{"id":23847,"date":"2011-09-14T23:09:43","date_gmt":"2011-09-15T03:09:43","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/09\/14\/greece-the-questions-investors-should-be-asking\/"},"modified":"2011-09-14T23:09:43","modified_gmt":"2011-09-15T03:09:43","slug":"greece-the-questions-investors-should-be-asking","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/09\/14\/greece-the-questions-investors-should-be-asking\/","title":{"rendered":"Greece: The Questions Investors Should be Asking"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

Will Greece default, or won\u2019t she?\u00a0 This seems to be the question on every investor\u2019s lips, and the uncertainty surrounding the outcome has the markets on edge.<\/p>\n

I have no inside information about how this crisis will be resolved, and even if I had the phones of every European leader bugged I\u2019m not sure the information gleaned would be particularly useful right now.\u00a0 The EU leaders tasked with resolving this crisis seem to have no more of a grasp on the situation than those of us on the outside.<\/p>\n

No one said that investing is easy or that it should <\/em>be easy.\u00a0 Investing is an exercise in making difficult decisions under conditions of uncertainty.\u00a0 If we knew the future ahead of time, there would be no risk and thus no possibility for return.<\/p>\n

The questions investors should be asking is not \u201cWhat will Greece do?\u201d<\/em> but rather \u201cHow will my portfolio perform regardless of what happens in Greece?\u201d<\/em> and \u201cAm I being properly compensated for the risk I\u2019m taking?\u201d<\/em><\/p>\n

We\u2019ll answer that question shortly, but readers should first understand a very important point:<\/p>\n

There are two\u2014and only two\u2014risks that we as investors face every day:<\/strong><\/p>\n

    \n
  1. The risk of being in<\/em> an investment that falls in value<\/li>\n
  2. The risk of being out<\/em> of an investment that rises in value<\/li>\n<\/ol>\n

    We tend to focus on the first type of risk, and it appears that we are hardwired to do so.\u00a0 In their landmark 1979 study, psychologists Daniel Kahneman and Amos Tversky found that people dislike losses 2.5 times more than they like comparable gains, and that most will actually engage in risk-seeking behavior in order to avoid realizing a loss.<\/p>\n

    Yet the second type of risk\u2014opportunity cost\u2014can be equally damaging to your long-term financial health.\u00a0 If you pile into \u201csafe havens\u201d like cash or Treasuries that yield next to nothing, your standard of living is almost guaranteed to fall over time.<\/p>\n

    A good investment strategy should balance these two risks, offering decent upside potential while keeping risk to a tolerable minimum.\u00a0 Given the pricing in today\u2019s market, this is actually easier to do today than at any time in recent memory.\u00a0 As I wrote in the last post<\/a>, at current prices I like \u201cboring\u201d blue chips that you know will survive anything<\/em> like the \u201cWintel\u201d duo of Microsoft (MSFT) and Intel (INTC)\u2014see \u201cThe Ugly Sister<\/a>.\u201d I also like consumer products maker Procter & Gamble (PG) and healthcare giants like Johnson & Johnson (JNJ). If we have another 2008-caliber meltdown, these companies will survive it intact and will continue to pay solid (and likely growing) dividends throughout. And if we avoid a meltdown, they should at least match the broader market\u2019s upside. Companies like these would seem to give you the best risk \/ return tradeoff given the unknowns we face.<\/p>\n

    If you liked this article by Sizemore Insights<\/em>, you\u2019d probably enjoy The Sizemore Investment Letter<\/em>, our premium members-only newsletter. Click here<\/a> for more information.<\/p>\n","protected":false},"excerpt":{"rendered":"

    By The Sizemore Letter Will Greece default, or won\u2019t she?\u00a0 This seems to be the question on every investor\u2019s lips, and the uncertainty surrounding the outcome has the markets on edge. I have no inside information about how this crisis will be resolved, and even if I had the phones of every European leader bugged … <\/p>\n

    Continue reading “Greece: The Questions Investors Should be Asking”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-23847","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/23847","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=23847"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/23847\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=23847"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=23847"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=23847"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}