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Too Much of a Good Thing Can Be Bad for the Lawn & Your Investment Portfolio
August 3, 2018 / Christian Ravsten
I’m not a green thumb in the garden but I understand that basics when it comes to keeping my grass green. I water regularly, mow once a week, fertilize in the spring, and do aeration once a year. This past April, I fertilized with a turf builder product which claimed to green up the grass and kill those pesky dandelions. Well, the grass greened up nicely and it killed the dandelions.
A few weeks later, I had a thought that if the fertilizer did the trick after one application, another application would really green up the grass and help it come in strong for the summer season. What happened was the exact opposite. The second application of fertilizer burned our grass. We had big spots of really dry, brittle, brown grass that looked terrible. After doing some research, I found out the chemical-based fertilizer that I had used was full of salts, that when put on the lawn too frequently cause the grass to dry out and even die. The resolution to this issue was lots of water, time and hope that the roots didn’t die and the grass would bounce back.
I began thinking about how my grass fertilizer story relates to investing. Equities are like fertilizer, that when added to your investment portfolio can provide upside performance, positive returns and opportunities for growth. The problem is when too much of your allocation is invested in equities and the market corrects, you can end up getting burned and potentially lose a sizable amount of money. You then have two choices, wait and hope the equities earn a positive rate of return which will recover your losses, or cut your losses and purchase other investments with the hope that you recover what you lost. As investors, we can’t control the market but we can control how much “fertilizer” we invest in and when. The key is to understand the length of time you should own the equities in your portfolio and when to stop using them to avoid disastrous consequences. Wouldn’t it be nice if there was a way to know when to stop using certain investments in your portfolio and instead to allocate to cash or other safety measures?
At Foxstone Financial, we use advanced investment technology that leverages Artificial Intelligence to monitor our mutual fund and ETF investments on a daily basis to find the optimal portfolio. Our unique technology performs these tasks by making six million iterations every night to determine where to invest, and how long to stay in each investment. If a change is needed, the technology informs us to allocate to a different asset class or allocate to cash. Humans just don’t have the ability to run six million calculations on a nightly basis to determine what and where to invest. My experience has been that many investment advisors aren’t sure when to exit the market and if and when they do, they aren’t sure when to get back into the market. Thus, the approach they most often taken is to stay in the investments, not sell, and “Hope” the market and the investment allocation recover quickly. With our advanced investment technology, we don’t have to use HOPE as an investment strategy.
A few weeks later, I had a thought that if the fertilizer did the trick after one application, another application would really green up the grass and help it come in strong for the summer season. What happened was the exact opposite. The second application of fertilizer burned our grass. We had big spots of really dry, brittle, brown grass that looked terrible. After doing some research, I found out the chemical-based fertilizer that I had used was full of salts, that when put on the lawn too frequently cause the grass to dry out and even die. The resolution to this issue was lots of water, time and hope that the roots didn’t die and the grass would bounce back.
I began thinking about how my grass fertilizer story relates to investing. Equities are like fertilizer, that when added to your investment portfolio can provide upside performance, positive returns and opportunities for growth. The problem is when too much of your allocation is invested in equities and the market corrects, you can end up getting burned and potentially lose a sizable amount of money. You then have two choices, wait and hope the equities earn a positive rate of return which will recover your losses, or cut your losses and purchase other investments with the hope that you recover what you lost. As investors, we can’t control the market but we can control how much “fertilizer” we invest in and when. The key is to understand the length of time you should own the equities in your portfolio and when to stop using them to avoid disastrous consequences. Wouldn’t it be nice if there was a way to know when to stop using certain investments in your portfolio and instead to allocate to cash or other safety measures?
At Foxstone Financial, we use advanced investment technology that leverages Artificial Intelligence to monitor our mutual fund and ETF investments on a daily basis to find the optimal portfolio. Our unique technology performs these tasks by making six million iterations every night to determine where to invest, and how long to stay in each investment. If a change is needed, the technology informs us to allocate to a different asset class or allocate to cash. Humans just don’t have the ability to run six million calculations on a nightly basis to determine what and where to invest. My experience has been that many investment advisors aren’t sure when to exit the market and if and when they do, they aren’t sure when to get back into the market. Thus, the approach they most often taken is to stay in the investments, not sell, and “Hope” the market and the investment allocation recover quickly. With our advanced investment technology, we don’t have to use HOPE as an investment strategy.
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