The portfolio that helped clients sleep through this week
How a diversified portfolio can reduce anxiety - while still growing wealth
This week was a perfect reminder that the markets don’t move in a straight line
The uncertainty around Greenland created massive panic in the markets. Doom-and-gloom dominated headlines.
On Tuesday, the S&P 500 fell 2.06% in a sharp, broad selloff.
Next day, as the headlines changed, it recovered some losses.
If your portfolio was all-stocks, you were holding on for dear life.
You know who slept well?
Clients that had invested in thoughtful, diversified portfolios.
If this week gave you anxiety, this edition is for you.
Comparison: ‘All Stock’ vs Diversified
Let’s compare two simple portfolios over those two days:
Portfolio 1: All stocks. 100% in S&P 500.
Portfolio 2: Diversified across US Stocks, International Stocks, Gold & Bonds.
All Stock Portfolio (S&P 500) | Diversified Portfolio | |
|---|---|---|
Jan 20 (Tue) | -2.03% | +0.04% |
Jan 21 (Wed) | +1.15% | 1.00% |
Cumulative | -0.95% | +1.04% |
Source: Google Finance. All Stock portfolio: VOO. Diversified portfolio: 25% VOO, 25% VEU, 25% GLD, 25% BND. Past performance is not a guarantee or indication of future returns.1
While the world was going through a panic attack, clients with thoughtful, diversified portfolios made money 💰️
The lesson (especially if you have a large account)
You don’t just need growth, you also need resilience.
Diversification helps because different assets often respond differently to the same shock2
Stocks can drop on nasty headlines
High-quality bonds can stabilize - or if they go down, they don’t go down as much.
Defensive assets like Gold can hold the line - or even go up!
By losing less, you can come out ahead.
While having a smoother, lower-stress ride.
Planning for the future
In this scenario, stocks bounced back quickly within a day.
But what if we run into a future shock that lasts for weeks or months? Or if the economy runs into a years-long recession?
Will your portfolio support you during those times - or will it crash?
As the saying goes, it’s not helpful to dig a well when the house is already on fire.
The time to get ready is now.
If you’d like a free review of your portfolio, just reply to this email.
I would be happy to help.
Sumeet Ganju Sumeet Ganju is the founder of InverseWealth, a fee-only fiduciary RIA, where he helps tech operators and founders turn concentrated equity into lasting wealth. He writes here most Sundays.