Sun Tzu and the Art of Personal Finance Part II

I’ve mentioned before that War is the Art of bringing more weapons to a battle than your opponent.

To me, Sun Tzu’s The Art of War discussions on military strategies, tactics, battlefield arrangements and spying is all about maximising one’s weapons in a conflict while restricting your opponent’s capability to bring his weapons to the battle.

Even the modern military idea of Combined Arms is based on mixing military services to bring overwhelming weapons against your enemies before he can respond.

Imagine the scenario below which is the old method of war:

standard-battle

It seems both sides will fight to a stalemate.

Imagine then the new method of war:

combined-arms

It seems one side can quickly overwhelm the other. Instead of relying on basic infantry, we combine tanks and artillery to hit our enemies from all sides.

Which side you prefer to be on?

So imagine instead we are talking about a personal finance scenario: there are many enemies, and the first step to win the battle is to know your enemies, is the below scenario what happens to you if you do not know your enemies?

the-enemy

We will get overwhelmed and see our money shrink.

It is interesting cause I do have the experience of talking to someone who remarked: “yes, inflation, currency depreciation, how bad can it be?” It really is a case of not knowing the enemy. That is why inflation has been called the silent killer and it’s the tool of choice for governments to tax their people. If people don’t see it coming, they can’t complain.

And if we do know the enemy, how many weapons then do we have access to to counter and even attack our enemy head on?

combined-arms-2

If we have all the weapons, how many weapons then are we using pointing in the right direction or are in the right position and in the right combination to each other?

In the Art of (Personal Finance) War, different weapons serve different needs, too much of one will actually jeopardise the whole army. Too much property and you risk being outflanked by interest rate hikes, too little cash reserve and you may not ride thru crisis, too much cash reserve and you risk having your purchasing power eroded by imported inflation.

I actually know someone who kept a huge amount of cash just in case he needs to service the loans on his huge number of properties. It isn’t really efficient and it really comes down to him not exposed to the right kind of liquid investments.

The fact is that in this modern day and age, there is a way to optimise our asset allocation in consideration of all those opposing risk. And there are data-proven tools available to counter the threat. It is here now and we need to learn up the missing investment lessons we ought to have learnt in school.

*Infantry, Tank and Artillery images from a game called Panzer Corps.

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