Sunday, March 20, 2011

Sailing vs Investment

Hi all

It has been a while since you have heard from me, but I am in great spirit and
still doing very well on this beautiful
ocean!

We are waiting for the favourable east wind to blow which will allow us to make
a better run in for Madeira. Like all good
things, this cannot be rushed or forced and we will just have to make the best
with what winds we are given on the day.

I have come to realise that there is actually a big link between sailing and
economics (more specifically investing)...you
get one type of person that wants to sail as fast as they can and get to their
destinations in the shortest possible time.
They are likely to choose to have a full main and head sail, which will be
pulled in tight. This will cause their sails to
be under an immense amount of pressure. They could cause their vessel to be
taken on a very bumpy ride, and possibly even
cause them to be dismasted or to burst a sail in heavy winds. These sailors can
be compared to the risk-loving invesors.
They are the speculators who want the largest returns, even if it adds risk to
their portfolios. They want all the benefits
sooner rather than later. Maybe a Harly-Davidson?

On the opposite side of the spectrum, you get the risk-averse investor. This
type of sailor will be cautious of heavy winds,
and will choose to reef their mainsail and furl their genoa in a bit so as to
have less sail exposed to the wind and thus
take the pressure of the wind better. They may even choose to open their
mainsail from time to time to spill some wind and
save their rigging. They are not too concerned about how quickly they can reach
their destination, but are more focussed on
getting there (in one piece). This investor will tend to forgo some of the
attractive high returns in favour of the slightly
less attractive returns. But in doing so they reduce the amount of risk in their
portfolios and increase the likelihood of
reaching their investment goals. Maybe this is a safe, comfortable retirement in
the future.

So you may ask, how do I get the best of both worlds? This sailor will carefully
assess the weather files he/she can expect
to encounter on their journey, and then choose and adapt their sail trimmings
accordingly. Therefore in light winds they can
have full main and headsail out, but in the event that a gust, storm blows
through they will be able to quickly put in a
first or second reef in their respective sails and wait for the storm to blow
over. This investor will choose to have a well
diversified portfolio of assets (some risky assets and some relatively riskless
assets) thereby giving them slightly higher
returns than the risk-averse investor at the same time as a lower than average
level of risk in their portfolio. The trick
is finding a asset manager who can accurately establsh what type of investor you
are, and what you hope to achieve from your
investment. From there, they should be able to compile a tailor-made portfolio
of assets for you. Give me a call in a few
years by which stage I will be a successful asset manager/ investment broker and
I will gladly do this for you!:)

Quite funny how sailing can be related to other walks of life hey?

Our current position is 23* 41'N 33* 24'W 13:00 UTC.

Hope you all had a very relaxing weekend.

Chat later
Brad

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