Posts made in March 2021

Investing tip: Flexible and Diversified

Keep Your Investments Flexible and Diversified

The fourth installment of our series on 7 Principles of Long-Term Investing is related to the last. In fact, one could look at it as the other side of the Don’t Follow the Crowd coin. However, it is a warning to avoid becoming myopic about your own investments by remaining flexible and diversified.  

Before we dive into the subject at hand, be sure to read, or reread, the first three installments here, here and here. Also, remember that you are in this for the long haul and the total return on your investments is what’s paramount.  


Markets are volatile. And much of the volatility comes from variables beyond anyone’s control. If you have any questions, look at wild swings caused by the pandemic of 2020 and wide variety of actions taken by governments across the globe. No one predicted 2020 and its effects will be felt, potentially, for years to come.  

Smart investors will use 2020 as an opportunity to learn about, or remind themselves, of the importance of keeping their portfolios flexible and diversified.  

We were taught the same lesson when the dotcom bubble burst in the 1990’s. Hundreds of thousands, if not millions of investors lost everything they had because they put everything they had on technology and internet startups. That level of risk is not good if you are 25 and certainly not when you are approaching retirement age.  

Regardless of your age, you should reduce risk in your portfolio by including a variety of quality investments including stocks, bonds, international securities and a few alternative investments if they are supported by your risk tolerance and goals.  


Even the most prudent investor with a highly diversified portfolio faces risks. It’s is the nature of the beast. That is why the second point; flexibility is so important.  

Flexibility should be built into your diversification strategy. There are several ways to diversify your portfolio, but the most common are by industry, by risk tolerance, by country and by investment type.  

When the bubble burst in the 1990’s the magnitude of the losses came on the heels of people leveraging flexibility to move dollars into a single industry. Many did the same in 2020 as pharmaceutical and other healthcare related companies were put in the spotlight because of the COVID pandemic.   

If you diversify correctly, you can still take advantage of the market changes we saw last year and in the 90’s without putting your portfolio at risk. The easiest way is to keep enough cash on hand to take advantage as the investment opportunities present themselves.  


If nothing else, it is important to remember that there is no one type of investment that is always best. Every type of investment, from corporate bonds, to treasuries, to blue chips, to small-cap stocks and so on will have their day in the sun and your portfolio should have enough diversification that some will be up while others are down.  

Remember, investing is a long-term play. You are not in it to make a quick buck and get out.  

chasing the crowd is an investing mistake

Chasing the Crowd is an Investing Mistake

Welcome back to our series on the 7 Principles of Long-term Investing. If you haven’t read the first two, or if you want a refresher, you can find them here and here 

The first principle – focus on the total return of your investment – provides a great foundation for the ones that follow, including today’s; Don’t chase the crowd.  

Be Aware of the Hype 

Why is it you never put complete faith in a weather forecast? Because most of you have enough real-world experience to know that doing so is a fool’s errand. There are too many variables that cannot be controlled, so meteorologists use models – sometimes several – to build a forecast. But, still, forecasts are not perfect, and we are all required to use a little common sense. The same is true for investing. 

Watch any of the financial shows and you’ll see analyst after analyst offering their opinion of the next hot stock. Now for a little secret, if the TV analysts are talking about it there’s a good chance the institutional investors already have it on their radar and are moving money into it to take advantage.  

The same goes for your friends, family, neighbors and coworkers. By the time they are investing in the latest trend, they’re not getting in on the ground floor. They are several stories up and there’s very little room before you hit the ceiling. Put another way, whatever the hot thing is – a stock, security or sector – the price has already been inflated by the hype.  

Remove Emotion 

We aren’t suggesting you ignore the TV analysts or your friends and family, but the hype around their recommendations usually leads to decisions born of emotion rather than reason. And emotion and money do not mix well. Savvy investors seek objective, independent research that uses the best information available, calculated choices and a realistic assessment of risk and determination to avoid making decisions based on purely emotion. As we’ve said in previous posts, investing requires thinking and panning for the long term. Chasing the latest shiny investment object is anything but. This is the reason it is critical to test every decision against the first of our seven principles.  

When faced with the opportunity to chase an investment trend, ask yourself if doing so is putting the total return on your investments in jeopardy. If you answer “no” to that question, follow what the savvy investors do. Research the trend using more than one objective source (3-4 is optimal). Decide what level of risk you are willing to take with your investment dollars. Remember, crowd chasing can lead to lower returns, so you must be willing to sacrifice the potential for higher returns if you invest those same dollars in a different investment vehicle.  


We said it earlier, but it bears repeating, money and emotion do not mix. Unfortunately, that truism can be lost in the crowd when it is rushing to pour investment dollars into the latest hot trend.  

When you see that happening, when your friend and family are telling you about all the money to be made by going along with the crowd, that is when you, the savvy investor, takes a deep breath and recalls the first principle because you know it is better to assess the trend than to join it based on the lure of short-term gains.  

Remove emotion from the equation and buy yourself the time needed for the due diligence necessary so you can make a rational decision based on data, reason and what is best for the long-term health of your portfolio.