Investing 101 – Smart Advice from Dr. Seuss
A key investing lesson from Dr. Seuss:
A while back, I came across a post from James Clear related to how Dr. Seuss came to write his famous Green Eggs and Ham book.
It turns out that Theo Geisel took a $50 bet that he could write an entertaining kid’s book with only 50 words. He won. Big time.
So what does that have to do with investing?
Simple: I believe that you can build a killer investment strategy using ONLY six investments! Not only do I believe this, I implement this strategy with my clients.
Too good to be true? I don’t think so. Portfolio theory tells us that we want to build an investment portfolio by purchasing a number of assets in different classes. To me, the key classes for US-based investors are:
Key classes for US-based investors
- The US market
- The developed international market
- The emerging international market
- The real estate market
- The fixed income market
If you “mix and match” amongst these five classes, you are totally capable of building an extremely well-diversified portfolio. Furthermore, if you do your research well, you can find a SINGLE solid investment choice for each asset class—normally a mutual fund. Five classes, five securities. Good to go.
A quick test for the astute reader: Did you see the sleight of hand here? I actually suggested using SIX investments not five! So where is the other investment that I recommend/use?
It is in the US market—I like to leverage the persistent size, value and profitability premiums and introduce two US holdings.
For the “do-it-yourself” reader, I would encourage you to run some numbers using these asset classes. For the reader who is NOT familiar with asset classes and the methodology that you would/could use to build such a portfolio, I would encourage you to seek out professional help with your investments and financial planning.
Would You Like More Support?
- Would you like to whittle your portfolio down to a handful of investments that you actually understand?
- Do you have a well-defined Investment Policy Strategy that is used to drive your investments in support of a comprehensive financial plan?
- Would you like to partner with someone who is used to helping people get through these struggles and (then, with confidence) implement portfolio strategies in a systematic manner while focusing on your desired outcomes?
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