was in classroom tutelage, under Lloyd Best, that I first
heard his description of our maroon culture
of innovation and entrepreneurship. I believe he was referring
to investors who had mastered the rules to survive, but
never to prosper.
His recurrent thought was that few understood that everything
depends on what resources are appropriated by whom and deployed
to what end and in what sequence.
So regardless of the macroeconomic variables of price inflation,
interest rates, money supply and balance of payments, you
are what you are, based on your ability to harness resourcesyour
own as well as that of others.
The individuals role in investment as a contributor
to the economy is often the least appreciated. It falls
in the realm of microeconomics whereas macroeconomics deals
with things on a national scale instead of from the perspective
of the household and individual.
An individuals investment portfolio is really how
that individual chooses to commit his funds to acquire assets
which he will hold over a period of time. Time is always
a critical element. The more time you have to achieve your
desired goal, the more risk you can take in selecting your
There are several other variables that affect the individual.
A variable is anything that can change if you look at it
at different times. For example the exchange rate, the interest
rate, mortgage rates and the price of land are all variables.
These will influence your ability to acquire assets. If
you wanted to acquire ownership in a bank, the easy way
would be to buy stocks or shares in the bank. The best time
to buy is when the price is low.
Hypothetically, if the macroeconomic report says the stock
market has been falling, and returns are low, now may be
a better time to buy stocks. The price of the individual
stock is more likely to be lower now.
But the reverse thinking affects investors adversely: because
the market is not doing well, people do not want to participate,
or even begin to sell off what they have. If youre
a day trader, meaning you want to make money quick, this
may not apply to you. But traditionally, the buy and
hold for a long period strategy is the better strategy
for these types of assets.
There are two broad classes of assets: marketable securities,
and real assets. A real asset is a physical thing, such
as a piece of land, gold, or building. It is tangible. A
marketable security is a paper claim to a real asset. The
paper claim means that you have a piece of paper which represents
some or total ownership title. They are called marketable
securities because they can be bought and sold easily, by
investors. The typical securities market is called a stock
How much of which classification you select must be part
of a structured financial decision. In truth, we are not
the victims of variables; we are the actors!
According to Best: It is fashionable to treat the
contours of this landscape as if they were something disreputable,
instead of proceeding on the premise that they are simply
the outcome of historical and system forces.