We’ve heard this a lot lately: “Well, I guess no one is making money this year…”
Everyone is lamenting that “the markets” are down.
But are they?
One definitely is—the S&P 500 is down this year.
But the rest? They are up.
In fact, 66% of your Financial Zen Portfolio (depending on your model) is having a great year so far.
Even after today’s tumble:
– Emerging Markets: +11.2% YTD (+23.4% last 6 mos)
– International: +8.5% YTD (+15.7% last 6 mos)
– Small Caps: +7.6% YTD (+16.9% last 6 mos)
– Mid Caps: +6.9% YTD (+13.5% last 6 mos)
Meanwhile, the S&P 500 is down 0.2% YTD and bringing up the rear for the last 6 months at just 7.2%.
This is exactly why we don’t just own one ingredient.
Diversification is the only “Free Lunch” in investing.
Most people invest based on what has done well recently—like Big Tech and the “Mag 7.” Then, they sell whatever is down the most.
Rinse and repeat.
The result? We buy at the top and sell at the bottom—the exact OPPOSITE of what we should do.
That is why we buy “all the things” and then deliberately (and sometimes painfully) rebalance like clockwork.
You might feel “wrong” for a while as you sell the hot thing to buy more of the laggers, but eventually, mean reversion happens and you look like a genius.
Luckily, 50% of you reading this are Financial Zen Members, so we’ve been automatically rotating out of large caps and into the other ingredients for quite some time now.
For the other half, who likely own mostly S&P 500 index funds, consider using a robo-advisor (like Wealthfront, Betterment, or Financial Zen) to do this for you.
That way, when your coworkers say, “Man, rough year for the markets so far, huh?”
You can just smile and say…
“Speak for yourself.”