I’ve read a few great books lately and one is directly related to the work I do for you. Written by Timothy F. McCarthy, former President of Charles Schwab, it’s titled The Safe Investor.
I’ll share a little now for you,
Eggs and Baskets
Market volatility, rather up or down, can cause investors to eliminate exposure to a certain asset class. Doing so often causes harm as trying to time the market is not a strategy. It is an emotional reaction. Mr. McCarthy tells some great real-life stories in this regard.
“. . .lack of diversification remains among the biggest mistakes I till see being made by even the “sophisticated” investors. The idea of diversification may be easy to understand, but too many times I have observed it is not easy for people to follow, even when they have been properly instructed.”
The tech bubble of the late 90’s taught many about real diversification. Not all investors realized how much risk they had largely due to holdings being too correlated.
“Diversifying can be much trickier than you think. . . you may think you are diversified because the investments are with different managers, or in different parts of the world, or even in different asset classes. But unless you and/or your advisor are regularly checking the details about how similar investments are, or how an event can affect all, don’t be surprised if you get surprised and are more concentrated than you think.”
Portfolio design takes knowledge and experience helps too. The Safe Investor is one tool and I strive to be another. It’s a good read and I agree with a great deal of it.
Remember, U.S. equity markets have risen and you need to know the risks involved with getting out of balance. Email for an appointment if you want to make certain your portfolio accurately reflects your risk tolerance and goals.
Until next time,
Susan R. Linkous
Investment advice offered through
The Linkous Group, Ltd.
A Registered Investment Advisor
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