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| Adrian Mastracci, investment counsel at KCM Wealth Management, says “You are in the marathon of investing. The slow and steady path to accumulating your nestegg may be boring and unexciting. But it has worked very well for centuries." |
For Immediate Release
Vancouver, BC (May 25, 2004): What can investors learn from the investment practices of long ago?
Adrian Mastracci, investment counsel with Vancouver's “fee-only” KCM Wealth Management, comments, “Investors often think of portfolio theory as being a modern phenomenon, developed in the last century. Perhaps, with particular emphasis on the last fifty years. After all, it is commonly referred to as Modern Portfolio Theory, or MPT for short.”
“For example, Benjamin Graham is still considered the father of value investing. His 1934 book ‘Security Analysis’ co-authored with David Dodd is a staple of many business schools,” says Mastracci.
“You can read volumes of other books, magazines, newsletters and educational papers all devoted to MPT,” adds Mastracci, “Television, the internet, radio and a variety of print media cater to MPT.”
“Today, professionals and investors have a large basket of MPT tools to analyze, benchmark, select, monitor and attend to every conceivable portfolio requirement,” notes Mastracci, “It’s easy to be swamped in MPT.”
“However, I have a little different perspective. Modern portfolio theory is not that modern and you don’t have to be swamped. In fact, it has a long and rich history spanning centuries. Moreover, the fundamental practices have remained much the same,” indicates Mastracci.
“A little explanation. Not long ago, I was revisiting some of the plays I had studied in high school,” recounts Mastracci, “One was 'The Merchant of Venice’, a comedy written around four hundred years ago by William Shakespeare (1564-1616).”
“I discovered one paragraph that ought to interest every investor,” continues Mastracci, “A very insightful paragraph.”
Let’s turn back the clock to the days of Shakespeare and focus on the words of Antonio, the Merchant of Venice, spoken early in Scene 1 on a street in Venice:
SALARINO
But tell not me; I know, Antonio
Is sad to think upon his merchandise.
ANTONIO
Believe me, no: I thank my fortune for it,
My ventures are not in one bottom trusted,
Nor to one place; nor is my whole estate
Upon the fortune of this present year:
Therefore my merchandise makes me not sad.
“Stop the presses right there. Shakespeare would have made a very insightful investment advisor,” remarks Mastracci, “I would hire him today to dispense the same eloquent advice to my clients.”
“Even four hundred years ago, Shakespeare professed the benefits of diversification,” observes Mastracci, “Antonio’s portfolio had various ships, going to several destinations with different cargo.”
“That is terrific advice,” points out Mastracci, “Had the Nobel Prize existed in his day, Shakespeare would surely have been awarded the one for investment acumen.”
So you ask, what can we learn from past investment practices? Here are but a few:
- For starters, don’t reinvent the investment wheel. There is a saying about the more things change, the more they stay the same. Perhaps it’s true, the situation is not so different today, if at all.
- The investment practices of long ago still work very well, thank you. Antonio’s approach is still good advice now. Shakespeare would be proud.
- Today, many investors have portfolios that could benefit from the same fundamentals that made good sense in centuries past. Vintage portfolio theory at that, but very modern for its day.
- Shakespeare’s investment wisdom has truly withstood the tests of time. Something all investors aspire for their portfolios.
- Successful portfolios are boring by design. On the other hand, if you have an exciting portfolio, consider a second opinion to determine if it’s really doing what you expect it to be doing.
- Diversification in time, cargo and ports of call is still basic investment necessity. Minimizing unnecessary risks and attention to asset allocation assist your portfolio quests.
- Accumulate your nestegg slowly. Add a sprinkle of capital preservation along the journey. That way your merchandise won’t make you sad either, just like Antonio.
“You are in the marathon of investing. The slow and steady path to accumulating your nestegg may be boring and unexciting,” explains Mastracci, “But it has worked very well for centuries.”
“Heed the savvy words of Shakespeare,” suggests Mastracci, “His perspective and approach serves you as well today as it did centuries ago when it was so eloquently recited on a street in Venice.”
“The vast MPT tools of today make it easier to deal with your portfolio,” Mastracci concludes, “However, the fundamentals of managing your portfolio have remained much the same.”
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