Most folks have multiple roles-as business owners, professionals, employees, consumers, residents, students, parents and investors. So our views of the world may vary according to whatever hat we’re wearing at any one time. This complexity of individuals and their range of motivations, depending on their circumstances, highlight the inadequacy of cookie-cutter or automated investment solutions.
For instance, if you work for a taxi booking firm, you’re naturally heading to consider greater-than-usual curiosity about technology that allows consumers to book cabs straight. That’s because these new disintermediated services may influence how you make your living. On the other hand, as a consumer you might welcome any initiative that increases competition, widens your decreases and choice prices.
As a taxpayer, you may look on attempts to encourage user-pays systems in colleges kindly. But as a parent, you may be concerned about your teenage children dealing with excessive debt to invest in their education. As citizens, we might champion a laissez faire approach to financial policy. But as investors, we might feel uncomfortable about certain policies and seek to express our values by placing limits about how our money is invested.
The point is everyone has the right to their own opinions and smart people can legitimately and respectfully disagree on many issues, including about what might happen in the global world economy and about how policymakers should act. The trick is in being clear with ourselves about which hat we are wearing whenever we make investment decisions and the trade-offs involved with reconciling our personal opinions with our desired investment outcomes. For instance, you may have an impression on what central banking institutions should do in normalizing interest rates.
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But you don’t want to hold your decision about your portfolio allocation to longer-term bonds on your view of the interest outlook? As a worker in an industry going through digital disruption, you may have an aversion to the technology putting you out of employment. But as an investor, would you like to forsake earning a share of the wealth from the new forces created by this disruption?
The point is we have many jobs in life and there often can be conflicts between our personal beliefs and opinions in one area with this wishes in another. Our strong view on the economic view may lead us to believe the market should come around to prices assets predicated on that opinion.
But the energy of markets is such that they reflect the views of thousands of people, a lot of whom may hold contrary views. Remember, also, that rivals in those markets include professional investors with multiple sources of state-of-the-art and information technology. And also they have trouble getting these forecasts right with any consistency.