My wife and I were visiting our son recently (he works as an Investment Consultant in Westlake Village, California) and went to visit a few wineries in the Central Coast area of California. This area (Paso Robles and environs), is less well known than Napa/Sonoma and I was struck by how the individual wineries each had created a compelling story about their land, their process….their wine.
Actually, wine and investing have a lot in common. There are thousands of different types of grapes just as there are thousands of different types of investments. Most of these grapes, however, fit into either red or white just as most investments are comprised of either stocks or bonds. Wines are sold and differentiated by way of their backstory and the same often holds true for investments. Individuals make investing decisions as well as decisions about what wine to drink largely based on the messaging.
Wine and investing are also both somewhat mysterious and complicated (or at least that is the storyline the purveyors want to convey). Therefore, it is easy to fall into the trap of relying on meaningless ratings (for wine) or analyst recommendations (for investments) when making choices. Actually, wine and investing are fairly simple in terms of the variables that can be controlled.
Among the factors that can be controlled are how the various grapes are mixed into the wine like the allocation of various investment types into a portfolio. What cannot be controlled for winemakers is the weather, the day to day swing in temperatures and the amount of rainfall. For investors, the price, short-term price movements and extraneous news events also can’t be controlled. For both, the cultivation of patience is an important ingredient for long-term success.
We also notice similarities in how making wine and investment design are both deeply rooted in science. Just like the winemaker, our role is to apply that science. Ready for a real conversation?