With the turbulent financial markets this year, I am often asked, “How are you doing with the market being so bad?” 

I usually reply something along the lines of, “Pretty well.  At Shadowridge, we expected bear markets in both stocks and bonds and had plans in place for how to deal with them.  We recognized these declines for what they were when they started to show up in prices earlier this year.  Since we planned ahead, we are very comfortable with our portfolio changes and performance.  And importantly, our clients are comfortable, too.”  

The kicker comes when the person usually says, “Gee, that is great, you must be really well diversified.”  

My reply goes like this: “Diversify? Why would I want to diversify when everything is going down?  You just lose money in more places.  The only way to survive in this market is to concentrate on what little you can find that is making money.” 

An old acquaintance in the industry, Bill DeShurko from 401k Advisor, gave me a great analogy a while back, a way to illustrate this idea of concentration vs diversification.  Ask yourself if you can diversify away the risk of being in a room with poisonous snakes by adding more snakes? 

Here is what the US Stock Market looks like these days.

So, where can one diversify effectively?

Here are some current snakes with YTD performance as of October 24, 2022: 

  • Facebook/Meta -61% 
  • Amazon -28% 
  • Google -29% 
  • Tesla -39% 
  • Home Depot -33% 
  • Toyota -27% 
  • Pfizer -23% 
  • JP Morgan -22% 

Clearly this is not a time to try to diversify away market risk! 

As I said in my 2018 book Why Bad Things Happen to Good Investments, “The surest way to make money is to have more money in asset classes that are going up, and less in asset classes that are going down.”  It is a simple concept, but takes professional know-how to do it well.  This is what we do at Shadowridge. 

If you know someone that is worried about the health of their investments, please have them call Shadowridge at 888-434-1427 for a free portfolio review, to see what our proactive management can do for them.   

Remember, friends don’t let friends blindly buy-and-hold.