Home    News & Publications    Podcast #9: Diversified Portfolio

Podcast #9: Diversified Portfolio

September 29, 2020

Listen to the podcast below to hear about this week’s update about diversified portfolio.




Hi Everyone,                                                                                      

Jill was unable to deliver this podcast today so I volunteered to take her place. Who am I you ask?

I’m your diversified portfolio.

My objective as your diversified portfolio is to provide a steady investment return over time. I know there will be times I decline, but I try not to decline as much as the general market.

I also try to give you a steady ride going up but alas, I’m not going to return as much as the general market. After all, I’m diversified. When one theme zigs I try to have another one that zags so regardless of what is going on, not everything goes up or down at the same time.

This is important because the more you lose, the harder it is to make up. For example:

If you started with $25,000 and lost 10% or $2,500, your reduced balance is $22,500. The way the math works, you have to earn 11% to get back to $25,000.

In 2008, the S&P 500 dropped over 50%. If we assume you lose 50% on your $25,000, your new balance is $12,500. You would need to earn an eye popping 100% just to get back to $25,000.

That’s why it is important that I, as your diversified portfolio, lose less when the markets decline.

In today’s environment, only a few stocks are moving the markets so my diversification doesn’t look as attractive, but over time, I believe I will prove my worth.

There are approximately 9,000 companies in the various global indexes but only 30 of them account for 70% of the total gains over the last five years. More than half of the 30 companies are in the U.S.

Of the 30, ten stocks accounted for 50% of the gains:

U.S.                  4

China              4

Canada           1

Brazil               1

Even my college endowment fund brethren holding diversified portfolios have not performed well. (Source: Bloomberg.com)

I faced a similar situation in the late 1990s. Abandon diversification in favor of the stock indexes or continue to take the long view and lose less when the markets decline but participate when they rise. My portfolio owners did very nicely sticking with me in the first decade of 2000s. I think I’ll continue as I am.

Jill will be back next time but until then,

Best Regards,

Your Diversified Portfolio


Receive the Financial Connections quarterly newsletter


No Hidden Costs. No Referral Fees. No Commissions.

As a fiduciary, we put our clients' interests first. Our compensation comes exclusively from you. If we don't directly provide a particular service, we can serve as a resource for referrals to other professionals.

Download the fee schedule Download Disclosure Form ADV Parts 2 & 3