Growing up in the New York tri-state area has many benefits including the diverse group of people with a large array of interests which makes life interesting. Among them is the vast number of sport teams to root for and follow. The choices are plentiful and the combinations can be quite different. Are you a Mets fan or a Yankees fan, Jets or Giants, Knicks or Nets, Islanders, Rangers or Devils?
And when you run into a fellow fan, there is an automatic connection since you experience the same highs and lows of the specific team. There is a bond that the fans must stick together especially during a tough season.
As you know, we are a true believer in the benefits of a diverse approach to investing. The choices of companies to invest in or root for are plentiful. However the difference with investing is that in order to be successful in your portfolio, you need to own a portfolio with no “favorites” but own a diverse number of companies. As an example, rather than “root” for the success of one specific large company, invest in all of the large company stocks. Owning an array of companies, located not just in the United States but the international markets as well, will allow for the growth of your portfolio.
One year a specific sector may do better than others like the NY Rangers this year, but having a diversified portfolio is key to having an overall long-term successful plan. Last year, large U.S. companies as indicated by the S&P 500 index performed well. Although most financial media sources will list 11.74% as the S&P 500 index’s return in 2014, an investor reinvesting dividends in the S&P 500 would have theoretically done even better: 14.04%. This year as of May 15, 2015 the gain is 3.10%.
In comparison, the MSCI EAFE Index which is a stock index which captures large and mid-size companies across so-called Developed Markets countries in Europe and Asia Pacific, excluding the U.S. and Canada lost 4.90% in U.S. dollars. This year the index is handily beating their U.S. counterparts with a gain in U.S. dollars of 9.16% as of April 30, 2015.
Celebrating when any of the 11,000 companies in 44 countries (where we invest most of our clients portfolios) are performing well takes the stress out of trying to time when each country or individual company will do well. It has been said the diversification is the only free lunch on Wall Street. Make sure that you have a healthy portion.
It’s as if you can just say you are a New York fan and when any of the New York teams win, you are overjoyed by the results. Investing in the complete market, gives you the ability to celebrate when the overall global market is performing well.
So keep your portfolio diversified, and keep “rooting” for your specific sports team.
And in case you’re wondering, LETS GO METS!!!
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