Cicero, the well-known philosopher and statesman from ancient Rome, also happened to be a very prolific and astute investor. Cicero’s investment methods are well documented and the principles he employed are not at all unlike the principles we employ in portfolio construction over 2,000 years later in the modern era.
One key principle to Cicero's investment strategy was his emphasis on reasonable diversification. He believed in spreading his investments across multiple industries and locations to minimize risk. For instance, he invested in real estate, land, agriculture, but also in commerce and shipping. This approach allowed him to benefit from different economic cycles and avoid the risks associated with pooling his money in a single industry or asset class.
Cicer also believed that it was important to have some liquidity, meaning, he needed a way to exit his investment if he wanted to or needed to. One of Cicero’s requirements for investing in shipping expeditions was to invest in a share of the overall pool of investment in a fleet and receive his earnings after the fleet had returned from its voyage. This allowed him to manage his risk and provide liquidity by selling his shares to a buyer before the fleet arrived back in port. This approach also ensured that he had access to cash or other liquid assets, which provided flexibility and allowed him to take advantage of new opportunities or meet unexpected expenses.
The importance of identifying high-quality investments was also a factor in Cicero’s investing decisions. It's worth noting that Cicero's success as an investor was not just based on diversification and liquidity, but also on his ability to recognize good investment opportunities when he saw them.
When Cicero purchased an estate in Arpinum, for example, he recognized its potential for growth and development that would help bring the value up over time. Similarly, when he invested in shipping, he likely identified a merchant fleet with a strong track record of profitability.
The importance of conducting research and analysis when making investment decisions if highlighted by Cicero’s forward looking analysis and focusing on high-quality investments that have a strong likelihood of generating consistent returns over time.
In today's world, there are many tools and resources available to help investors identify high-quality investments, such as financial news websites, stock screeners, and analyst reports. By staying informed and doing their due diligence, investors can increase their chances of making successful investment decisions and achieving their long-term financial goals.
Here are three key principles you can take away Cicero's approach to investing:
Diversify. Never pool you money in just one investment vehicle. Instead, invest your money across different industries and asset classes to minimize risk and take advantage of different economic cycles.
Don’t fail to consider liquidity when making investment decisions. Having access to cash or other liquid assets can provide flexibility and allow investors to take advantage of new opportunities or meet unexpected expenses.
Stay focused. The markets are volatile and sometimes they look grim. But plan your investment strategy and then follow your plan. Don’t make knee-jerk investment decisions based on fear. Instead, focus on your long-term goals and be patient. Like Cicero, successful investors understand that building wealth takes time, and they remain disciplined and patient in their investment strategies.