By Federico Tessore – Pasaporte Investor – (Argentina)
The world is chaotic.
Technology and globalization have brought us many benefits, and given us access to new experiences and goods and services that were unimaginable just decades ago.
But they have a downside. They’ve added tens, hundreds, and even thousands of new variables to the equation.
Today, thanks to technology, the number of variables that can explain any economic event are innumerable.
Here’s an example. If, 50 years ago, the price of a stock rose 5% in a day, there were only a few variables that could explain that movement. Undoubtedly, the company posted positive quarterly results. There wasn’t much more to it.
However, today, if a company raises its price by 5%, it could be due to causes as varied as the Chinese Central Bank lowering its interest rate, a terrorist attack in France, or even rain in Patagonia, which benefited the company in some way.
Therefore, as investors, we’re always challenged to pinpoint which variables we’re going to investigate. We can’t look at everything. That’s impossible. Thus defining the “dashboard” we use to manage our investments is essential.
Traditionally that dashboard includes two main variables: risk and return.