Your Investments: Birthdays, the Super Bowl, and setting boundaries

So this is a big birthday week in our family. First, a big happy birthday to Savta on her”shinuy kidomet” (area code – much better in Hebrew!), reaching the age of Gevura. The term “gevura” can mean strength or power. But a “gibor” is also a hero.

The Mishna in Avot 4:1 asks, “Who is a gibor? One who conquers his desire.” It’s not someone who uses brute force. Rav Soloveitchik views this as the defining factor of the Torah’s view of heroic action and the character of the hero. The strongest do not receive this title; rather, it is the one who is driven by a calling and has the inner strength to live within self-imposed limits.

Savta, you are a model of what Rav Soloveitchik defines. You live according to your own moral compass, doing what’s right, and not what’s necessarily popular. And you are certainly driven by a calling.

The other birthday is that of our son, MAK. Over the last two years, he has been, like hundreds of thousands like him, what many would say is the epitome of the more traditional definition of a “gibor” – that of a hero, serving in Gaza, Lebanon, and Shechem (Nablus), putting yourself in harm’s way to defend the country.

I would argue that MAK, along with all the other soldiers, was also driven by a calling. While they used brutal force many times as is required in a war, we ended up winning the war because of their understanding that they were fighting for a greater good. Obviously, to protect their home, but also because this was a clear fight between good and evil.

I want to wish you both a year of health and happiness and continue to do what’s right, even if it goes against the tide.

While I am excited about the game, my kids, led by the aforementioned birthday boy, MAK, want a blowout BBQ. As I have gotten older, the amount of meat I am willing to eat at 2 a.m. has declined. Just thinking about a 2 a.m. BBQ is bringing on a queasy feeling.

But maybe this year I’ll give in to the wishes of the kids, because at the rate things are going, I’ll be a lot older the next time one of my favorite teams makes it to the championship!

What’s great about football is that it’s a team game. As Super Bowl-winning quarterback Tom Brady said, “I just love working hard. I love being part of a team; I love working toward a common goal.” It’s the reliance on a team effort that I would like to focus on vis-à-vis your investment portfolio.

In other words, you need a diversified team approach to achieve ultimate success. While there are a couple of stars, both teams in this year’s game personify the total team approach. They are both teams with solid players who work together as their recipe for success.

There are those professionals who believe diversification is the magic sauce for ensuring that you won’t lose money. Well, that is just not true. Investors who diversify can lose money just like anyone else.

According to Morningstar, “Having a diversified portfolio doesn’t mean you’ll never lose money. Diversification doesn’t mean complete protection from short-term dips or market shocks. Diversification does not guarantee that if one investment goes down, another investment will go up-it isn’t a seesaw.”

Since I mentioned food, let me continue with the food analogy to explain the concept of diversification. Let’s say you have some friends coming over for a Shabbat meal. Would you only serve roast beef or chicken wings to your guests?

Doubtful – certainly in my house! Even for those of us meat-lovers, we would expect some salad, vegetables, drinks, and desserts to be served as well. And of course, some tea to wash it all down! You want your Shabbat meal to be successful, and, as such, you need a well-rounded menu.

If it’s good enough for winning the Super Bowl and successful entertaining, it must be a good way to invest. What is diversification? It is an investment approach that uses many varied investments within a portfolio.

The theory states that a portfolio of different kinds of investments will, on average, yield higher returns and pose lower risk than any one individual investment.

It is a way to smooth out volatility in a portfolio caused by market, interest rate, currency, and geopolitical risks. In layman’s terms, don’t put all your eggs in one basket. Since this past fall, diversified portfolios have fared much better than concentrated hi-tech portfolios, which got killed.

Steadier approach

The whole point of diversifying is to lower risk in a portfolio. It’s to set boundaries, so that you don’t get sucked into all the hype but rather stay level-headed. For most investors, a slow and steady approach is the path to financial success.

Review your portfolio to see if you may be able to benefit from proper diversification, to help improve returns and lower your risk.

Go Seahawks!