Monday, September 28, 2009

Investing is Personal, Part 2

I have had the pleasure of advising a few investors of great significance financially in my life and I told them we would stand on top of our desk and yell if we thought they were making the wrong move. To be honest, I didn’t actually stand on top of my desk and yell, but I did say “I am standing on top of my desk and it’s time to sell” when the market peaked in 2000. The investors were unmoved, comfortable with the status quo in volatility and likely uncomfortable with the taxation they would bear when selling. The rest is history, advice spurned turned into money burned.

But investing is personal and what right do I have to deny them the comfort of their own persuasions? Thus, great investing and their results are a function of debate and a wrestling with facts and myths, perspective and context, history and human behavior. This is why it is important to start with philosophy and policy, our personal, unique astrological-type chart for navigating the investment ocean.

I am struck how little attention is paid to the contrarian view. It is hard to define a top or a bottom price in any asset class, but it is fairly simple to define where money is not available. This provides a starting point for research and the development of investment targets. The next step is to define sustainability of the target. Is it too early to invest? Is it too late? Does the investment provide a reasonable reward for the risk?

One area that is devoid of capital at this time is the Venture industry. The resistance by investors to consider even the most conservative opportunities is striking and will definitely result in well rewarded returns for the shrewd investor. Five years ago the toughest investment to source was exceptional venture investment funds - today you can have your pick.

The most popular investment today is liquidity, leveraged within a leading financial institution. Five years from today, I suggest the most popular investment will be private or semi-private growth companies.

Make sure you spend more time looking out your windshield instead of the rear view mirror - it’s much bigger, and it makes the drive a lot easier!

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