Author Archives: Edward Brownlee

10 Lessons to Learn from Jeff Bezos

Posted on by

“You can be grinding for four years with no results and, in the 5th year, become the biggest thing on the planet. The power of not giving up is real.” ~ Jeff Bezos

Here are 10 Incredible Lessons from Jeff Bezos:

1. Customer Obsession: “Start with the customer and work your way backward.” Bezos emphasizes the importance of focusing on customer needs and satisfaction above all else. Amazon’s vision: “To be earth’s most customer-centric company.”

2. Long-term Thinking: Bezos encourages a long-term perspective, often at the expense of short-term gains. He believes that truly great businesses are built over decades rather than years.

3. Embrace Failure: Bezos recognizes that innovation and experimentation come with the risk of failure. He encourages taking calculated risks and learning from mistakes. Amazon has benefitted from this mindset, part of its DNA and culture.

4. High Standards: Bezos insists on maintaining high standards in all aspects of the business, from products and services to hiring and decision-making. He is known for banning PowerPoints and unnecessary meetings to force a high standard of work.

5. Innovate Continuously: Amazon’s success is built on a relentless innovation process. Bezos encourages constant innovation to stay ahead of the competition and meet evolving customer needs. Pushing for “same-day deliveries” is an example of this.

6. Invent and Simplify: Bezos advises his team to invent new solutions and simplify existing processes. This fosters a culture of continuous improvement and efficiency.

7. Frugality: Bezos believes in controlling costs and avoiding unnecessary expenses to maximize efficiency and maintain a lean business model. Large corporations become more efficient over time if they relentlessly focus on staying lean.

8. Think Big: Bezos encourages ambitious, audacious thinking. He believes that thinking small limits potential and that bold ideas can lead to groundbreaking success.

9. Build a Great Team: Surround yourself with talented, passionate individuals. Bezos emphasizes the importance of hiring and retaining top-tier talent. As an entrepreneur, you need to attract people smarter than yourself to work for you.

10. Stay Agile: In a rapidly changing world, Bezos advises businesses to remain flexible and adapt to new opportunities and challenges swiftly. Amazon AWS is the prime example. It was a bold bet that few thought would pay off. Today, AWS is on its way to $100 billion in sales.

Source: Invest In Assets | Stock Market Investing  https://x.com/InvestInAssets/status/1718559795907907679

Lessons from Charlie Munger

Posted on by

Lessons from Charlie Munger’s latest podcast interview: I have added some context to the interview to help you better understand the stories Munger shared.

1. On retail investors gambling in the stock market,

“They don’t know anything about the companies or anything. They just gamble on going up and down in price. If I were running the world, I would have a tax on short-term gains with no offset for losses on anything, and I would just drive this whole car of people out of business.”

2. Why algorithmic-driven trading firms like Renaissance technology are taking excessive risk

“The easiest trade is to front run what you know, what the average is, what the index funds have to buy, and you know what it is. Exactly. They all know that. And they get their returns year after year by taking the leverage, the midday leverage, up higher and higher and higher and higher. So, they’re making smaller and smaller profits on more and more volume, which gives them this big peak leverage risk, which I would not run myself. And that’s the only way they make these big returns, is to have this huge leverage that would make you crazy if you were already rich.”

3. How Warren and Charlie changed their mind quickly with Diversified Retailing after they realized it was too competitive (and how they made a ton of money after changing their mind) Some context: On January 30, 1966, Buffett, Munger, and Gottesman formed a holding company, Diversified Retailing Company, Inc., to “acquire diversified businesses, especially in the retail field.” Buffett and Munger then went to the Maryland National Bank and asked for a loan to make the purchase. The lending officer looked at them goggle-eyed and exclaimed,

“Six million dollars for little old Hochschild-Kohn?”  Even after hearing this, Buffett and Munger—characteristically—did not question their judgment and ran screaming out the door.

“We thought we were buying a second-class department store at a third-class price” is how Buffett describes little old Hochschild-Kohn.

