In the last several years doctors, scientists, nutritionists, dietitians, and even personal trainers have told us that too many carbs can be detrimental to our health. According to these experts eating dry carbs such as pasta and starchy vegetables too often leads to too much sugar in our bloodstream which quickly converts to fat. This leads to a higher probability of heart disease, diabetes, and cancer along with other physical ailments. The consensus of so many experts in these last few years has created a market for books, videos, infomercials, Dr Oz appearances and so on.
All of this has got me thinking about the “carbs” in our investment portfolios. To return to the food analogy, an important consideration is who is consuming these carbs and in what quantities. A marathon runner is certainly going to use carbs differently than someone who has adopted a more sedentary lifestyle. Likewise, there are some investments that work for some and not for others. For example, rental properties can be a very successful holding for an investor if the investor has the time, money, and desire to maintain them. If, however an investor will not give the necessary attention to such an investment then the rental property(s) could turn out to be a “high-carb” holding. Speculative investments are another example of a “carb” that can be detrimental to a portfolio if it is taking up a lot of space in your portfolio. The recent bitcoin craze is a great example of a type of speculative investment that could work for some and not for others. Clearly, if you are taking out a second mortgage on your house to buy bitcoin then you should cut out those “carbs”!
So how do you know the right amount for your portfolio? This is where a thorough examination of your financial background and financial behaviors are required. If you took the time to be examined by a nutritionist you could find out the appropriate amount of carbs for your body based on your level of activity, hormone levels, current weight, etc. The same could be said when your finances are examined by a financial professional. Your financial background will include questions such as: *What are your goals? *When do you plan on retiring? *What is your desire and ability to bear risk? These questions will help paint a picture of what a successful portfolio should look like.
No two portfolios should look exactly alike. Investment holdings can be similar but there are too many variables at play. Keep in mind that investments are only a part of someone’s portfolio. A financial professional should always look at the big picture. For example, how does your holding in “XYZ” stock fit in with your life insurance policy?
As you start the new year don’t forget to examine your financial health just as you do your physical health. You may find that your portfolio has an unbalanced amount of “carbs” that needs to be addressed. If you would like to set up a time with my firm for an initial consultation click here. This is the best time of the year to be inspired and finding solutions to meet long term goals for your portfolio can mean the difference between mediocrity and greatness. Here is to your success in 2018!