Macro vs. Micro Investing: What’s the Difference?
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Today, I want to shed some light on Macro and Micro investing. We’ll look at the differences between the two, how investors approach it, and explore the timeframes of each.
The Brain of a Macro Investor
In real estate, a macro investor is going to explore the big picture of the markets they invest in. They’re looking to history to get clues for how to move forward. A macro investor is going to examine the whole cycle of a market.
They’ll use the 2007–2009 housing market as an example. 2006 was the top of the asset cycle, and at that stage, the market is overvalued. That’s the time to get out of the market, before it crashes. Then, it’s going to have to run its course at the bottom of the cycle. For the United States, it took until 2011–2012 to get the true bottom of the cycle.
This knowledge allows a macro investor to come in at the bottom of the market and buy as much real estate as they can. Then, they hold on to those assets while they produce cash flow, maybe buy a bit more, and other investors will follow suit.
Macro investors can clearly see how the market will play out, and they tend to influence other investors, which directly influences the marketplace. Now, we’re again at what I believe to be the top of the asset cycle. This is the time these macro investors will be selling off certain properties to prepare. This can play out over a couple of years.
The Brain of a Micro Investor
Micro investors, on the other hand, are more interested in the minutia. They gravitate to technical analysis and charting. To continue the real estate scenario, a micro investor is more likely to jump into the market at any point in the asset cycle. They’ll buy and sell in a specified time frame, not worried about the long game.
Let’s look at a commodity, like gold, which bottomed out around 2019–2020. Those who bought gold during that time were buying at the bottom of a market. These are the macro investors. Micro investors, on the other hand, seek opportunities to make money in the middle of the cycle, even when gold corrects.
For example, gold went over $2,000 this year, then had a massive correction down to $1,800 or so. Micro investors, who had been diligently tracking the market, were able to make money in a short time frame, even when the price of gold was dropping. From a macro perspective, gold is going to go up because of the shenanigans of central banks, yet micro investors don’t need the big picture to make quick gains.
What Kind of Investor Are You?
It’s important that you figure this out. While there may be appeal to micro investing because it’s quick, it takes close monitoring of marketing and fast-paced decision making. Macro investing may seem like an opportunity for massive gains; however, it requires a good knowledge of the warning signs that accompany a crash.
So, ask yourself:
- Are you better at identifying big-picture trends, or analyzing short-term opportunities?
- Do you have the patience to position yourself from a macro perspective for a big win?
- Are you interested in day-to-day or week-to-week trends, and are good at identifying patterns?
- Or do you have a head for both?
In one of the communities that I’m on the board of, I’ve seen investors who are normally bullish with both gold and silver actually make money by shorting them. Cryptocurrency is yet another arena for this opportunity. I’m personally bullish when it comes to crypto. And from a macro perspective, there’s a lot of opportunity in the future. However, short timeframes may allow investors to buy a lot of depth.
Short Term Opportunity for Crypto
Earlier in the year, Bitcoin was at a $200 billion market cap. Just to put that into perspective, that’s Jeff Bezos’ Net Worth. It’s still a small market. In the short-term there might be massive pullbacks, because in a small market that’s so liquid, even small moves can have a big effect on prices. Those pullbacks are huge opportunities for micro investors to buy in depth, then sell it off when it begins to soar again.
If you’re interested in detailed analysis, you could make money shorting cryptocurrencies when their prices go down. It requires attention to detail and regular monitoring, but you could do it. And these macro and micro strategies can work in any asset class.
I hope you’ve found this explanation helpful, so you can determine which type of investor you are, for maximum success.
You can listen to my new podcast, Cashflow Investing Secrets here.
Live your Freedom, Live Your Legacy, On Your Own Terms,
M.C. Laubscher is a husband, dad, podcaster & Cashflow Specialist. He helps business owners and investors create, recover, warehouse & multiply cashflow. You can learn more about exclusive cash flow strategies in M.C.’s new video series at https://www.yourownbankingsystem.com/