Undeserved
Sometimes you do all the right things and end up with suboptimal results. Other times you do all the wrong things and end up in a better place than you deserve.
On the freeway, it is optimal for all traffic to be moving along at roughly the speed limit. That way everyone has a greater chance of arriving at their destination safely at a fairly predictable time.
But some drivers do not leave on time and feel they can make up those precious seconds by treating their fellow drivers like a giant slalom – weaving and darting between cars to get to their destination faster.
Most of the time, those aggressive weavers do reach their destination in less time without encountering law enforcement or crashing into someone, but they took significant risks to accomplish that feat.
On Sunday, the Packers did very few things correctly. They had fewer total yards, fewer first downs, less time of possession, fewer total plays, and more turnovers than the Bears. The coaches made some questionable judgement calls in important situations that turned out poorly.
Yet, thanks to the outstretched arm and accompanying large hand of one Karl Brooks, the scoreboard read Packers 20 – Bears 19 when the game clock expired. If the Packers opt to continue this suboptimal level of play and decision-making for the remainder of the season, it is more likely to end poorly than better.
In portfolio construction, one of the primary tenets of good behavior is diversification. Similar to driving the speed limit, incorporating multiple different investments that act differently under different circumstances into one’s portfolio typically leads to a smoother, safer ride.
Note that diversification does not guarantee you will not experience a crash. Temporary declines in portfolio values are to be expected along the way. Diversification means you are not riskily bobbing and weaving through the markets to hopefully get to your destination faster and unscathed.
Over the last 12 months, those with properly diversified portfolios have felt a little bit like the Bears on Sunday. Traders who flagrantly defied best practices and bet on risky undiversified portfolios concentrated in a few technology companies have scored more points during that time period. They have not faced any law enforcement consequences or crashed. Yet.
Unlike the Bears, there is still plenty of time on our clock. Diversification’s benefits and our clients’ financial goals are gradually implemented over decades, not quarters.
While doing the wrong thing can momentarily give someone the illusion of success, the risks that are taken are frequently underestimated.
Our approach is much simpler. Consistently do the right thing and diversify, even when it appears those engaging in poor behavior are getting ahead. This can be frustrating at times (please consult a Bears fan regarding Sunday’s game for a firsthand experience), but we are coaching our clients for long-term success.
Quote of the week: Winston Churchill: “Success is not final; failure is not fatal: It is the courage to continue that counts’”
