The best advice I have ever been given when it comes to investing is “pretend you are in a dark alley, late at night and everyone is out to get you”. Very true, or when was the last time that someone just came up to you and gave you money? The whole idea of capitalism is that more is good, and when the only way to get more is to take from others, well then that is just the way it has to be. Survival of the fittest, evolution, kill or be killed, all perfectly played out in the way we invest our monies.
That much understood and appropriately disillusioned, let us figure out the best way to attack the capital markets. The first thing we need before we go and do battle is to assemble our army, and understand how to use all the weapons we have at our disposal. Do we want brute force and go for tanks and troops? Which in our world, would mean buying stocks and bonds – the stalwarts of any good investment strategy. Or do we need special forces, ninjas and helicopters for specific target attacks? This would be investing in trading strategies (hedge funds) and other alternatives. And do we want to use instruments of death, nuclear missiles, or chemical warfare? You know, using financial derivatives and employing leverage and using margin or there alike.
Clearly, we need council and generals to figure out the plan of attack, given the perplexity of warfare (and random markets, as such). The private banks are always good with their shiny armour and swagger of self-belief, much different to the IFAs, which resemble more the working man’s financial engineers. And who to choose when it comes to feeding the troops and maintaining the equipment? We would need accountants, fiduciaries, administrators, custodians and tax advisors to help us manage the assets.
We would also need to choose the point of attack. Do we progress our interests by land or by sea, and to which exchanges, markets or regions should we allocate our monies? All of these decisions will have a large impact on the success of our strategy. And then there are the costs and fees it entails to go to battle day after day, for we are at war for so long as we invest our monies. Such are the (brutal) realities of investing and there is no sugar-coating the concepts of risk and return and zero-sum games. Better to know what it is we are getting ourselves into, and eyes wide open before it is too late, and all of the money is gone.