Deni Avdija, Yam Madar, and Building a Winning Portfolio
As originally appeared in The Jerusalem Post on July 26th, 2019.
I am a member of a team, and I rely on the team, I defer to it and sacrifice for it, because the team, not the individual, is the ultimate champion. –Mia Hamm
A few weeks ago I mentioned a former baseball coach of mine that liked to say “there is no I in team.” Watching the captivating run by the Israeli under-20 national basketball team, as they won the FIBA European championship, really drove home the team concept. Yes, they were led by Israeli teen sensation Deni Avdija, but without each individual player stepping up in crucial spots throughout the tournament, Israel would never have won. Whether it was point guard Yam Mamdar providing stifling defense and quarterbacking the offense, or clutch plays by Kravits, Adam, Hanochi and the rest of the squad, it was inspiring to watch Israel truly put forth a team effort.
The morning after the victory, I was listening to Avdija being interviewed on Israel Army Radio. He was asked about his feelings winning the Most Valuable Player (MVP) honor of the tournament. He basically said that he wasn’t the MVP, rather each player played a major role, and that it’s a shared honor. Pretty mature response for someone who had to celebrate by drinking milk, because he isn’t old enough for alcohol! It’s reliance on a team effort that I would like to focus on vis-à-vis your investment portfolio.
Watching all the games with some of my kids, I kept pointing out how well they were playing and how that can relate to their money. “Kids you see how they play as a team; Well that’s how you should build your investment portfolios!” Okay, so I didn’t say that. I save those gems for my column. If I said that at home someone would throw the remote at me.
Like I mentioned above, each player came in and really contributed in their own way. Whether it was a key rebound or a clutch 3-pointer for example, and it was that cumulative contribution which ultimately brought home the trophy. In other words, you need a diversified team approach to achieve ultimate success. While there may have been one star, this championship personified the total team approach.
It’s this same diversification that is key in managing risk in your investment portfolio.
No guarantees
Diversification isn’t the secret sauce for never losing money. Any investment professional that says it is, is lying. Investors who diversify can lose money just like anyone else.
As I have written before, according to Morningstar, “Having a diversified portfolio doesn’t mean you’ll never lose money. Diversification doesn’t mean complete protection from short-term dips or market shocks. Diversification does not guarantee that if one investment goes down another investment will go up-it isn’t a seesaw.”
Last week I mentioned that I am an expert in eating cake. Well, I am quite knowledgeable in other courses of a meal as well. I have used this example in the past, and I think it’s a good illustration of what diversification is. Let’s say you have some friends coming over for a Shabbat meal. Would you only serve roast beef or chicken wings to your guests? Doubtful—certainly not in my house! Even for those of us meat-lovers, we would expect some salad, quinoa, vegetables, drinks, and desserts to be served as well. And of course, some tea to wash it all down! You want your Shabbat meal to be successful and as such you need a well-rounded menu.
If it’s good enough for winning the European championship and successful entertaining it must be a good way to invest. What is diversification? It is an investment approach that uses many varied investments within a portfolio. The theory states that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any one individual investment. It is a way to smooth out volatility in a portfolio caused by market, interest rate, currency and geopolitical risks. In layman’s terms, don’t put all your eggs in one basket. Flashback 7 months to this past December, when the market got crushed, to see that while diversified portfolios also lost money they fared much better than concentrated portfolios which got killed.
Steadier approach
The whole point of diversifying is to lower risk in a portfolio. For most investors, a slow and steady approach is the path to financial success.
Now is a great time to review your portfolio and see if you are too heavily weighted in just a few investments. If so you may be able to benefit from proper diversification, to help improve returns and lower your risk.
Congrats to the Israel under-20’s. El, El Israel!
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.
