What if your investment portfolio were a garden? In any thriving garden, you’ll find a mix of plants: some are blooming beautifully today, while others might be late bloomers. Yet, it’s the latter—the ‘underperformers’—that may offer the most intriguing benefits for a balanced financial ecosystem. The investment world calls this diversification, but let’s call it what it is—wisdom.
The behavioural quirk that prompts us to cash in our high-performing “roses” and cling to our slow-to-bloom “daisies” is something psychologists term the “disposition effect.” Oddly, we seem more willing to part with a winning stock to lock in gains and prove our investing prowess. In contrast, letting go of an underperforming asset feels like an admission of poor judgment. So we hang on, often to our detriment.
But here’s an unconventional thought: Maybe we should be embracing those late bloomers, those ‘daisies,’ if you will. Why? Because if all your assets are high-flyers, zipping along with the current economic jet stream, they’re likely sensitive to the same market conditions. If those conditions falter, guess what happens to your entire garden?
At Victus Group, we believe in the philosophy of balanced growth. By intentionally keeping a few ‘daisies’ in your financial garden, you’re setting up buffers, shock absorbers that could prove their worth when economic seasons change. These underperforming assets are not ‘bad’ investments; they’re simply operating on a different growth timeline or are attuned to different market conditions.
The late bloomers in your portfolio aren’t just placeholders; they’re potential future stars. When your ‘roses’ have had their day in the sun and start to wilt—because no asset is perennially on top—your ‘daisies’ may begin their bloom. Having a portfolio with this ebb and flow means you’re not putting all your bets on a single economic or market condition.
The same philosophy extends to geographic diversity in your investments. When local markets are going through a rough patch, your international assets might be the ‘daisies’ that save the day, or vice versa. Holding both local and offshore investments provides a yin-yang balance to the inevitable volatility, smoothing out returns over the long haul.
In essence, your portfolio isn’t just a collection of assets; it’s a dynamic ecosystem. In a well-tended financial garden, each plant has its role in the grander scheme. So the next time you contemplate pulling out those underperformers, remember: Sometimes, wisdom lies in letting your ‘daisies’ grow.