The last thing packed. Probably an afterthought. You throw it in the car cause who knows! There seems to be room, might as well bring it. In my car, it ends up atop of a beautifully packed and organized trunk. Everything has its place, heavier bags on the bottom, I use all of my shoes, sneakers and sandals to wedge and snug all the other stuff in its place to reduce the risk of rattling. Then comes the last item, thrown in with haste on top, but with good intentions.
First bump in the road, it rustles. Next bump it rattles, and so you spend the next 50 miles cursing that rattling, rustling, tapping sound of the last loose item packed. A gloriously packed minivan brought down by the plastic bag with a half used squirt bottle of sunscreen.
The tire pressure is solid, gas tank full, GPS set and directions for a second route laid out…
This same analogy applies so perfectly to construction of your portfolio and long term investments.
The broad theory is solid and asset classes chosen, the time horizon long enough, the plan B identified and expectations are set. But what about adding one more thing? What about a 3% position to commodities? What about adding a 2% allocation to only renewable energy stocks? Back-tested, that position improves performance AND lowers the volatility!
Well the portfolio is packed and ready for the long haul, so you toss this well-intentioned addition on top and then you hit the first bump, it rustles. Next bump, it rattles, and so you spend the next how many days, months or years, cursing that rattling and rustling. What was non-correlated has become correlated, what was supposed to zig has zagged, and it just won’t stop zagging…
My job is to keep the last thing packed in your trunk and out of your portfolio.