It’s always interesting to look at what’s trending as a topic in the investment industry. Most searches focus on topics such as – is [insert specific investment] a good investment? Or what should I invest in this year?
The mindset is interesting. Lower down the chain or not existent at all are topics like; defining my investment goals, strategies for investing in my retirement and strategies for debt reduction.
Many investors make the mistake of looking for products or asset classes before they have clarified what they are trying to achieve.
The challenge with the product first approach is that it can sometimes trap investors into a certain way of thinking that may not serve them well.
An interesting example of this is a middle age investor I was chatting with recently. He was asking if it was a good idea to invest in crypto currencies. I asked him what he was trying to achieve. He said he was looking to make some regular money on the side to supplement his monthly living expenses.
After highlighting certain aspects and characteristics of currency trading it soon dawned on him that what he was seeking; regular monthly income, and the asset class he was looking at weren’t compatible. I’m not saying anything good or bad about crypto currencies here, I’m highlighting the fact that different asset classes aren’t necessarily good or bad, they just have different characteristics.
These different characteristics need to be matched to the circumstances, goals, needs and desires of the investor.
Warren Buffet is famous for his “circle of competence” aphorism where he likes to remind investors to stick to areas of investing that they fully understand and have natural abilities for.
Given my friend worked over 40 hours a week, had a young family, had never traded currencies before and didn’t really understand how currency markets worked, it was obvious that he was outside of his circle of competence.
So, what’s the best investment for 2022? It’s the one, or basket of many, opportunities that satisfy your circumstances, goals, needs, and desires.
Don’t fall into the trap of being an asset type fanatic, just stick to your circle of competence and be patient. You’ll find a lot more success with that strategy.
Ben Godfrey, CEO