Putting all your eggs in one basket.

facebooktwitterlinkedinby featherI have heard it before.

“It’s not that I don’t trust my financial Advisor, it’s that I enjoy listening to more than one idea and thenTensed mature man and woman with bills and calculator sitting on sofa at home decide which idea is the best. So I have three Advisors and split it evenly. I also want to compare performance. It’s not necessary that my other Advisors know what else I own. It’s none of their business. I don’t want to put all my eggs in one basket. 

Why this makes no sense.

  1. 3 or 30 advisors do not necessarily translate into diversification. The advisors or the asset managers for example may all own the same companies.   Instead of getting more ideas, they have more of the same.
  2. With no one Advisor understanding and coordinating the asset allocation management as it pertains to the overall portfolio, greater risk may result.
  3. Asset allocation management, that is the balance between Stocks, Bonds, Alternative Investments and Cash, is not a static process; rather it is an evolving process that requires:
  • Rebalancing when the market movement causes the allocation to become out of balance.
  • Reallocating when the client’s situation and family dynamics change.

The rebalancing process is not based on timeframes. Rather it is based on market movement; therefore, having one’s investment assets spread out among several Advisors makes it almost impossible to result in a disciplined rebalancing process.

4. There is the risk of not being able to monitor for appropriate correlation or interrelationship between the investments, funds, and managers. The worst situation is where an individual has a group of Advisors all working with parts of the investment portfolio, and none of the Advisors know what the other Advisors are doing.

Find one Advisor you trust, get agreement on your expectations, and make sure the Advisor is looking at all aspects of your financial life with frequent reviews and adjust accordingly

After all, investors should not be worried about the basket.   What good is having multiple baskets, if all the eggs are rotting away.

Written by Jaimie Blackman

Jaimie Blackman

Jaimie Blackman has created Sound Financial Decisions ™ powered by MoneyCapsules®, to help guide business owners through the complexities of succession planning.

Jaimie writes “Smart Succession”, a monthly column in Music Inc., and also writes a bimonthly column for Canadian Music Trades magazine. He has spoken at NAMM U Idea Center, and at Yamah’s Succession Advantage.

As a financial literacy educator he has taught at New York University and has lectured at the 92nd Street Y, Marymount Manhattan College, and CUNY.

As President of BH Wealth Management, Jaimie also helps his clients implement investment and insurance solutions which are aligned to their personal values. Visit bhwealth.com to learn more.

To subscribe to Jaimie’s Succession Success: Insights for Music Retailers, visit moneycapsules.com.

The purpose of this post is to educate. Our content should not be construed as advice. If legal, tax or other advice is required by the readers, professional advice should be sought.

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