Unwritten Rules

Barry Ritholtz wrote a great list of ten insane things people on Wall Street believeWhile the post may make you chuckle it also should remind you of the nature of the markets and the mentality of traders.

There is a great battle going on constantly in the investing world. Investors vs traders. For the most part these two groups have similar goals. To make money. But, the approach to doing so is drastically different. Traders enjoy the daily barrage of ever changing information and news related to the markets while investors enjoy the mundanity of the markets. Traders enjoy being in the game. Investors just want to be on the team.

Luckily, our clients are investors. But, traders do affect investor strategies. A majority of Barry's list is a sort of "unwritten" rulebook and if traders are playing by those rules then shouldn't investors also take advantage of knowing them? The answer is yes, but only to a certain extent. We really like to interweave our short term projections into our client portfolios. Being able to take advantage of what is currently happening in the markets is an important piece of active management. The key is doing so without harming a client's long term approach and goals. It's tough and it's even tougher when clients forget they are investors and want to gauge short term performance as if they were traders. In the grand scheme of their portfolios, one year (or even 2 or 3) should be meaningless.