Thursday, June 16, 2022
A man needs a code. Fellow financial farmers we are in turbulent investment times, and it is good to rehash the importance of having an investment code. What is your code? Is it...ahem...codified? Just like an NFL coach rolling into town to take on the opposing team, investors need a game plan of how they plan to invest, what catalysts spur action, what signals indicate distress, and what their exit strategy is...the old axiom of "if it can be measured it can be managed" rings true.
Consider my Absolute Alpha strategy for example. The goal is straightforward: A positive yearly return regardless of market conditions. How will the goal be accomplished? By utilizing momentum vectors. What is the benchmark? S&P 500. How is it implemented? A standard brokerage account. How are positions added or reduced? Direct buys/sells. This is just one simple example of a codified approach.
The major goal of having an investment code is the desire to manage outcomes within a certain time horizon, risk tolerance, and achieve certain financial results. A process is only as good as the data it is fed and the constructs of its creation. Having an investment code also solidifies the standard deviations which may occur...just how volatile is your process? What does the data say? How do you plan to react to the data?
Time and information may be the most valuable commodities of all, and having an investment code helps financial farmers glean what is and what may be...we already have a pretty good idea of what was.
June 16th for many Americans is a seminal day. It is the calendar day when you are finally working for yourself after bearing the yoke of excessive taxation and regulation for over half the year. It is a day of freedom. It is the day the Founders had once set to January 1st...obviously there has been some slippage! Nonetheless if you don't have an investment code, create one today. In many ways it will help define your financial success in the future. A man needs a code.