Investing - Simple v. Easy
Smart and efficient investing is paramount for long term financial success. Investing isn’t simple or easy, mainly due to an overwhelming amount of available information, motivated media pundits, investment options, confusing pricing terms, and most importantly, uncertainty of what will happen in the future.
As a member of the investment profession, a candidate for the Chartered Financial Analyst designation, and a ferocious consumer of investing resources (mainly podcasts, books, white papers, and news articles), I still cannot call investing easy. And I probably never will.
As the former Princeton football offensive coordinator James Perry used to say, “the offensive strategy is simple, Jason, but it’s far from easy.”
So I’m going to try to simplify the long term investing process.
There are three important, explanatory macroeconomic (ie. big picture) variables that can indicate how prices may be determined in the future:
US interest rates
The US Dollar
The price of Crude Oil
The Federal Reserve has recently lowered US interest rates (and appear to be on a path to continue this trend) for the first time in over a decade, signalling the end of a 4 year period of raising rates. The US dollar has seen years of strength, but indicators (like the price of gold) and analysts have recently been signalling a dollar pullback. Crude oil prices are relatively muted compared to prices seen over the last 12 years. Changes in the trends of these variables can dramatically alter the ability to generate investment returns.
Considering these changes, a simple solution can be to position your long term investments to take advantage of falling interest rates, a weaker dollar, and a potential rise in crude oil prices.
Simplicity aside, how easy is it to invest according to these changes in trends? I have some thoughts, but want to hear your ideas (please comment :)!