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 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
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
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
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
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).