03/22/2022
I was reading "Color Theory for Tattooists" yesterday and realized how similar color theory is to investment theory.
Let me explain…
In color theory we start with our hues - the pure colors. This is comparable to our broad asset classes - think stocks, bonds, cash, real estate, and alternatives.
Each hue can be broken down to it's own tints, tones, & shades.
Each asset class can be broken down as well - size, type, and location.
An example- stocks can be classified as large, mid, or small cap (size), they can be international or US (location), or they can be a growth or value stock (type).
Even though they may have different tints, tones, or shades (size, location or type), they are all the same hue (asset class).
The next step in investing is combining the different assets to create an investment portfolio that suits your situation.
Much like colors compliment each other, so do different asset classes.
Take stocks and bonds for example - It's a common belief that bonds compliment stocks - when one is lagging the other is likely performing well.
Other asset classes work in a similar complimentary fashion so we need to use different types depending on what we're hoping to achieve.
We can pick different colors (asset classes) of varying tints, tones, and shades (sizes, locations, & types) to create the color scheme (investment portfolio) for our financial plan (art work).
