A macroeconomic thinker believes he understands the biggest trends going on in the world and thus allocates his capitals in the sectors set up best to protect and grow his capital. We’ll continue our discussion of different investor styles by looking here…
If you’re more of a macroeconomic thinker, funds might be the most appropriate solution to speculate on the directions of different markets. By using funds, you are not as subject to a bad news event destroying the value of your portfolio because one company had something go terribly wrong. If you own a fund, the one company might make up a tiny percentage of your holdings and not affect your much because the other companies that you own within that fund for that sector hold up fine.
As an example, let’s imagine that in early 2001 you decided that you wanted a large allocation to the energy sector. Well, the darling of that sector at that time was Enron, and so you might have decided to put your energy sector money into Enron stock. You know what would have happened, Enron fell apart at the end of the year and your “energy sector” would have performed horribly. This was not because your allocation decision to focus on energy was a bad one, but instead because the one company that you picked to represent energy for you was the wrong choice! A fund would have been much better for you.
This website spends more time discussing the issues involved with this type of speculation than any other because we feel that we are living days where massive worldwide economic shifts are going to happen and to ignore them is to risk peril and to capitalize on them is potentially powerful.
In what ways are you the Macro Economic Thinker?
This is Part 2 in a short series on the different types of investors. At the following link you can find Pt 1. If you’d like to check out the series on asset allocation and diversification, you can follow the links to read Pt 1, Pt 2, Pt 3, Pt 4, or Pt 5.