Recently I read about something called the “Eat Right for Your Blood Type” diet. It’s advocates claim that certain blood types require specific foods because of their ancestral history. With all of the dietary factors that affect your health and well-being, would you base your diet on nothing more than your blood type? After all we don’t have the same life styles, do the type of work, nor have the limited knowledge base of our ancestors. Clearly there are more important dietary factors than blood type, including things such as the age, structure, weight, and condition of a person.
This latest diet fad got me thinking about how different investing in today’s market is versus 25 years ago. Our financial markets have evolved significantly in terms of complexity in just one generation…and the pace of change is accelerating. Consider these investing “factors”:
- There has been a proliferation of derivatives and other financial securities of all types.
- The ever-increasing speed of and access to information in today’s markets has created fundamental changes in investment strategies.
- There are now more mutual funds than companies listed on the New York Stock Exchange.
- The number of hedge funds is growing exponentially.
- The global business environment is dynamic and integrated in a way unimaginable 25 years ago.
- Private equity buyouts and mergers and acquisitions are proliferating as the world is awash in cash since the Fed opened the spigots in 2001.
And yet the typical Wall Street firm will tell each of their clients to invest in the exact same way, using an almost identical asset allocation of stock and bonds regardless of the specific characteristics of the investor. Makes about as much sense as a fad diet. True, it may have made sense to the typical investor of 25 years ago. But today’s investor has so many more options designed to fit their needs. Given the relative complexity of the financial picture of today’s investor, it is crucial to customize the investment approach for each investor’s portfolio.
Should we invest in the same way as our predecessors? Using some generalized or commoditized version offered to us by the Wall Street marketing conglomerates? You deserve more than that. Your individual financial story (and history) is different from other investors. Today with the right investment advisor you have the capability, and the right, to invest with regard to your “age, structure, weight, and condition” to ensure your financial health and well-being.