Case Studies in Portfolio Management

09/09/2019 - Uncategorized

My approach to wealth management rests on something called strategic diversification. I know—we hear “diversify!” all the time. But what does that really mean? In my experience, it means a lot more than what many of my new clients have done up to the point of our first meeting. That matters because, done properly, strategic diversification has the potential to grow wealth not just as retirement nears, but throughout retirement.

The strategy hinges on active management of a portfolio’s investment allocation. If that sounds like a lot of work, it is. But I love doing it; it keeps me at the top of my game, and assures that I’m constantly fine-tuning my approach to helping clients pursue their dreams. At the core of strategic diversification is one question, which I ask of every client: “What can I do to give you confidence?”

Some want an annual phone call assuring them they are on track. Others take it (much) further. One guy said, “If you think I’m spending too much and at risk of running out of money, call me, AND follow up with a letter, in big red type, that says ‘DO NOT SPEND ONE DIME OVER THIS AMOUNT!’” And I’m fine with that. Sometimes the biggest threat to our wealth is us!

I’ve also had clients that I’ve spent a lot of time educating on the markets’ cycles, explaining that big single-day or multi-day losses are nothing to worry about, and the reasons why. I’ve built them a beautifully balanced portfolio, one I was confident would meet their retirement goals—only to have it decimated when they called my office and demanded I sell their holdings. Why? Because the financial news channels were having a doom-and-gloom field day over the latest downturn in the stock market. Which is just silly.

“Invest for the long haul,” like “diversify!,” is a mantra we hear all the time. Strategic diversification makes the daily swings of the market non-issues. It places your capital in positions that enable you to buy on weakness and sell on strength—not only while you’re still earning, but in retirement, too. I can always tell when a client really “gets” this: he no longer calls when one of his holdings drops.

Now understand, there’s nothing wrong with watching the markets, just like there’s nothing wrong with watching a football game. The risk is in reacting to them, and it makes no difference whether the news on Wall Street is “good” or “bad.” Either way, many individual investors tend to sell when their stocks are dropping or buy when they’re on the rise: the opposite, in either case, of what they should do. But strategic diversification—coupled with active portfolio management, enacted by a trusted advisor who works in your best interest—can leverage market cycles to your benefit. It can be a great way to protect and grow wealth.


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