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What Am I?

Before making critical decisions through the financial decision making process, one of the prerequisites is to determine your behavioral make-up. We consider this discussion/introspection a critical first step as you work to establish your goals and objectives. Who you are as a money person, or your belief system with regards to money, will have a significant impact on future decisions as you go about managing your money to meet your goals.

Who you are as a money person can be explained by three varying attitudes and an understanding of the perception of each: 1) An investor; 2) A saver; or 3) A trader. Each has definitive advantages and disadvantages; and while it is possible to behave in a manner that can be categorized by different attitudes, some are better suited for various pools of capital than others.

A separation of the various capital pools can be accomplished by an actual physical separation or a mental separation, but it is imperative that this separation occurs. Failure to do so could potentially create an additional level of risk to your wealth management process. That additional risk is you; and the human propensity to let your emotions make the wrong money decision at exactly the wrong time.

The following observations about these perceptions come from experiencing multiple decades and multiple market cycles. We have been able to witness firsthand how clients have acted and reacted to the cycles of the past, and their subsequent changes in the decision making process as some maintain the belief that similar cycles will continue in the future. We will first provide a general observation about each of the three money attitudes and second provide an explanation of the advantages and or disadvantages of each.

  • Investor – Is willing to take a level of market volatility risk in order to participate in the wealth creation process that comes from the ownership of growing businesses over time. The objective here is a real return (when possible) after the consideration of taxes and inflation.
  • Saver – Is typically unwilling to accept market risk and is willing to receive a lower return over time in order to avoid that risk.
  • Trader – The objective of the trader is to make returns on a shorter-term basis. Market volatility risk is inherent in this approach and that volatility is the very foundation of this tactical strategy.

Each of the three types of attitudes will have periods, through the course of market cycles, during which performance may be enhanced by one type of attitude relative to the other two. This reinforces our observation that no one approach will work 100% of the time. We further understand that the investment process is an exercise in emotions, as cycles of fear and greed continuously evolve. That is why an intellectual understanding of the pros and cons of each attitude is essential to an effective wealth management decision making. The stated purpose of the remainder of this document is to provide such is an explanation.

We believe an intellectual discussion about money management begins with an understanding of what is required to preserve the value of wealth over time. That is not to say that this need be the stated objective of everyone, but we do believe that if this is not a primary objective that a conscious awareness of possible deficiencies be part of the decision making process. What is not an integral part of this document is a discussion about the savings process – the focus is on capital that has already been accumulated or is being accumulated as part of an already implemented savings program.

In order to preserve the value of capital (purchasing power) an after-tax return that is greater than inflation is required. This is an important concept if the use of the capital or cash flow from the capital is to be used over multiple decades or multiple generations. While taxes have an effect on income and capital gains, inflation is working against the full amount of the capital base. Over time we can expect tax rates and inflation rates to change in accordance with the Investment Season (Please see the Financial Observations section of this website for a further explanation).

The reason this is important is that savings type investments, including some types of bonds, do not provide a history of capital preservation over the longer-term. The ownership of growing businesses has provided rates of return that preserves capital over time. This is true because this is the process that has created wealth as an outcome of the industrial revolution. We have not been able to identify any other process that truly creates wealth in our society, or throughout history.

While trading can participate in the wealth creation process it typically is associated with a shorter-term perspective and ignores “the over time” aspect of wealth creation. We further have observed very few “traders” who have been able to provide the consistency that investors require over the longer term. Those traders who are very good are typically not available in a public venue.

We therefore conclude that if you have an objective of preserving wealth then participating in the wealth creation process is the only practical way to accomplish this objective.

This does not mean that one cannot participate in all three of the separate attitudes about capital. We do conclude that one cannot use the same pool of money for all three at the same time – pools of money should be separated into designated defined pockets and if one is going to change from one pocket to another the decision should be non-emotional in nature and part of an efficient decision making process. The risk of not following this procedure is that your emotional state becomes an additional risk to your own future financial well-being.

If you would like to further discuss these varying attitudes, and how they might affect your own personal situation, please feel free to contact us.


Opinions expressed are those of the author and are not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.


Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. There is an inverse relationship between interest rate movements and fixed income prices. Generally, when interest rates rise, fixed income prices fall and when interest rates fall, fixed income prices rise.