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Wise investment strategy should be tailored to mesh with personality | |||
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By DAVID MOON, Moon Capital Management Sitting next to the railroad tracks in Asheville, North Carolina, is a little restaurant named The Depot. It is a quite pleasant place. Jess, the bartender, knows everyone's favorite order before they sit down. The burgers are good - not great. But the ambiance is incredible. As you enjoy your meal, a train rumbles by, fewer than ten feet from your table. On a recent visit, like a kid, I pressed my face against the window as a train passed, feeling the power of the massive machine, set against a majestic mountain backdrop. "Mr. Bojangles" played on the jukebox. My friends and I immediately decided we liked Asheville. Of course, Knoxvillians have been talking about Asheville (and Chattanooga) for years, lamenting the progress each has made in <fill in the blank of your favorite thing, here.> But what has each really done? Asheville and Chattanooga are examples of cities that have taken advantage of their natural strengths and advantages. Asheville didn't install railroad tracks so they could build a restaurant named The Depot next door. Chattanooga, even with its huge foundation wealth, didn't install a downtown river to make its aquarium more attractive. Some things are diamonds; others are rhinestones. In the right place and setting, rhinestones can look pretty attractive. The key is to know the difference. The same is true for individual investors. If you are naturally an aggressive person, it makes little sense for you to swing for homeruns in your retirement plan. Imagine a seven foot, 370 pound basketball player taking three point shots or trying to bring the ball up court; it's not a pretty sight. During the late 1990s, many naturally conservative investors took all sorts of risk they would never take under normal circumstances. Alternately driven by fear and greed, many of these people became engrossed with their stock market activities, spending hours on the computer or watching CNBC, sometimes making money; sometimes losing it. Ultimately, many of these people lost significant money. And they were never happy during the process, even when the market moved their way. The problem is that they were following a strategy that was inconsistent with their core beliefs and personality. Socrates was once asked why Alcibiades, who was brilliant, was always unhappy. Socrates replied, "because wherever he goes, Alcibiades takes himself with him." Life is short. It is too short to spend it in an uncommitted, malleable state, never fully understanding your strengths and weaknesses or your goals and plans. Did the bear market of 2000-2001 incite you to abandon your investment plans for retirement? Or did you not have any plans to abandon ' just a random collection of individual investments? If you are young, time is one of your best strengths in working toward retirement. Use it. Let the power of compound interest - and the historically superior (yet volatile) returns of the stock market work in your favor. You will do little but torture yourself constantly jumping from one strategy to another. That's no strategy at all. You should identify a strategy that accomplishes your goals, yet is consistent with your core personality and strengths. Otherwise, you are relying on a sort of investment grace to be your financial savior. If you are not so young, risk takes on a different meaning. You have less time to stand in the ring and duke it out with volatile investments. Without knowing your own strengths and weaknesses and developing a plan around them, however, you may be forced to adopt an investment strategy that is not in perfect harmony with your personality. If so, you may find yourself like Alcibiades. In 548 BC, the Greeks built the Apollo temple at Delphi. Above the main doorway was the phrase "Know Thyself." That is not bad advice, even 2,500 years later. David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).
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