Seth Levine is a professional, institutional investor focused on selecting high yield bond positions for a financial services company. He is also the creator of The Integrating Investor where he blogs about macroeconomic and investment strategy related themes. Seth holds a Bachelor of Science degree in Mechanical Engineering from Cornell University and is a CFA charterholder. You can learn more about Seth at www.integratinginvestor.com and follow him on Twitter at @SethLevine2. Please note that any opinions and views he expresses are solely his own and do not reflect those of his current of former employers.
Despite the opulent or debauched images one might have about the investment industry (depending on one’s perspective), the fact is that investing is a highly intellectual pursuit. I don’t mean this in the colloquial sense where one ruminates on meaningless abstract ideas purely for contemplation’s sake. Rather, it is an immensely cognitive and productive activity. Successful investing doesn’t require exceptional physical conditioning, brawn, salesmanship, “people skills”, mathematical aptitude, or a high IQ. It entails (I think) developing some kind of mental model for how the world works. Not only must this model display some degree of accuracy (i.e. be a good one), but one must maintain conviction in his/her model and have the integrity to stick to it through thick and thin. Said differently, one needs a well-defined investment philosophy.
It’s no secret that emerging markets (EM) are in a bit of a rough patch. While the unfortunate events in Turkey garnered most of the attention initially, nearly anything related to EM has slid in value. What exactly is going on here? Is this just another acute crisis making its way through the lesser developed regions of the world again? Or have other signals emerged to suggest there to be a larger issue at play? Given the is-ought approach we take on this site, it’s worth digging into some more. After all, a better grasp of what this market driver is—if anything—should better inform us for how we ought to position our portfolios.
Let’s face it; we investors are all after the same thing: return. While individual risk tolerances and expectations might vary, the purpose of investing is universal: to preserve and/or increase wealth using that which we already have. It’s a distinctly human activity. While there may seem like an infinite number of ways to invest—and in fact there are—at the end of the day, I believe you can boil each down to either a discretionary or systematic approach. Why just these two methods? Investing draws heavily upon one’s cognitive ability. Human reasoning operates in just two ways, through induction and deduction. I find that the discretionary and systematic categories align quite well with these.
There was a period of time when I was obsessed with home improvement shows. I’d watch almost anything on the subject: Backyard makeovers, kitchen remodels, gut renovations, you name it. It’s fascinating to see what a skilled craftsman can do with the proper tools. In fact, if there’s one lesson I learned from these shows it’s the importance of using the right tool for the job.
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