>","protected":false},"excerpt":{"rendered":"<p>Antes de que me abuche\u00e9is, os prometo que mi colega gfo publicar\u00e1 la respuesta al acertijo en un par de d\u00edas. Por cierto, m\u00e1s de treinta comentarios, y todos geniales. Dicho esto, cambiamos de tercio. Seguramente todos habr\u00e9is le\u00eddo el art\u00edculo de Jos\u00e9 M\u00aa D\u00edaz Vallejo en el que nos habla de algo tan desconocido [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":["post-22813","post","type-post","status-publish","format-standard","hentry","category-sin-categorizar"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/22813","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=22813"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/22813\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=22813"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=22813"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=22813"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}