The biggest U.S. stocks have performed well. You made money. Experts have gathered to tell you this is a problem.
Not a problem for them. A problem for you. Your portfolio went up and now financial advisors are concerned you might feel good about it. Can't have that.
The pitch is diversification. Add assets. Lower volatility. Translation: your S&P 500 index fund made too much money and we need you to buy things that make less money so you'll feel balanced. Balanced is code for bored. Bored clients call their advisors more. Advisors bill hourly.
The word greedy appears in the headline. You bought an index fund and held it. That's greed now. Greed used to mean leveraging your house to buy GameStop calls. Now it means you didn't sell Apple to buy emerging market bonds yielding 3%.
Experts say you need to diversify away from the thing that worked into things that didn't work because the things that didn't work are due for a comeback. This is called risk management. Risk management is when you voluntarily make less money because a chart from 1973 suggests you should have owned gold.
The S&P 500 returned 26% last year. Your advisor wants you to add international small-cap value funds that returned 8%. The 18% difference is called volatility protection. Protection from what? From making 26%.
Low-cost index funds built wealth. Experts recommend you fix that by adding high-cost actively managed funds that will build someone else's wealth. Probably the expert's.
Don't get greedy. Get diversified. Get balanced. Get poorer at a rate that feels sophisticated.
Photo by James Yarema on Unsplash
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