So Many Shoes, So Little Money – Blog

Investing Philosophies

January 13th, 2009

There are as many different investing philosophies as there are fashions trends (According to Vogue.com Spring ’09 promises us: Nudes, metals, sky high stilettos, tribal, harem pants, and God forbid, jumpsuits.) The investing beginner should ignore this and choose with an eye towards the future, not just what is in style today. Day-to-day, stocks and stock markets, mutual and index funds will go up and down, sometimes a lot. If you did your homework before investing and kept current on your investments, you shouldn’t get overly excited either way.

There is a school of thought in investing that following crowd behavior – trends – creates opportunities. For example, if everyone believes denim jackets are back this season (Jcrew.com) and you spot the trend ahead of other people – you realize denim is going to be so this season before everyone else – you can profit by buying ahead of the crowd. You make money as denim prices increase.

However, there is also an investing school of thought who believes in eschewing trends: If denim is in, they ignore it and invest something else – such as leather. They believe that since everyone will be buying denim, and no one will be buying leather, denim will be over-priced and leather will be under-priced. When leather comes back into style, you profit because you bought leather when it was cheap and out of fashion.

Who is right? Both. However, unless you are a seasoned investor, remember, “Fashions fade, style is eternal.” Yves Saint Laurent

Filed under: Investing

Tags: Investing, Shopping, stock