Investing is the process of putting money to work. Investing is very simple: Spend less than you earn, and put the difference away where it won’t be spent easily. The goal is to have money in the future.
Asset Management is the process of growing money that is invested. Asset Management is about making choices with the goal of protecting and growing the money in the future. While this sounds simple, and many, many writers and speakers give their two-cents worth regarding what to do, the bottom line is that the future is unknowable, and therefore experience, access to information, models, and historical contexts can make a huge difference in gains and losses.
Investing can ONLY be done by the individual/family; Asset Management can be done by anyone. Here’s the sad part: Investing, the process that only the family can do, is not done by the majority of families. The second sad part is that there are thousands of people who think that they can be good asset managers but do not have the time, talent or tools to do so. Hundreds of thousands of families don’t try to manage their money and give it to banks and financial institutions to “manage” not realizing that the first responsibility of these firms is to their shareholders and not the clients.
My advice to families: Invest. It does not have to cost anything in happiness to spend less than you earn. And then, find an Asset Manager who pays attention to cycles.
Those people who survive and thrive over time realize that there are periods of abundance and periods of famine; a time to reap and a time to sew; it has been the story of history for thousands of years. In periods of abundance, invest and save. But when adversity is at hand, you must be able to grasp the change and willing to change course / pick up and move. Cycles occur all around us, and the impact the security and value of assets.
The good news is that our clients have done their part – they have Invested; they have built-up assets for their future use.
Our greatest value to our investors is that we understand the cyclical nature of asset management and have accumulated measures to monitor the state of markets and economies, have indicators to give us transition points, and defined plans of action. We know how devastating it has been when the money that families had saved to get them through retirement was cut in half by cyclical stock market changes. We have watched as political changes caused family wealth to be confiscated. In both types of traumatic conditions, when the situation was turning for the worst, it was observable and the solution to protect one’s self was known and possible to do. The difference is in being aware, having a plan, and most importantly, in actually executing the plan. We have specific measures, indicators and rules to “force” us as investment managers to face reality. But it all starts with knowing that cycles matter, and not simply following some blind asset diversification mix in perpetuity. Our processes have produced annual gains above what passive managers have delivered, and we are prepared to protect our clients’ assets when the period of abundance wanes.
Anyone can be a great asset manager when the markets are going up. But as Warren Buffet is purported to have said, “Only when the tide goes out do you discover who's been swimming naked.” Don’t be caught with your pants off.
Worth thinking about...
God bless you,
Ed & Branson