At the beginning of the New Millenium, the concept of
investing, of “doing something” with your excess capital, has
never been stronger. While this applies to citizens
everywhere, nowhere has it hit home as much as in the U.S.
where many of our clients live and do business.
Various “analysts” and “experts” have moaned that the
savings rate of the U.S. citizen has gone negative. What
they fail to understand…or choose to ignore…is that savings
no longer represents anything in the United States. First,
there is inflation, always understated by the government,
usually by at least 50%, which uses various tricks and
numbers games to convince the unwary that all is well. The
value of savings is constantly going down.
Additionally, the American Internal Revenue Service has
chosen to tax even the negligible rate of return on savings,
actually punishing sound savers for doing so. The “market”
has responded by pulling savings out of the banks and
risking it on what is arguably one of the strangest bull
markets in history.
But two questions come to mind: (1) Why should anyone
invest? and (2) how should they go about it?
While we would not claim to have the definitive answers to
either question, we feel we have enough background to at
least offer some suggestions.
WHY DO IT AT ALL?
1. To get a better rate of return than one can get on bank
2. To create a large enough egg to retire on without having
to sacrifice your current quality of life, particularly if you
happen to live longer than expected.
3. To provide for the ever growing cost of your children’s
4. To safeguard yourself should major illness strike.
5. To ensure that your spouse and children are not left
destitute should you die.
6. To provide funds for travel, study, rest and recreation.
7. To pay off debts and obligations and to live as credit-free
8. To take full responsibility for your life and not rely on
government doles, pensions and/or Social Security
Systems should they fail, a distinct possibility in the
Here we’re going to explore a lot of possibilities. Some of
the thoughts are ours; others came from sources whom
we’ve come to both admire and respect. In any case, you’ll
need to choose what works for you.
First, we believe you need to work out who you are
as an investor. Much of what you do should be based on
your own personality, knowledge and what makes you feel
We suggest that you honestly evaluate the kind of person
you are. Do you really like risk? Are you the kind of person
who likes to plunk down $20 to $100 bets on impulse at the
racing track or casino?
Or are you the kind of person who, 50 years ago, would have
been exclusively into blue chips, utilties and similar “safe”
investments, holding on for the long haul? And who, if he
does visit a casino, plays quarter slot machines and avoids
the expensive games?
Maybe you are a combination of these, wanting solid
investments, but willing to take a risky flyer now and then?
Whatever the case, we feel you need to consciously
recognize who you are as an investor, what kind of player
you’ll be at the table, no matter in which country that table
may be set up. (There is nothing “wrong” with being at one
end of the spectrum or the other. One is not “better” than the
other.) The reason is simple: If you invest contrary to your
nature, you are not going to be happy with your investment
strategy nor will you sleep well.
If you’re strictly conservative, making a lot of high risk
investments will leave you feeling out of control, nervous
and very out of sorts. You won’t trust your choices, will trade
emotionally, getting out of those which frighten you because
of their volatility, just when you should be letting some of
them ride. Or, worse, remaining in losers long after they
should have been dumped, buying more of that stock on the
downhill run, desperately trying to recoup your losses. Your
emotions will seriously colour your choices, never a good
At the opposite end, if you’re risk taker, trading slow moving,
stodgy and conservative stocks will leave you totally bored
and unsatisfied with what you’re doing. You’ll miss the
excitement of the game and will constantly be wanting to get
out of the slow movers into something with more pizzaz, as
the Americans put it.
So, to quote the old adages, “Know Thyself” and “To Thine
Own Self Be True.” Only in this way will you find satisfaction,
happiness and peace of mind.
Secondly, we believe you need to work out a
philosophy of things in which to invest. Find areas of
investment which interest you. If you understand energy
issues, for instance, there are plenty of both high risk and
conservative stocks and commodities in which to invest.
You’ll enjoy continuing to study the field, happy that you are
working with known values.
If you have a good background in technical or biomedical
issues, you’ll be far more knowledgeable in your investment
choices sticking to these areas.
One group which we’ve studied, relies on what they call
“freedom” issues, companies which produce goods or
services which empower individuals, which makes things
either cheaper to buy or easier to use. They scour the world,
willing to make investments anywhere they find solidly
managed companies which are making a difference in the
way we live, “freeing” us up to expand our lives. We find this
particular philosophy a sound one. However, you may have
an entirely different one which suits who you are and what
you know. Keep to it.
Thirdly, you need to plan some constant study.
Never before in the history of humankind has there been
such a rate of change as we’re experiencing now. And the
rate itself is increasing. What was sound six months ago is
unworkable today, simply because some new technology
has entered the picture. Old industries, once considered
financially sound, are being overtaken by newer
technologies…or being undercut by the same industries
located in other countries with a far lower labor rate and
Technology changes even the old. Robotics, really
instituted by the Japanese whose “old” infrastructure was
completely destroyed during WWII, almost totally overtook
the American auto industry which was relying on 1930s
technology in old and very outmoded factories. That
particular US industry either had to change…or fold. They
changed. Note, however, how that changed the fate of the
autoworkers unions. They, too, had to adapt, to go with the
So you must keep constantly educated as to the newest
developments in your field of interest. And no longer can
you restrict your education to just what is happening in your
own country. Changes and improvements in other
countries will rapidly impinge on world markets. Keeping
up with such changes is your best insurance that you’ll stay
ahead of your investment game.
Fourthly, Learn to Think Globally! It would be
difficult to overstate this critical strategy. Virtually all markets
are now international. India, as an example, has some of
the best computer programmers in the world. Their
software products are world class. They can compete with
anyone. And they do it at wages lower than most of the
“developed” nations. If you’re investing in technologies and
ignore the information and products coming out of India,
you’re playing with a short deck.
Other countries, too, are growing in their competitive
structures. Individuals, as never before, are acting as
corporations, able to do business from anywhere in the
world which connects to a modem….or a satellite. Creative
entrepreneurs, carrying six pound laptops, are complete
businesses, able to compete with anyone, anywhere.
And Fifth, learn to adapt. Even if you’re a
conservative, work to become used to the idea of being
ready to change your game plan quickly when new
information becomes available. Sticking with the old, which
has already become outmoded even though it’s only a few
years – or a few months – old, is a recipe for financial
disaster. Think of being a chameleon, ready to shift to the
new background while still maintaining your sense of who
you are and how you best work.
We wish you happy and successful investing.