The Portfolio as Partner

The Portfolio as Partner
Words by:  Bryon Gragg
Published May/June 2012

Recently I was reviewing a portfolio and had a smile break out at just how beautiful it was. That may sound strange, but a well-constructed portfolio is a thing of beauty, at least to me. So, I discussed the topic of comparing a beautiful portfolio to a beautiful woman with the editor as well as some clients. The consensus was that it would be either the greatest article ever written or the end of a career. As I truly enjoy writing these columns and didn’t want to take the chance of ending a career, I decided I’d discuss how a portfolio is like a partner to you.

First, a well-constructed portfolio is much like the perfect partner and designed to be with you forever. A portfolio will grow with you and change according to your needs, lifestyle changes and goals. The portfolio at the end is not exactly the same as in the beginning but it has the underlying elements that appealed to you in the first place.

A portfolio should be diversified just as a couple should have diverse interests. While a couple can share many of the same interests, each party should have his or her own hobby or interests he or she can share with the other. One partner may be extroverted and always on the go, while the other would prefer quiet nights and time alone; the successful couple manages a balance between the two. A well-constructed portfolio is the same way, having a proper balance and allocation among different classes, sectors and companies.

A portfolio is designed to be there for you in your golden years. Much like the perfect partner, a portfolio should be something you can count on in your retirement. Many times retirement can last as long as a working career, so it is imperative that it be structured for the long run. You don’t want to run out of money before running out of life.

Speaking of running out of life, a portfolio can take care of your family long after you are gone. Some people don’t plan to leave anything to their families because of their own needs or because their family members are successful in their own right. However, there are others who wish to develop a portfolio that can span several generations. Often a desire to educate grandchildren or great-grandchildren can be accomplished with the proper portfolio and planning. Charities and educational institutions can be helped long after you take the last bus out by proper planning with your portfolio.

Just like a partnership, marriage or relationship,the journey with a portfolio can be both exciting and frightening. There are times you are afraid to look at your statements and wish that you had never gotten involved in such a situation. There are other times that life is so bright and happy that you hope it will never end. Like any relationship, a portfolio will have its ups and downs, sometimes very quickly and sometimes prolonged or seemingly prolonged at the time. In the long run, a well-constructed portfolio will return to the journey for which it was intended.

As an analogy, when you have a disagreement or rough spot with your partner, you don’t just dump your partner and find another. Many people seem to want to do this with a portfolio. When times get a little rough, they want to abandon their portfolios and move to cash, gold or any other flavor of the week. Much like a relationship, your portfolio just isn’t going to work with this type of attitude. The proper portfolio can hang with you during the rough times and emerge successful afterward. Don’t believe me? Ask the people who stayed true to their beliefs during the market meltdown a few years ago. I haven’t heard one person say, “I’m really happy we panicked and sold everything dirt cheap before it went back up.” Sure, there will be difficult times, but you work your way through them.

I truly believe that a portfolio is like a relationship. You need to work at both to make them succeed. And while I can’t speak to your personal relationships, I can ask you about your portfolio:

Do you have the right one for you and is it built to last?

Take time to give it some thought and I hope you’ll be able to look at it and smile.