| Humpty Dumpty sat on a wall; | | | | It should be something that matches your |
| | | | long-term financial goals. Your portfolio |
| Humpty Dumpty had a great fall. | | | | should not be populated by the latest "stock |
| | | | du jour", recommended by your broker. |
| All the King's horses | | | | |
| | | | The main way to avoid the problem is to find |
| And all the King's men | | | | a financial advisor who understands your |
| | | | goals and has the ability and willingness to |
| Couldn't put Humpty together again! | | | | help you reach them. |
| | | | |
| You know this tragic story. | | | | Lastly, if this has happened to you, I'm |
| | | | afraid you will have to swallow some bitter |
| During the 45+ years that I have been a | | | | medicine. You might have to sell most or all |
| financial advisor, I have seen this over and | | | | of your holdings, and start over again. |
| over and over again. | | | | There is no sense in compounding a mistake |
| | | | into an even larger mistake. |
| A new client comes into my office and asks me | | | | |
| to review their old portfolio. Very often it | | | | Conventional wisdom states that your |
| is littered with holdings that make no sense. | | | | portfolio should be built upon a very strong |
| It might have been possible that each of | | | | foundation. This strong foundation should be |
| those holdings was purchased for a specific | | | | comprised of high quality stocks and high |
| reason at the time, but when put together it | | | | quality bonds. The best way to visualize the |
| looks like a patchwork piece of cloth, a | | | | construction of your portfolio is to |
| crazy quilt. | | | | visualize a pyramid. As we move up along |
| | | | with the slope of the pyramid, you might |
| Investment professionals refer to this as a | | | | consider having smaller and smaller pieces of |
| Humpty Dumpty portfolio. This is a portfolio | | | | slightly higher risk investments. |
| that is broken beyond repair. Truly, all the | | | | |
| king's horses and all the king's man couldn't | | | | Conventional wisdom declares that you should |
| put this portfolio together again. | | | | have the proper amount of diversification. |
| | | | Conventional wisdom is never the cutting |
| What's the lesson here? | | | | edge. You may not to double your money |
| | | | overnight with this philosophy but you can be |
| How can you avoid being burdened with a | | | | relatively certain that your money will be |
| Humpty Dumpty portfolio? | | | | there in the future when you need it. |
| | | | |
| And, if this does happen to you, what's the | | | | Conventional wisdom is generally right. |
| best thing to do? | | | | Otherwise it would be called conventional |
| | | | stupidity. |
| The most important lesson to be learned here | | | | |
| it is that while it is important to trust | | | | I grew up in Brooklyn, New York. When this |
| your financial advisor, it is also very | | | | specific event happened, I was far away, on a |
| important for you to pay attention to your | | | | business trip, so I didn't see it, but I know |
| own investments. After all, it is your | | | | a guy who knows a guy who did see it and he |
| money. | | | | claims that Dumpty was pushed. |
| | | | |
| It is important for you to understand that | | | | But that's another story. |
| your portfolio should have some coherence. | | | | |