Sand Hill's Chief Investment Officer, Brenda Vingiello, CFA, joins Jenny Harrington on “Halftime Report” to go over their most recent portfolio moves. Brenda's commentary begins
Diversification – Don’t Leave Home Without It
Published Date : May 7, 2015
“The secret of success is constancy of purpose.” – Benjamin Disraeli
As a new parent, I am routinely reminded that patience and rational decision making, combined with preparation for a variety of outcomes, are critical ingredients in creating a palatable recipe for all involved. On a recent family road trip, my husband and I packed more than we’ve ever attempted to stuff into our SUV and marveled at how life has changed now that the safety and well-being of our daughter is such a priority. While we feared we had over-packed, we felt at ease knowing we were prepared for almost any challenge that might present itself. Investing – whether to meet short or long term goals – is also a life adventure with its twists and turns along the way. History has shown that preparing for a range of potential outcomes by maintaining a diversified portfolio is important, since unforeseen events can quickly derail even the best intentioned strategy.
For many of us, there is a time and place for spontaneous adventure, but when it comes to protecting the things we care about most, we generally prefer a well thought out strategy we can comfortably embrace for the long-term. Over time, a diversified investment portfolio results in a less volatile return path, as the sum of the parts will never perform as well as the strongest asset class or as poorly as the worst asset class during any given period.
Yet there are times when tried and true methods don’t work, and we may feel as though we have over-thought our approach. During 2014, diversifiers such as commodities and international equities were detractors. A “narrow” market prevailed, with a simple allocation to large stocks and long bonds outperforming the so-called “endowment approach” that has served investors well over the long-term. While disappointments occur from time to time, it does not mean that a system will not provide the desired results going forward.
Modern Portfolio Theory, developed by the Nobel Prize winning economist Harry Markowitz, is based on the proven concept that investing in a well diversified portfolio can maximize risk-adjusted returns over time. As a simple way of demonstrating this approach, the chart compares investing only in the prior years’ “hot” sectors, or conversely in those that are “down and out,” to investing in a diversified portfolio. The diversified portfolio produces a better return with less volatility.
Even with data in hand showing that diversification will ultimately benefit investors, it is natural to feel regret at not having been over-exposed to the best performing segment or segments of the market. Nevertheless, it is important to bear in mind that over-exposure to any given sector adds risk to a portfolio, and may ultimately jeopardize longer term goals if the market doesn’t behave as anticipated. Remembering our purpose, whether it be to protect our nest egg or our beloved cargo, brings us back to the need to be well prepared and take a thoughtful, diversified approach.
At Sand Hill Global Advisors, our investment philosophy is predicated on preserving our clients’ wealth while growing it over time. We employ a disciplined, diversified approach, which we believe will allow our clients to spend less time thinking about their portfolio, and more time focusing on other, more personally rewarding, life adventures.
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
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All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
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