In Part One of our series highlighting some of the glaring issues related to your investments, we talked about understanding what you’re invested in and why. In Part Two, we focused on what it meant to accurately measure how your portfolio is performing.

Today, in Part Three, we’re taking a look at the contents of your portfolio and identifying an area that may be compromising your growth potential, as well as discussing some big ideas that could put your portfolio on par with its much larger counterparts.

Comfort is the Enemy of Growth

Many of the clients we meet with have been working in the same industry (some with the same company) for several decades. Suffice it to say, they feel comfortable having a sizeable portion of their portfolio in that company (or at a minimum, that industry’s) stock.

Their justification is: they’ve worked in the industry, they understand the ins and outs, so it makes sense that the bulk of their portfolio is made up this way.

While this runs counter to the ‘Don’t put all your eggs in one basket’ argument that is common in the world of finance, if you look closely it’s easy to see why this is the case.

Here’s what I mean:

Many companies offer stock purchase plans that allow the employee to buy stock (often at a discounted rate) on a regular basis. Given the relative ease of accumulation, it’s not uncommon for those assets to grow significantly over time and make up a larger portion of one’s portfolio than originally intended.

Looking at your own investment statement, how much of your portfolio is connected to one industry — or worse — one company stock?

If it’s over 15% you could be entering the danger zone.

Remember Enron, Lehman Brothers, and more recently, Kodak? Their employees’ thought they knew the companies they worked for inside and out, so what could go wrong?

I think we all know the answer to that: everything.

Take Advantage of Opportunities

It may not seem like it on the surface, but the fundamental differences between your investment portfolio and one with billions of dollars in it aren’t as pronounced as you might think.

So does that mean your $100,000 portfolio could achieve the same level of quality that is found in a $10 billion dollar behemoth?


In fact, you could build a portfolio that mirrors what the “big guys” are doing by simply taking advantage of an opportunity that’s been hiding in plain sight — you just haven’t known where to look.

Within the realm of financial services firms, the competition level is high. For you, that means a number of great products that you can capitalize on.

Here’s another way to look at it: Fidelity, Vanguard, Dimensional, Schwab and many other investment management companies are all working feverishly to provide high-quality, low-cost funds to the consumer market.

And when investment companies compete for your dollar, you win!

The options are numerous, they’re great, and they’re better than anything you could hope to put together with individual stocks on your own. Check, check, and check, right?

Want to hear something even better?

This hyper-competitive environment is only going to continue improving the investment solutions available to you as a consumer.

Needless to say, there’s a great opportunity in front of you and you’d be remiss not to take advantage of it.

Final Thoughts

Here’s the good news: whether your portfolio is too concentrated on one industry or not currently taking advantage of the opportunities, the mistakes you’re making are very common and reversible.

You’ve already done the hard part of acknowledging that something is wrong. Now it’s time to take the next step and right your course.  Properly managing your investments means more than just throwing money into an account and wishing for the best. It means understanding the contents of your portfolio and getting rid of any assets that no longer fit or don’t provide the best long-term impact.

If you need some help getting started, we’re just a phone call/email away. Alternatively, if you’re still trying to make sense of it all, maybe the next (and final) post in this series will help. Check back in a few weeks when we will complete this series with a look into costs.

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