Safety First
What kind of investor am I?
Patience and aggressive opportunism is what you need.
It’s an odd combination, but it’s what works best.
— Charlie Munger
I have tried to find out by taking investor type surveys, but find that they only confuse the issue as the questions are all besides the point. Either my answers were missing the point or the questions were. Here are my efforts at the usual survey material.
Am I a “growth” investor?
Sure, I am happy to own growth, as long as I have underpaid for it. I want growth and value; perhaps I am just greedy.
Am I am value investor?
Value investor is a redundancy. “Investing” is short for value investing.
Am I aggressive?
Well, it depends what direction one might be aggressively pursuing. Am I aggressively trying to make sense of the world and respond prudently? Sure? Do I just go around all day with an aggressive attitude? I hope not.
How about risk? Do I like risk? How much risk do I want in the portfolio?
Now we’re getting somewhere. I despise risk. I want no, or as close to no, risk in the portfolio ever if one means the risk of overpaying.
So I am conservative?
In the sense that I like to be far far away from overpaying, then yes. In the modern colloquial sense that equates conservative with conventional, then hardly.
What do I allocate to bonds?
It depends entirely on the price. What bonds? What price?
What do I allocate to equities?
Which ones? What price? The question is absurdly incomplete without a price. How does any frugal person shop without reference to the price?
What about cash?
Yes, please. I like lots of cash. Sacks of it. Some Yankee dollars, some foreign fiat, and piles of gold and silver. Leverage is the opposite of flexibility and I generally want plenty of flexibility. To muddle the matter a bit, I want flexibility in case I want leverage in the future.
What does one make of such questions?
All of these questions appear to presuppose that we are only able to get fair deals and need only to pick which fair deal we want. How depressing. But the logic is utterly circular and useful only to the very kind of high priced helper who puts together such surveys. What if we want better than a fair deal? To take returns utterly unfairly priced relative to the safety that we can maintain.
I, for one, want safety first but not just because I’m being a wuss. I want safety first because safety — buying securities only at close proximity to their real economic downsides — is a great perch from which to be predatory. I want safety because when I am virtually certain to not lose much, only then can I size positions and go after opportunities for large potential rewards. So, in the end, we can be safe and at the same time go after the most mispriced assets with catalysts to unlock returns. We can be safe predators. Maybe even “aggressive” predators.
