Cleaning the Shabbat table and portfolio diversification
‘My theory on housework is if the item doesn’t multiply, smell, catch fire or block the refrigerator door, let it be. No one else cares. Why should you?” Erma Bombeck
As Shabbat approaches in the Katsman home, the tension becomes palpable. It hits its apex as I walk through the front door Friday night after synagogue, and then it breaks. First course plates, soup! - Shouts of which course and whether it’s clearing the food or plates can be heard throughout our sleepy neighborhood. Who would imagine that helping clean up the Shabbat table could be so strategic? Come Friday afternoon each of our kids ask how many guests we are expecting, and for which meal. But it’s not because they want to be social, They’re calculating what will be the easiest of the chores to do. No one wants to get stuck with ‘mainfood’. It’s just so much work. It’s so cut-throat that rules have been created. If you have a birthday in the upcoming week, you are exempted from helping, and everyone else begrudgingly has to pick up the slack. It’s gotten so bad that last week after I picked our two youngest children from school on Friday, my youngest yelled ‘first plates’ at the top of her lungs. Startled, I luckily managed not to crash the car and then I called a penalty. She was reminded that it’s too early for her ‘call’, gotta wait ‘til Friday night!
The real miracle is that by hook or by crook (or by our oldest just helping out of the goodness of her heart) the table does get cleaned. It’s our family form of teamwork.
Families that work together strengthen their relationship. Eliza Martinez of www. Oureverydaylife.com quoting a University of Illinois Extension report on the importance of family teamwork, writes: “Family members who work together can help balance each other’s strengths and weaknesses and bring everyone closer together. Parents who work as a team have a positive impact on their children’s emotions and relationships. Kids who work as a team can increase their sibling bond, tend to watch out for each other and want to help and take care of one another.” After cleaning up each course our kids sit around singing ‘Kumbaya my lord’ they feel so close to each other. Not.
Investors have their own form of teamwork and it’s called diversification.
DIVERSIFICATION
Firstly, it’s important to define what diversification is. Diversification is an investment technique that uses many varied investments within a portfolio. The primary goal of diversification isn’t to maximize returns. Its primary goal is to limit the impact of volatility on a portfolio. In layman’s terms, don’t put all your eggs in one basket.
Why diversify? As I have written many times, I know people who believe diversification is for “wimps.” They rightly point out that if Bill Gates had sold off all his Microsoft stock 35 years ago, he wouldn’t be the Bill Gates we know today. That’s all well and good, but for the overwhelming majority of investors, the money they are investing tends to be their whole life savings and they can’t afford to take the risk of investing in one asset and hoping to strike it rich. The consequences of a wrong investment decision being made can literally wipe you out financially.
HOW?
First you have to define what your goals are with the money. Can it sit for decades and grow, or is it needed in a few years to pay for a child’s wedding? Once you know your goals then you can build a portfolio that will enable you to achieve those goals.
According to Fidelity, “To build a diversified portfolio, you should look for investments— stocks, bonds, cash or others—whose returns haven’t historically moved in the same direction and to the same degree. This way, even if a portion of your portfolio is declining, the rest of your portfolio is more likely to be growing, or at least not declining as much.”
REVIEW
If you feel you are too heavily weighted in just a few investments within your portfolio, speak to a financial adviser to review your holdings to see if you can benefit from proper diversification, to help potentially improve returns and lower your risk.
Happy 17th, MAK. Enjoy your week off from cleaning.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing and is a licensed financial professional both in the United States and Israel. He helps people who open investment accounts in the United States.