The news is constantly full of "investment themes" -- BRIC, commodities, falling
Dollar, alternative energy, mortgage crisis, and so on.
Investing with themes is a good idea, because you will be swimming with the
stream instead of against it. However, themes don't last forever.
Getting onto a theme too early can be costly in terms of losses or "dead money".
Getting in too late can result in underwhelming profits or even losses, if
everybody else is exiting when you are entering.
Whatever theme you may be contemplating, we think it is useful to analyze
it in terms of generic theme dimensions. From our perspective, those dimesions
are:
Development Time
Strength
Duration.
Properly classifying themes will help you decide if they are right for you.
For example, a fast development, weak and short duration theme is suitable
only for the nimble -- essentially short-term traders. On the other hand a
slow development, strong and long duration theme is not really suitable for
a trader, but may be suitable for a long-term investor in an asset allocation
program. There are many degrees between those two extremes.
To help you with classification, we have developed this three-dimensional
chart that creates 27 theme categories:
Disclaimer: Opinions expressed in this material and our disclosed positions
are as of July 5, 2010. Our opinions and positions may change as subsequent
conditions vary. We are a fee-only investment advisor, and are compensated
only by our clients. We do not sell securities, and do not receive any form
of revenue or incentive from any source other than directly from clients. We
are not affiliated with any securities dealer, any fund, any fund sponsor or
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purposes only, and is not personal investment advice to any specific person
for any particular purpose. We utilize information sources that we believe
to be reliable, but do not warrant the accuracy of those sources or our analysis.
Past performance is no guarantee of future performance, and there is no guarantee
that any forecast will come to pass. Do not rely solely on this material when
making an investment decision. Other factors may be important too. Investment
involves risks of loss of capital. Consider seeking professional advice before
implementing your portfolio ideas.
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