After fifteen years of managing money professionally, I can safely say that I love my job. One fulfilling part is working with people to understand their financial needs and goals and coming up with a financial plan and portfolio of holdings that gives them the best chance of achieving those goals. Another exciting part of the job is everyday getting a chance to try to understand what is going on in the world, (not just the investment world, but the whole world), and seeing, first, if any events affect the plans and holdings of clients and, second, digging into whether any recent events, decisions or circumstances provide opportunities to add potential investments to client portfolios in a way that presents a good chance to generate long term wealth with an acceptable level of risk. Of course, finding ways to generate wealth for clients is always helpful to enable clients to meet their financial objectives. By the same token, understanding a given day's events also helps to know when it might be time to re-evaluate particular client holdings. The point is not to be a day trader but to get up every day to learn new things about the world -- business, politics, science -- and then use that knowledge to manage client wealth, over time, by being in the right investments, businesses and industries and avoiding those places where risking capital is just not worth the likely rewards.
Managing money is not just following current events, however, it is also understanding why markets and the people (or machines) trading in those markets are making certain buy or sell decisions about investments in relation to events and why these decisions, on a market wide scale, often reflect unwarranted over or under reaction. This is the "chess" to the "checkers" of just following the news. In an age of short-term trading, machine trading based on algorithms, and huge amounts of money sloshing around financial markets at any given time, it is the ability to know when markets occasionally and briefly "get it wrong" that can add value to investment portfolios by allowing an investor to add investments of great long term potential value when they are "on sale".
This important ability to find investments representing good value is not just about understanding markets but also involves understanding ourselves; specifically, why people make financial decisions and why those decisions are often wrong. This comes out of the discipline of behavioral economics and one need not be an expert in it to use its principles to understand why people's behavioral glitches, sometimes playing out on a market-wide or even global scale, can, if you can control your own behavioral follies, provide the opportunities to generate wealth over and above general economic growth. Sometimes these glitches involve herd-like selling of an unpopular stock that is in the news, other times it is failing to see a dramatic change that a company makes to the status quo of an industry. If an investor can be aware of the news and the behavioral biases reflected in reaction to the news, there is opportunity to build meaningful wealth over time, even in well-known and already omnipresent industries and companies.
The news flow of 2018 has been fast and furious. That doesn't mean that great investment opportunities arise every day, but you certainly need to be present every day in the investment arena -- searching, listening, evaluating -- to find tomorrow's great wealth-creating investments. If you cannot be there yourself, or choose other things to do with your time, then Arrival Capital can help do that for you; burrowing deep into the news of the day, and the trends and developments of the weeks, months and years, to find those investments that can lead to the creation of wealth as part of a carefully constructed individualized investment portfolio. After fifteen years, there is never a dull moment, even during the summer. Enjoy yours!
