Send your grain across the seas,
and in time, profits will flow back to you.
But divide your investments among many places,
for you do not know what risks might lie ahead.
Why start with a quote from the Bible and one that seem to focus on investments?
To answer that, I must get a few days back in time when I was working on my stock of tea, putting them from bags into metal tins and trying to rationalise which tin should contain which tea.
Then I must forward two days later when I was driving for work from one place to another and I heard someone on radio talking about stock picking, the name of a method to select stocks to invest into.
The more I heard them, the more it made me think about how we pick up teas. I kept on coming back to the way companies/banks/investors manage and pick their investments and stocks, wondering if there was anything in it for us?
Before we go any further in this post, don’t worry, this won’t turn into a lesson on investing.
What are the goals of any investor? Have the higher return on investment for the risk he/she is willing to take. Common sense says that if you risk a lot, you will probably earn more but this is not sure as it depends on a lot of factors and also on the expectations or likeness to take risks.
Classical strategies are to have some secure assets that will bring you the same amount of money whatever happens and some more risky ones that should reward you with a higher return on investments.
But how does this translate to tea selection?
Stop everything you were doing and look at your teas before thinking on how you picked them up.
Yes, that’s right, you have some you know are good ones and some newer that you expect much of.
In other words, you diversified your portfolio by splitting your stocks between secure assets (those you know) and risky ones (those you want to discover).
The split between both depends on your willingness to accept risk or if you are in an adventurer mood.
How do you select your more risky tea? You start by gathering some information on the place it was grown in, the kind of tea, how it was prepared, what is in it (if it is a flavoured tea), who is selling it… You will then compare these data to the one you already have, which will tell you what you should expect from it and you will perhaps even try it to see if it suits your tastes.
Based on all these information, you will decide if you want to buy a small portion of it, a bigger one or none at all.
And this was just an example as those of us who have a fondness for a peculiar tea (like Oolongs, Darjeelings…) are following an another strategy: the index fund, in which you try to replicate the moves of a peculiar set of an index, believing that no tea picking can beat on the long run, the constant quality of these peculiar assets you like, making the search for other good quality teas not worth the time and energy spent on it.
By acting like this, we just went to the same decision process that portfolio managers when they decide to invest in something.
The only difference between both is that for tea, there are no mathematical models or computers trying to decide if you have to buy this tea or not based on a lot of maths.
And this is something I am sure will stay forever as I think that between personal tastes, crop quality, soil, harvest, the man behind the tea processing… there are too many human or natural factors turning a tea into the tea we like for a computer or model to summarize and decide for us.
And just when I was writing this, I found something said by a Canadian Kevin O’Leary (that I don’t know) that sums it up quite nicely.
“When you’re an investor, you can look at the quantitative and qualitative elements of an investment, but there’s a third aspect: What you feel in your gut.”