The strength curve (The Financial Athlete #119)

A common mistake in weight lifting is to de-emphasize the eccentric motion (extending the muscle, or lowering portion of repetition) by letting the momentum take over. It’s important to be strong in the full range of motion, also known as the strength curve. This is done through negative training (fighting gravity while lowering the weight) with a full range of motion. A standard way to do negative training is with 2 seconds on the concentric motion (contraction of the muscle) and 4 seconds on the eccentric motion.

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Investors typically have a “forte” (strong point) for where to invest money. For example, real estate agents for residential property feel comfortable investing in houses and may own several. This is natural, since they are at the forefront at finding the best bargains. However, the tendency is to not expand beyond the “forte”. This is like a weightlifter who insists on only doing isometric training, which would narrow strength to a small area in the range of motion.

This is not an argument to diversify for the sake of diversification. I am not a proponent of that. Rather, I am proponent of chasing value. Just because the price of an asset drops dramatically should not suggest it is undervalued. The reduced price may still exceed the true value. Discover value through research. Examine the quality and potential of the asset. Avoid “value traps”.

Value cannot always be found in one asset class such as residential real estate. It’s fine to be overweight in your “forte” as long as valuations are reasonable, but when that asset class becomes too overvalued, sell and redirect the money to an undervalued asset class or hold onto cash. The money may be invested under the same major asset class, as there may not necessarily be a correlation between the two in terms of price vs. value. An example of this would be to sell residential property to buy office real estate. The major asset class is still real estate.

THE FINANCIAL ATHLETE STRENGTH CURVE

The Financial Athlete Strength Curve concerns being aware and financially literate of the full range of asset classes and favoring those undervalued, which can be held for the long-term. In chasing value, there is rarely a situation calling for equal proportion of investment in each major asset class (stocks, bonds, cash, real estate, precious metals).

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10 Responses to “The strength curve (The Financial Athlete #119)”

  1. becky Says:

    this is wierd so wierd

  2. shannoon and sophiee Says:

    this is weird 😦

  3. jenny Says:

    omg. weird

  4. sophiee Says:

    omg this is really weight he looks like hes having a poo 🙂 lol xx
    nd by the way heyahh beckkyyy xx

  5. becky Says:

    hiayh r u okk sophie ? xx

  6. sophiee Says:

    heyahh beckyy yeah im fynn hruu ??? x

  7. sophiee Says:

    heyahh alliieee howw rr uu xx

  8. Allli ;D Says:

    I amm good thankuu x

    Saving this websitee (Y).

    Tiss Kooll x
    ‘D

  9. sophie Says:

    this is soo weird 😀

  10. sophie Says:

    heyahh beckyy nd aliee how r u both int 2htis websitee soo cool x 😀

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