Beyond the Bell

“Return on hassle” refers to the concept of evaluating the time and effort required for a financial decision in addition to its expected financial return. Hedge fund manager Bill Ackman has another name for this idea: “Return-on-invested-brain-damage.” If the return isn’t high enough to justify the brain damage or hassle, move on. For real estate investors, this includes the mental and physical labor involved in finding tenants, maintaining properties, and managing debt, among other responsibilities. These are “hassles” that traditional investments like stocks and bonds don’t typically entail. An obsession with tax avoidance is perhaps my favorite topic when considering the “return on hassle.”

When you’re little, the world around you seems to turn like a play. And you’re at the center of it. Scenes change; sets turn over—without so much as an interruption. The show goes off without a hitch. The crew in black aren’t seen as they rush around the stage—but you wouldn’t have noticed them anyway. Because things happen somewhat magically when you’re a kid.

Awareness is the bedrock of financial planning. Awareness of incoming and outgoing cash flows, of risks and returns, of various investment vehicles, of economic conditions, of goals. Awareness. After awareness comes control. Controlling cash flows by directing them in the right investment vehicles at the right time over a long time-horizon to achieve those goals. For perhaps 70% of our lives this is what we are doing. We are saving, investing, and accumulating. Part of accumulating wealth is keeping our burn rate in check. As NYU Stern Professor Scott Galloway says, “Rich is having passive income greater than your burn. People on a path to money focus on their earnings; people on a path to wealth also focus on their burn.”