Imagine you’re currently building a house and you go ask a contractor whether you should buy sand or cement. The contractor would be confused because she cannot give you any recommendation without knowing what stage of the building you have reached, what other materials you currently have, what type of design you want, and so on.

I face a similar difficulty whenever I am asked by people what asset they should invest in. Or whether they should invest in Asset A or Asset B. Without any knowledge of your financial goals, the current investments in your portfolio, your risk tolerance or your investment horizon, whatever information I will give you may only be an approximation of what is appropriate for you.

This is because assets, like building materials, are not supposed to be viewed in isolation if you want to know whether to invest in them or not. Of course it is important to look at the characteristic of each asset, but then how it fits your overall portfolio and investment profile should be the overriding factor in making your decision.

For example, if somebody who is retired asked me whether it would be good to heavily invest in stocks (for themselves not their estate) I would probably say no. If a young person asked me whether they should take up a significant equity exposure with money that they would not need for several years, I would probably say yes. The same investment, but different recommendations because of the different profiles of the investors.

So instead of deciding what asset to invest in based solely on your perceived returns of the asset, take time to understand your own investment profile and how the asset will fit it. It could be that it may just not be good for you no matter how it works for others.