“We made nothing but money at Diversified. We didn’t exactly make it in retailing, but we made a lot of money. What happened was very simple. We bought this little department store chain in Baltimore. Big mistake. Too competitive. We realized we’d made a terrible mistake as the ink dried on the closing papers. So, we decided just to reverse it and take the hits to look foolish rather than go broke. You just told us how to get us out of this. By then, we’d already financed half of it on covenant-free debt. And they had all this extra cash, and our stocks got down to selling at enormous (discounts). In the middle of one of those recessions, we just bought, bought and bought and bought, and all that money went right into those stocks, and of course, we tripled it.”

4. How wonderful early years gave them a good head start. “Yeah, we bought a little savings and loan company for maybe $20 million. And when we left that thing, we had taken out of our little $20 million investment over $2 billion in marketable securities, which went into Nebraska insurance companies as part of their bedrock capital. So, we had some wonderful early years, which everybody needs. It is a wonderful early year.“

5. Charlie Munger’s Costco thesis – They sold cheaper than anyone else in America – Big, efficient stores – Huge parking spaces – Gave special benefits to people who come to the store in the way of reward points – Make suppliers wait (for payment) until they’ve been paid What made Costco so successful?

“Well, it takes a lot of good execution to do it. You have to set out to do it and then do it enthusiastically every day, every week, every year for 40 years. It’s not so damned easy. So, do you think success is the magic of the business model and culture? Yes. Culture plus model. Yes, absolutely. And very reliable, hardworking, determined execution for 40 years.“

Why did it take Costco decades to open its first store in China?

“The first store they tried to open in China, somebody wanted a $30,000 bribe Chinese culture, and they just wouldn’t pay it. And that made such a bad impression on Jim Senegal. He wouldn’t even talk about going into China for about 30 years after that.”

6. Advice for investors on finding great investments A caveat from me: While Munger advocates heavy concentration (and leverage), most investors still need his IQ or emotional control with volatility.

“You may find it five years after you bought it. Knowing these things may work into it, or your understanding may improve, but when you know you have an edge, you should bet heavily. You know, you’re right. And most people don’t teach that in business school. It’s unbelievable. Of course, you got to bet heavily on your best bets.”

7. Why did he and Warren become partners, “Both kind of similar, and we both wanted to keep our families safe and do a good job for our investors and so on. We had similar attitudes. His advice for an enduring partnership is, “Well, it helps if you like one another and enjoy working together. But I don’t use any one formula. Many partnerships that work well for a long time happen because one’s good at one thing and good at another. They just naturally divided, and each one likes what he’s doing.”

8. Munger feels that Berkshire could’ve taken on more leverage. “Warren still cares more about the safety of his Berkshire shareholders than anything else. If we used a little more leverage throughout, we’d have three times as much now, and it wouldn’t have been that much more risky either.”

9. Munger’s thoughts on VC: “It’s challenging to invest money well, and I think it’s almost impossible to do time after time in venture capital. Some deals get so hot, and you have to decide quickly. You’re all just sort of gambling. [VC] is a very legitimate business if you do it right. If you want to give the right people the power and nurture them, help them. You know a lot about the game’s tricks, so you can help them run their business yet not interfere with them so much. They hate you. By and large, having bumped into many people in businesses with venture capital financing, I would say the ordinary rule is the people in the business doing the work; they, more often than not, hate the venture capitalists. They don’t feel their partner trying to help them because they’re only taking care of themselves and don’t like them.”

10. How could VCs be better? “[At Berkshire], they know we’re not trying to discard them to the highest bid. See, if some asshole investment banker offers us 20 times earnings for some lousy business we don’t sell. If it’s a problem business we’ve never been able to fix, we’ll sell it. But if it’s a halfway decent business, we never sell anything. And that gives us this reputation of staying with things that help us. You don’t want to make money by screwing your investors, and that’s what many venture capitalists do.”

11. Why Warren’s investment in Japan was a no-brainer: “If you’re as smart as Warren Buffett, maybe two or three times a century, you get an idea like that. The interest rates in Japan were half a percent per year for ten years. These trading companies were entrenched old companies, and they had all these cheap copper mines and rubber foundations so that you could borrow all the money for ten years ahead and buy the stocks, which paid 5% dividends. So, there’s a huge cash flow with no investment, thought, or anything. How often do you do that? You’ll be lucky if you get one or two a century. We could do that [because of Berkshire credit]. Nobody else could.”

