June 1, 2010
Among the most frequent questions we get are those about safety. It seems at first like an easy question to answer: something is safe or it isn't. But stop and think: the very word "safe" is subjective. That is, what makes one person feel safe might not make someone else feel the same. Put another way, the defining question could be "safe from what?" The nearly automatic response to that question would typically be "safe from loss." But loss of what?
At its most academic, the goal of invested capital is future purchasing power. Variables that effect how much purchasing power you will have include not just how much your capital is worth but how much income it generates, the inflation rate, and tax policy.
Over the course of this week and next I will review and expand on safety and what different perspectives of safety mean to investors.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).