Tortoise or the Hare

In our world of constant media exposure, individual investors can be confused by many mixed messages. Live real time financial market news stations offer a steady stream of analytical programming. One popular programming format involves people with opposing views debating topics in an exchange format that often time digresses into a shouting match.

While political content shows can be easier to understand, investment programs can be a bit more confusing. This is because much of the debate regarding our capital markets often times involves people with one specific critically different fundamental basis for their views: Time horizon.

Investment advisors tend to take a longer term outlook while traders prefer to look at much shorter time periods. For example, an investment advisor might believe that the market is a good place for investors to gain equity exposure because of the long term prospects (market cycles can be measured anywhere between 5 and 10 years), while an active trader might refer to the market as having less potential because of economic and or political events that will take shape over the next week. Rationale behind long term Investment strategy and portfolio design can often times run counter to the instincts of shorter term market tacticians. While both sides of the debate hold valid views, the discourse may seem at odds.

Having a formal investment strategy drafted (Investment Policy Statement or IPS) can help clients feel a sense of confidence in their longer term objective while also addressing some of the more tactical issues regarding their portfolios. Achieving investment objectives requires broad perspective. Short term cycles require as much attention as longer term cycles. The most important factor is staying focused on the race. Whether you are the tortoise or the hare, each perspective should drive and anticipate clear action steps throughout varying stages of the capital management process.