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What We Can Learn from a 500-Year-Old Investing Style

Written by Rita Silvan | Published on December 4, 2018

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Bill Gates? Jeff Bezos? Warren Buffett? None of them holds a candle to Jacob Fugger, a.k.a. Jacob the Rich. Fugger was a German financier who amassed a fortune equivalent to US$400 billion in today's dollars and also paved the way for capitalism. Today's investors can learn a thing or two from this Renaissance financial master born more than 500 years ago.

Do the Math

As a young man, Fugger left Augsburg (now part of Bavaria, Germany) to study in Venice, where he learned a new way to double-check accounting figures. He created the first consolidated balance sheet. He also employed auditors to check up on his far-flung branch offices and review expenses.

Having an easy and reliable system to access all your financial records and to keep track of cash flow, investment returns and expenses to ensure you're on track to reach your goals is definitely important as an investor.

And while record-keeping should always be a priority, investing legend Benjamin Graham made a good point when he said... "The best way to measure your investing success is not by whether you're beating the market but by whether you've put in place a financial plan and a behavioral discipline that are likely to get you where you want to go."

Gain Power Through Knowledge

Monarchs relied on men such as Fugger to raise great sums quickly for military or political campaigns. Thought to have employed a network of spies across Europe, Fugger could assess an emperor's creditworthiness. He was so interested in trade and commerce that he hired a network of couriers to collect information, which he printed and distributed to clients — the world's first news service.

Smart investors do their research and understand the risks of investing. Today, unlike in Fugger's time, company information is easily accessible through public records.

Benjamin Franklin had it right when he once said: "An investment in knowledge pays the best interest."

Grow Your Circle of Influence

When Fugger left for Venice, the business capital of the day, he learned the latest accounting and business methods, but also expanded his social capital with valuable contacts that served him throughout his life.

Investing is an opportunity for life-long learning, which can be enhanced by joining investor communities and sharing knowledge with others.

While there appears to be some debate as to who said, "Education is not the filling of a pail, but the lighting of a fire" (it's widely attributed to Irish poet W.B. Yeats), it's an apt sentiment for DIY investors who know there's no shortage of learning opportunities or discussion topics when it comes to your money.

Find the Asset Mix That's Right for You

Fugger is said to have divided his vast wealth into four equal parts: stocks, bonds, real estate and gold coins.

It's estimated that his annualized return over 33 years was 12 per cent. Until the age of 40, Fugger took many financial risks. However, in the latter part of his life, he focused on preserving his wealth and influence.

Establishing an optimum mix of assets such as stocks, bonds, real estate, commodities and cash that matches your goals, risk tolerance and lifestyle needs at different life stages is key for investors.

In his book All About Asset Allocation, Richard A. Ferri writes "Asset allocation eliminates the need to predict the near-term future direction of the financial markets and eliminates the risk of being in the wrong market at the wrong time." A diversified portfolio can help you manage through market ups and downs.

Be Confident

Sovereigns, such as Charles V, the Holy Roman Emperor, had the power of life and death over their subjects, yet Fugger was confident enough to demand the prompt repayment of their loans with interest.

No one has more at stake in your investments than you. Build your confidence by digging deeper into research, discovering how others have pushed themselves or trying out new investment strategies in a practice account to determine if they're right for you.

Stay Calm

Fugger kept his cool in risky situations that could have ruined him. Even during periods of debt, he maintained his public displays of wealth and good humour until circumstances were back in his favour.

Although financial markets and personal circumstances are always changing, successful investors are level-headed and avoid panicky behaviour that can harm returns. Find out what you can do to keep a level head in 3 Ways to Keep Emotions in Check When Investing.

Give Back

In the latter part of his life, Fugger created a charitable trust and built Fuggerei, a city-within-a-city in Augsburg, to house Catholic labourers, artists and their families. He decreed that the rent must never change from one Rhenish florin (approximately 0.88 euros today, or around $1.33) and that residents must pray three times daily for the soul of the founder and his family. The gated residence has been continuously occupied since its inception and is now run by Fugger's descendants.

Consider your financial legacy when planning your future. What impact do you want your wealth to make?

Interesting Fact: According to Statistics Canada, Canadians donated $8.9 billion in 2016, the most recent year for which data is available.

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