Slideshows | July 22, 2015

Money gone wild: Explore the financial animal zoo

We’ve all heard of bull and bear markets, but what about the other animals in the world of finance?

When talking about finance and investments, images from the animal world are a popular way to explore the concepts – offering hints to common features and complexity.

Variety – the spice of life
Just like in the animal kingdom, diversity can be a key to survival when investing; it may help protect against localised contagion or reduce risk.

Welcome to our zoo
This may mean choosing a variety of investment “animals” for the portfolio. We have combed the world for exotic beasts to include in a money menagerie; read on to learn about other kinds of “animal spirits” in the world of personal finance.

 

1

Bull ridingIn a bull market, asset prices rise. Investors that pay less in a bull market and sell out later on may do well. But if they misjudge the bull's progress, they could end up in a bear market, where prices fall.

2

Eaten alive?Many argue boldness can be bad in finances. What if you fall prey to a shark? This Nadežda Silaški study says: “Sharks are known for their greed and hunting instinct – an investor hostile to the target firm’s management.”

3

War and peaceHawks are seen as aggressive and doves as symbols of peace. If you’re described as a financial “hawk”, you may be high-flying and active on monetary policy or interest rates. If you favour a passive approach, you may be a “dove”.

4

What we don’t knowThe black swan, long thought not to exist, was eventually discovered in Australia. Black swan theory, describing random events with unexpected effects, was introduced in Nassim Nicholas Taleb’s 2001 book Fooled by Randomness.

5

Christmas is comingIf you could predict a black swan, you might not invest in a turkey. This article also uses turkeys – fed every day until they become dinner – to show the danger of assuming things will stay the same. Get informed: don’t be a head-in-the-sand ostrich or a lame duck.

6

Flock together?Sheep in investment circles are, like their namesakes, known for their herd behaviour. Although moving together as a group may feel safer, smart investors may be better off defining their own financial principles and sticking to them.

7

Blind faithMyths about lemmings include that they fall out of the sky during storms, and take herd behaviour to new heights by jumping off cliffs when migrating. Neither is true – but people who follow others blindly have been called lemmings ever since. Instead, do your own research before acting.

8

Whale of a timeInvestors with large, ill-advised strategies may risk comparison with the London “whale” –  trader Bruno Iksil, who worked on the JPMorgan London credit desk in 2012. He was blamed for huge “whale” trades related to losses of $5.8 billion.

9

Barking up a wrong treeInvestments may be described as "dogs" if they’re unpromising performers. Also the dogs of the Dow is a strategy where people invest annually in the 10 highest-dividend paying stocks on the Dow bourse. Other ways to diversify include mixing asset type, size and location.

10

On safariA company described as a gazelle will be nimble and fast on its feet. Larger, lumbering organisations with big effects on markets may be characterised as 800lb gorillas or even elephants.

11

Roaring aheadWatch out for the Asian tigers. These booming economies include Hong Kong, Singapore, South Korea and Taiwan. Ireland is a Celtic tiger, and there are emerging tiger “cubs” in Thailand, the Philippines and Malaysia.

12

Not in the darkAnalysts have split developing economies into CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa) or EAGLES (Emerging And Growth-Leading Economies of Brazil, Russia, India, China, Korea, Indonesia, Mexico, Turkey, Egypt and Taiwan).

13

Milk for free?We all dream of finding a virtually unlimited source of money – a cash cow we can continue to milk for a long time, or a goose that lays golden eggs. This is of course a fantasy – little comes for free.

14

Top catIf you do well and reach a position to skim off the real cream when it comes to investing you may one day be described as a fat cat. Some people might feel envious – but for the lucky investor, the situation may be purrrfect.

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eZonomics team
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