When I was playing for the Steelers, I had a coach that used to joke we were eating the same food all week it was just presented differently. Inevitably, when we would have burgers on Monday, we would end up with chili, tacos, and spaghetti for the rest of the week. He would use this as an example when we were watching film because most plays in the NFL are the same or very similar, just in a different formation or motion to make it seem like a new play.

              When I first meet a client and they send me their investment statements, I tend to see something very similar. And if they have young kids like me, there’s a good chance spaghetti sauce is also on their paper statements. Many times, a 401k, IRA, or some sort of investment account has many different funds. It gives the appearance of diversification. It makes everyone feel good that they are in 4, 5, 6, or 7 funds. They even tend to have words in the title such as balanced, growth, total market, and admiral to make the funds seem different. 

              BUT when you open up these portfolios, you might realize there is just hamburger meat again. Most people think they are getting something new and fresh, but it’s the same thing recycled over. I typically find most people are heavy in large-cap stocks whether it is a mutual fund, ETF, or individual stock portfolio. And most people FEEL there is diversification within their portfolios, much in the same way we felt chili was different than hamburgers.

              I know what you’re thinking, why would an NFL team feed its players the same food? Simple answer… it’s easy. Why would an investment company have different funds allocated in the same or similar stocks? Simple answer… it’s easy. It keeps people happy when they think their portfolios are diversified, and it’s less work for everyone involved. Consequently, the client keeps their money with said investment company.

              The best coaches I played for would design a game plan with some plays that worked the previous week. They would put us in a new formation or motion to make it seem new, but they would include an assortment of new ideas or plays. Of course, the coaches could not predict how a game would unfold. When the first quarter ends, would we be winning or losing by 10? How would that interfere with how we play the rest of the game?

              Many experienced investors understand this as well. We can’t predict the future. We don’t have a crystal ball to see the when next pandemic, impeachment, financial crisis, inflation, deflation, terrorist attack, or natural disaster will happen. We can’t predict how any of these events will impact one specific segment of the market. This is why it’s important to stay diversified within your portfolio.

              You’ll notice when we build a portfolio, you’re invested in over 19 different markets and that is what it means to have diversification.

As always, let me know if you would like for me to take a look at your portfolio, and please, stop eating hamburger meat in all of your funds!

Material discussed is meant for general informational purposes only and is not to be construed as investment advice.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 4275 Executive Square #800 La Jolla, CA 92037 619.684.6400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners, LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC.  CA Insurance License #0L49687 | 2023-158307 Exp. 07/25