Wits & Wagers
Last week we were on vacation at my in laws house. Close family friends joined us for the trip and a couple of nights were spent around the table competing in the board game called Wits & Wagers.
While we were playing (and what I'm really referring to is the betting part of the game at this point), I started to see some similarities between Wits & Wagers and investing. More specifically - Diversification.
Diversify Your Investments: Are You on a Thrill Ride or Base Jumping?by Dan Andrews, Well-Rounded Success
You have a lot of responsibilities in life. One fortunate task you may have is how to manage your extra money. You’re at the point where you have some money accumulating in cash savings and you don’t know where to put it.
Some people may take this extra money and invest it in the latest trend, thus putting all their eggs in one basket. This leap of faith can end in a home run – which the person will brag about for decades – or a facepalm. This is the Base Jumping Approach to investments.
Don't Short-Change Diversification
When we talk about diversification, the general rule is ‘not wanting all your eggs in one basket.’ Obviously, it’s important that we not be in a position to lose the whole enchilada if a company goes out of business.
But actually, diversification plays more of a role than simply protecting us from disaster. Diversification is a tool that, used properly, can improve outcomes and increase the probability that we meet our goals.
by Nathan Schorsch, Head to Toe Financial Planning
When most people think of the stock market, what they’re thinking about is the S&P 500 index which is weighted towards larger and strictly US companies. While it does provide a good snapshot of the US economy, to say that just investing in the S&P through an index fund is all you should consider is short sighted and detrimental to your overall investment experience. With the extra volatility added by the US and China’s trade war along with other harmful trade policies, it’s useful to look at investments with broader scopes than the S&P can provide.
No Crystal Ball
Certainty is not a luxury that comes with investing. Successful investing focuses on probabilities and maintaining emotional discipline. We have to understand and accept that the future is uncertain. Investments performing well can get more expensive and low performing investments can get less expensive. Yesterday’s winner may or may not be the same tomorrow.
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