Diversify Your Team’s Payroll l Invest Over Many Non Or Loosely Correlated Asset Classes. Smart Baseball Managers spread their salary cap over the entire field and they try to not over-invest in anyone position. Depending upon the pitch, the batter could strike out or the ball could land anywhere on the field and multiple players might be required to ultimately throw the batter out. During a game that calculus plays out repeatedly. Any weakness on the field will reveal itself at least once in the game and that play may be the deciding factor between a win and a loss. Wealth managers advise that markets are also unpredictable and individual asset class returns can be all over the field. Investment managers need to allocate their assets so that their exposure covers the field no matter what asset class is hot. A good investment manager also knows that they need to have multiple asset classes performing at a high level in order achieve a consistent winning record.
Don’t Pay Up For Home Run Hitters l Consistent Players Pay Off Higher Over The Long Run. Home Run Hitter strike-out at a much higher rate than single base hitters. Sure, they put fans in the stands, but they don’usuallyt win series. Consistent batters hitting singles and doubles put more runs on the board and are generally less expensive to acquire. Similarly, a good Investment Manager will spend most of their time acquiring consistent dividend paying stocks and low cost indexed ETFS in smaller Equity asset classes while choosing solid short term bonds and bond ETFs in the fixed Income market.
The Team that Makes the Fewest Errors in a Season Win Pennants and Series l Investors Who Do Not Succumb to Common Pitfalls Generally End Up Ahead. Unforced errors cost ball games and eventually series. Most errors are caused by a poor mental decision not a physical issue. Similarly individual investors who are unable to separate their emotions from their decisions or allow fear to permeate their decisions in a down market or greed to permeate their up-market decisions fall victim to the market siren’s song. Wealth Planners and Investment Managers who are disciplined and dispassionate investors tend to make fewer mistakes and ultimately end up ahead of their peers.
If you are concerned about your investment’s s diversification and your Financial Planners Decisions and you would like to benefit from a conversation with an experienced and impartial fee-only fiduciary like Winthrop Partners, contact Thomas Saunders 267-454-4585 Thomas.Saunders@WinthropPartners.com