Andrew Carnegie – steel tycoon, philanthropist, and one of the wealthiest businessmen of the 19th century – once commented about creating wealth:
“Put all of your eggs in one basket. Then, watch that basket!”
Does that advice surprise you? Well, prepare to be even more surprised – because we agree wholeheartedly. Many SJS clients have generated their wealth through concentrated bets that began as very small investments, perhaps sweat equity, and grew over time to become significant. In other cases, their baskets didn’t do a very good job of nurturing those eggs. Some of our clients can tell tales of complete failures along the road to success. That may surprise you, too. Viewing accomplishments from the present day has a way of smoothing out the memories of past hardships, just as viewing financial markets at their current levels tends to smooth over memories of past volatility. This perspective comes with the passage of time.
Regardless of the bumps along the way, individual talent, innovation, and hard work applied to America’s free economy have historically yielded many success stories. We have plenty of these stories to share and see no reason why the future should be any less full of promise.
For clients who have spent their lives building their wealth, it can sometimes be difficult to give up their perceived “control” of their basket – of a business interest, real estate, or concentrated stock held over generations – and let us handle their investments. This “control,” which may be somewhat illusory, gets replaced with the so-called risk inherent in the financial markets. Maybe you’ve experienced similar feelings? This is completely normal, and can be a huge emotional obstacle to overcome. Some people never get there.
But we strive to help these investors see the benefits of making this trade off when the time is right, to give up the concentrated bet for a diversified portfolio that may offer a smoother experience over time. While investors may start off with all of their investment “eggs” in one basket, academic research and empirical evidence strongly support widespread holdings in the publicly traded financial markets. And consistent exposure to areas of the market that systematically add value are time-tested strategies to preserve and protect wealth. These strategies are the foundation of MarketPlus Investing®.
How does MarketPlus Investing fit into your picture? Eventually, the day may arrive when you know it’s time to preserve and protect your wealth, and move your eggs from that single basket into many, many more.
So, how can we help you “preserve” your wealth? First and foremost, by keeping you informed so you’re less likely to react to your emotions and potentially harm your portfolio. Emotions can be the great enemy of successful investing. And how can we help you “protect” your wealth, and from what? You might think market volatility is the only danger, but historically, inflation – and the associated decreased purchasing power – can be the bigger and historically persistent risk. It’s the white noise playing in the background of every minute of every day, and often doesn’t get the media play that an old fashioned market correction gets. This is yet another reason why we believe a well-diversified portfolio, designed with calculated risk exposure, can be so important to maintain wealth for the future needs of your families and loved ones. And this is the reason why we created MarketPlus Investing in the first place.