12. Why he loves companies with a strong brand—the ability to raise prices: “Well, it’s hard for us not to love brands since we were lucky enough to buy the Sees candy for $20 million as our first acquisition, and we found out fairly quickly that we could raise the price every year by 10%, and nobody cared. We didn’t make the volumes go up or anything like that; we just increased the profits. So, we’ve been raising the price by 10% annually for all these 40 years. It’s been a very satisfactory company. We didn’t acquire any new capital. That was what was so good about it. Very little new capital.“

13. What it takes to build Berkshire from scratch today – Intelligence – Work very hard – Be very lucky

14. His view on China: “My position in China has been that the Chinese economy has better prospects over the next 20 years than almost any other big economy. That’s number one. Number two, the leading companies of China are stronger and better than any other leading companies anywhere, and they’re available at a much cheaper price. So naturally, I’m willing to have some China risk in the Munger portfolio. How much is China risk? Well, that’s not a scientific subject. But I don’t mind. Whatever it is, 18% or something.”

15. What about BYD that captivated Munger?

“Guy (Wang Chuanfu) was a genius. He was at a Ph.D. in engineering, and he could look at somebody’s part, make that part, look at the morning, and look at it in the afternoon. He could make it. I’d never seen anybody like that. He could do anything. He is a natural engineer and gets it-done type production executive. And that’s a big thing. It’s a big lot of talent to have in one place. It’s advantageous. They’ve solved all these problems on these electric cars and the motors and the acceleration, braking, and so on.” Comparing Elon with Wang Chuanfu, “Well, he’s a fanatic that knows how actually to make things with his hands, so he has to he’s closer to ground zero. In other words, the guy at BYD is better at making things than Elon.”

16. Advice about building families “Well, of course, you’ve got to get along with everybody. You have got to help them through their tough times, and they help you, and so forth. But I think it’s not as hard as it is. Looks. I think half of the marriages in America work pretty damn well. And will it work just as well if both of them had to marry somebody else? And you’ve got to have trust with your spouse when it comes to things like the education of the children and so forth.“

Source:  https://x.com/SteadyCompound/status/1718861611904241789

Vitamin K2

Posted on by

Healthy levels of vitamin K2 support your heart, blood circulation, and bones.

Vitamin K2 is getting a lot of attention for its many health benefits. Vitamin K2 plays a role in regulating your blood pressure. It helps keep your bones strong. And it contributes to minimizing your risk of heart disease.

Vitamin K2 is also a powerful nutrient that is essential to many aspects of your health.  It is a fat-soluble vitamin that must be consumed in dietary or supplement form since our bodies can’t produce sufficient amounts on their own. Maintaining healthy levels of vitamin K2 supports your heart, blood circulation, and bones. Some think vitamin K2 may be the missing link between diet and several chronic diseases.

Vitamin K2 (MK-7)

Vitamin K2 can be divided into several different subtypes. The most important ones are MK-4 and MK-7. Research has shown that the long-chain form of vitamin K2 called menaquinone-7 (MK-7) offers more advanced benefits than its short-chain form, menaquinone-4 (MK-4).

Unlike MK-4, MK-7 allows for smaller, more convenient doses because it accumulates in the bloodstream. MK-7 beats out MK-4 with better accumulation and absorption rates in the bloodstream. MK-7 also aids in bone mineral density, helping with bone quality and strength – making it the superior form of K2.

Vitamins K2 and D3 are powerful for teeth and bone health. D3 helps your body metabolize calcium by directing it to your teeth and bones, but this job isn’t complete without K2. Vitamin K2 activates the proteins needed to deposit calcium in the correct spots.

Combat Common Deficiencies

In a survey from the National Health and Nutrition Examination, 25% of Americans were found to be at risk of a vitamin D deficiency. In comparison, 8% were vitamin D deficient – an increase from the previous 20 years. This research shows how widespread low vitamin D levels can be, and when left untreated, vitamin D deficiency can impact bone health, mood, and energy levels.

