Sunday Morning Coffee

Sunday Morning Coffee: The other day I posted a follow up about a money manager who believed she could short platinum as a proxy for shorting the euro. There were a lot of good comments including one reader who observed that investing should not be this hard. This is a great comment on many levels.

In thinking about how to invest (this will be different for each person) the starting point is to figure out what the real goal is. In my opinion most people simply want to have enough money when they need it. Most people get there by having an adequate savings rate, staying diversified, having a suitable asset allocation and then not succumbing to panic.

Obviously people have a whole range of goals so the important thing would be figuring out the correct goal for their circumstance. I think too many people target the incorrect goal for their investing.

Everything else then becomes about how to invest toward that goal in a manner that is realistic with time available to spend on the task and consistent with thought process, personality quirks and tolerances. In hiring an advisor it is crucial that the client buy in to whatever the advisor does. Hiring the wrong philosophy, even if the results are good, is a bad way to go.

Just about any investing guru would likely tell anyone to keep it simple. In this context the word simple is vague and can take on many meanings. Whatever you do in your portfolio there will be someone who thinks it is simple and someone else who thinks it is complicated. The money manager using platinum as a proxy for the euro does not think it is so complicated.

Clearly people should not invest beyond their level of understanding or time available to spend on the task but I am all for learning as much as possible, make that continuing to learn as much as possible. This is also a function of time available to spend and also willing to spend.

My personal interest level is probably pretty evident both in terms of career and interest in writing which is why posts like the ones from the couple of days are of interest personally. An investment process is something that should evolve as more learning and market experiences are taken in. To that end I think there is also value in exploring how other people come at the problem--this is where take little bit of process from various sources to create your process comes into play.

DIGITAL JUICE