Dynamic Marketing Communiqué

Here’s a discipline that led the greatest investors to success: They know how to SECURE their assets… [Wednesdays: The Independent Investor]

July 13, 2022

Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.

A Note from Miles Everson:

Investing is an important vehicle that helps us maximize our wealth. I believe everyone should learn how to do this financial activity wisely and properly.

Are you ready to know more about today’s topic?

One of the things we talk about every “The Independent Investor” Wednesdays is the investing disciplines of some of the greatest investors in the world.

In today’s article, we’ll focus on the fourth discipline.

Keep reading to know what comes next after learning how to balance your investing strategies to fit your spending habits and lifestyle.

Miles Everson
CEO, MBO Partners
Chairman of the Advisory Board, The I Institute

The Independent Investor

Investing Discipline #1: Commit to maximize your investment wealth.

Investing Discipline #2: Control your emotions.

Investing Discipline #3: Balance your investing strategies to fit your lifestyle.

These are the disciplines we’ve tackled so far in our past “The Independent Investor” articles. In these topics, we emphasized the importance and benefits of these disciplines in the lives of investors.

Today, we’ll move on to the fourth discipline of the giants of investing:

Buy the securities that fit your lifestyle!

Photo from Napkin Finance

The previous discipline (#3) teaches investors to balance their investments among asset classes—cash/cash-like savings, bonds, and equities.

This time, the focus is on choosing the right securities that fit each asset class.

… but first, what is a “security?”

security is a negotiable financial instrument that holds monetary value. It represents an ownership position in a publicly traded corporation via stocks, a creditor relationship with a government body or company, or rights to ownership as presented by an option.

In short, a security is typically any financial asset that can be traded.

There are 3 main types of security:

  • Equity Security – This represents ownership interest held by shareholders in an entity. Equity securities usually generate regular earnings for shareholders in the form of dividends. They also entitle holders to some control of a company on a pro-rata basis via voting rights. 

When planning to buy this security, keep in mind that its value rises and falls in accordance with the financial markets and company’s fortunes. 

  • Debt Security – This involves the borrowing of money and the selling of another security. Debt securities can be issued by an individual, company, or government, and sold to another party for a certain amount. 

The promise of repayment includes a fixed amount that must be repaid, an interest rate, and a maturity date (the date when the total amount of the debt security must be fully paid). 

Examples of this type of security include bonds, bank notes, Treasury notes, certificates of deposit (CDs), and collateralized securities. 

  • Derivatives – A derivative often derives its value from commodities such as gas or precious metals like gold and silver. The value of this security can also be structured on currency, interest rates, Treasury notes, bonds, and stocks. 

Derivatives are often traded by hedge funds to offset risk from other investments. In this security, sellers are not required to own the underlying asset that’s being traded. They have the option to pay buyers back with cash to purchase the asset or offer another derivative that satisfies the debt owed on the first. 

Now that we know what a security is and its 3 main types, let’s understand how securities trade and how to properly invest in the right securities.

How Securities Trading Works

Publicly traded securities are listed on stock exchanges, where issuers seek security listings and attract investors by ensuring a liquid and regulated market to trade in.

An initial public offering (IPO) represents a company’s first major sale of securities to the public. Once an IPO is made, any newly issued stock becomes referred to as secondary offering.

[Secondary Offering: This occurs when an investor sells his or her shares to the public on the secondary market after an IPO.]

In the secondary market, securities are transferred as assets from one investor to another. Compared to a primary market, where stocks and bonds are sold to the public for the first time, a secondary market is less liquid for privately placed securities—they are not publicly tradable and can only be transferred to qualified investors.

Sometimes, securities are offered privately to a restricted and qualified group known as private placement. Here, the sale of stocks or bonds is offered only to pre-selected investors or institutions rather than to the open market.

There are also instances where some companies sell stocks in a combination of public and private placement.

Investing in the Right Securities

Generally, securities represent an investment and a means by which individuals, municipalities, companies, and other institutions can raise new capital.

Companies can generate lots of money when they go public. For example: Selling stocks in an IPO.

Meanwhile, a city, state, or county government can raise funds for a particular project by investing in securities. Depending on an institution’s market demand or pricing structure, raising capital through securities can be an alternative to bank loans.

According to Professor Joel Litman, Chairman and CEO of Valens Research and Chief Investment Strategist of Altimetry Financial Research, there is an unending choice of securities to choose from thousands of funds.

In fact, with new financial derivatives that are seemingly being invented every week, even the most expert of experts wouldn’t be able to name every security that has been created!

So, what are you to do when choosing and buying the right security for you?

In the words of Warren Buffett, CEO of Berkshire Hathaway:

“You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick ‘No.’”

This means as an investor, you have to keep your securities as simple as your understanding of them. Usually, individual and family investors get into trouble when trying out new, untested securities.

With every new derivative, there is always a catch. As Buffett implies, there is no security that offers rewards without risks. So, you have to keep things simple to avoid problems in the future.

Additionally, if you’re thinking about how much time you need to devote to choosing securities, here’s what Professor Litman has to say:

Very few people are actual professional investors… and not every investor has lots of time and adequate resources to focus on security selection.

According to him, great investment minds call for the opposite—to devote as little time to individual securities as possible. In other words, you only have to choose the most reasonable, simple securities that generate the average return of each asset class.

As Paul Samuelson, the first American to win the Nobel Memorial Prize in Economic Sciences, said:

“You shouldn’t spend much time on your investments. That will just tempt you to pull up your plants and see how the roots are doing, and that’s very bad for the roots. It’s also very bad for your sleep.”

We hope you learned a lot from the first part of the fourth investing discipline of the giants!

Stay tuned because in the next few weeks, we’ll continue to dive deep into this topic and learn more investing tips related to securities.

Happy Wednesday!

(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)

About The Dynamic Marketing Communiqué’s
“Wednesdays: The Independent Investor”

To best understand a firm, it makes sense to know its underlying earning power.

In two of the greatest books ever written on investing, the “Intelligent Investor” by Benjamin Graham and “Security Analysis” by David Dodd and Benjamin Graham (yes, Graham authored both of these books), the term “earning power” is mentioned hundreds of times.


Despite that, it’s surprising how earning power is mentioned seldomly in literature on business strategy. If the goal of a business is wealth creation, then the performance metrics must include the earning power concept.

Every Wednesday, we’ll publish investing tips and insights in accordance with the practices of some of the world’s greatest investors.

We make certain that these articles help you identify and separate the best companies from the worst, and develop your investing prowess in the long run.

Our goal?

To help you get on that path towards the greatest value creation in investing.

Hope you’ve found this week’s insights interesting and helpful.

Stay tuned for next Wednesday’s “The Independent Investor!”


Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
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