Since the advent of social media, YouTube, TikTok, and the ability to share content easily, the world of investing has become more popular than ever. From stock picking and options to crypto and private alternatives, the landscape is more diverse than ever before.
With so many choices, it's easy to lose sight of the original goal — getting caught up chasing high returns while ignoring risk management. Investing is a personal process, and every investor is different. But the underlying goal remains the same: outpace inflation and preserve your purchasing power against a devaluing currency. The challenge is that inflation and currency devaluation are hard to gauge, since official measures don't always reflect what people actually experience day to day.
Market pricing is often the more honest gauge. Compare the headline inflation numbers to what's happening in your own life — are your everyday expenses rising faster than your income? Currency exists to simplify the exchange of goods and services, but because it's issued by a government or central institution, that institution can print more of it, devaluing what you already hold.
Ask your grandparents what a nickel used to buy — a loaf of bread, a gallon of milk, a pack of cigarettes — and compare that to today's prices. That gap is inflation eating away at your money, which is why investors turn to inflation-hedged assets to keep pace with the deterioration.
The cycle can also run in reverse, with prices falling and purchasing power improving. Managing that balance is the Fed's job: when it raises rates, borrowing gets more expensive, which cools demand. You can see this firsthand in today's real estate market: it's essentially frozen, with prices still high, homes sitting on the market far longer than expected, sellers holding out for the price they want, and buyers unwilling to meet them there. Headlines focus on what buyers and sellers are doing, but the Fed's rate decisions are often the real force behind the scenes.
Interest rates set the cost of money, and the amount of money in the system — and how it's allocated — matters at any scale, whether you have a billion dollars or a hundred. When rates change, they ripple through every asset class, changing how those assets are priced relative to one another.
We look at how asset classes fluctuate and move in correlation or non-correlation with one another. That relationship is part of what drives more stable growth in the face of currency debasement, and it's the foundation of the efficient frontier model, discussed at length in academia.
Great investors take a variety of approaches. Many start at the macro, global level and work down to the local; others, like Buffett or Lynch, focus more on the micro level. Real estate investors tend to focus on specific locations and cities. We look at the data appropriate to each investment vehicle, since every asset class carries its own built-in diversification.
Since corporate earnings drive stock prices, it's important to understand how individual companies handle inflation. Many U.S. multinational companies operate across the globe, hold large fixed-income and marketable securities on their books, and use currency hedges to manage exposure. A company like Chipotle, by contrast, is hyper-focused on its own business — it holds little investment beyond its operations, so its valuation is most sensitive to food and labor costs.
A company like Exxon, on the other hand, is sensitive to oil prices along with the usual factors. When inflation heats up and the dollar weakens, commodity-heavy earners like Exxon often feel it first, since their revenue is tied directly to commodity prices.
The bottom line: investing isn't a gamble, it's a necessity in a world where you need to keep pace with inflation just to stay even.
The best inflation-hedged investments depend on your risk tolerance, which is why the endowment model — the diversified, long-horizon approach used by university endowments — is often a useful framework.
Start by defining your short-term, mid-term, and long-term liquidity needs, since that timeline should drive how much risk and illiquidity you can afford to take on.
Be careful about following the herd or randomly picking ETFs — that's not a strategy. That idea echoes lessons from investors like Buffett and Lynch: risk comes from not knowing what you own, while risk management comes from understanding it. If you're over-diversified, over-concentrated, or simply unsure what you own, take the time to find out, then consider rebalancing around a disciplined allocation.
Four of the best investing books for portfolio management and security selection:
Unconventional Success: A Fundamental Approach to Personal Investment by David F. Swensen
The Intelligent Investor by Benjamin Graham
Winning the Loser’s Game: Timeless Strategies for Successful Investing by Charles D. Ellis
Security Analysis by Benjamin Graham and David L. Dodd
You can also choose asset classes based on your own personality and skill set — as Walker Deibel puts it: attitude, aptitude, and action. If you're handy, for example, buying a rental property might be your best bet.
If you're not handy at all, passive real estate might work better. Peter Lynch, in his excellent book One Up on Wall Street, recommends finding your edge — the area where your own knowledge or experience gives you an advantage over other investors.
The goal is to battle the investor's worst enemy: themselves. For example, we sometimes advise clients with spending compulsions to buy gold and silver bullion. It satisfies the urge to buy something tangible while putting that capital somewhere it's harder to spend impulsively than cash sitting in a brokerage account.
Like real estate, it's illiquid, so once you're in, plan on a 5-10+ year time frame. If you need quick liquidity, public markets can provide that, but be cautious about how much exposure and how compulsive behavior can play into that decision.
It isn't just about returns, economic cycles, and market fluctuations. It's about managing your own behavior as an investor. The best book on this subject is Benjamin Graham's The Intelligent Investor and his lessons apply across every asset class.
As we all know you can have extraordinary success and lose it in a flash. Like Dr. Dre says about success in the music business, "Anyone can get there, but not everyone can stay there".
We have found it useful to utilize this spread sheet which we have put together to track our own allocations. The simplest strategies are often the best. You can find it here on our facebook page. Mozella Asset Management Facebook Page
For testing your portfolio drawdowns and volatility, Portfolio Visualizer is a great resource.
Every asset class, book, and rule of thumb here is only a starting point — the right mix depends on your goals, timeline, and tolerance for risk. If you'd like help applying any of this to your own portfolio, request an appointment with our team.
Disclaimer: The content provided by Mozella Asset Management is for educational and informational purposes only and should not be construed as financial, legal, or tax advice. Nothing contained herein constitutes a solicitation, recommendation, endorsement, or offer by Mozella Asset Management to buy or sell any securities, futures, options, or other financial instruments.