Healthy Blood Flow

Some of the calcium we consume can end up being stored in blood vessels and soft tissues, constricting blood flow to your heart. Vitamin K2 draws this excess calcium away from the soft tissue, aiding blood circulation.

The Story of Oprah Winfrey

Posted on by

“Create the highest, grandest vision possible for your life, because you become what you believe.” ~ Oprah Winfrey

Oprah Gail Winfrey’s career has been almost impossibly successful. Oprah’s net worth of $2.6 billion also makes her the first African American female billionaire.

Defying the odds is nothing new to Oprah, who has been battling against adversity her whole life. Oprah Gail Winfrey was born on January 29, 1954, in Kosciusko, Mississippi, to Vernita Lee and Vernon Winfrey.

Oprah Winfrey grew up in extreme poverty and was sexually abused by several people throughout her childhood. She bounced between living with her mother, father, and grandmother, and as a teenager, she frequently ran away from home. She became pregnant at age fourteen, but the infant died shortly after birth.

During her high school years, she began working at a local radio station. She worked her way through several media jobs, and eventually, she landed a job as a TV news anchor. But she was later fired from the position.

She didn’t allow one person’s opinion of her on-air suitability to stop her, however. She went on to create her own talk show and by the age of thirty-two, her show became a national hit. By the age of forty-one, she had a reported net worth of over $340 million.

Oprah has started her own magazine, radio show, and TV network and has coauthored five books. She’s even won an Academy Award. She’s started a multitude of charities to help people in need, including a leadership academy for girls in South Africa.

Oprah didn’t let her childhood or her former employer take away her power. A woman who was once teased because she was so poor, she wore potato sacks as dresses was named one of the world’s most powerful women by both CNN and Time. Statistically, her upbringing would have predicted a poor prognosis. But Oprah refused to be a statistic. She chose to define who she was going to be in life by not giving away her power.

Oprah’s story shows how important education, faith, and hard work are. She is a true believer that working towards your goals will take all your effort, but it will be worth it.

“Whatever someone did to you in the past has no power over the present. Only you give it power.” ~ Oprah Winfrey

References:

  1. https://www.thelist.com/346339/the-tragic-story-of-oprahs-childhood/
  2. https://stmuscholars.org/from-rags-to-riches-the-story-of-oprah-winfrey/
  3. https://www.thelist.com/346339/the-tragic-story-of-oprahs-childhood/

Chronic Diseases Greatest Threat to Life Expectancy

Posted on by

Chronic diseases are the greatest threat to life expectancy and public health, killing far more Americans between 35 and 64 every year.  ~ Washington Post

While opioids and gun violence in the U.S. have rightly seized the media and public’s attention, heart disease and cancer remained, even at the height of the COVID-19 pandemic, the leading causes of death for people 35 to 64, according to a Washington Post analysis of mortality data.

And many other conditions  have become more common, including diabetes and liver disease. These chronic ailments are the primary reason American life expectancy has been poor compared with other Westen nations.

The pandemic amplified a racial gap in life expectancy that had been narrowing in recent decades. In 2021, life expectancy for Native Americans was 65 years; for Black Americans, 71; for White Americans, 76; for Hispanic Americans, 78; and for Asian Americans 84.

Life expectancy is a wide-angle snapshot of average death rates for people in different places or age groups. The life expectancy metric is a reasonably good measure of a nation’s overall health. And America’s is not very good.

In essence, the U.S. healthcare system geared toward disease and illness treatment rather than prevention. Health care is “the only business that doesn’t reward for quality care. All we reward for is volume. Do more, and you’re going to get more money,” Michael Imburgia, a Louisville cardiologist said.

The rate of obesity deaths for adults 35 to 64 doubled from 1979 to 2000, then doubled again from 2000 to 2019. In 2005, a special reportin the New England Journal of Medicine warned that the rise of obesity would eventually halt and reverse historical trends in life expectancy. That warning generated little reaction.

Obesity is one reason progress against heart disease, after accelerating between 1980 and 2000, has slowed, experts say. Obesity is poised to overtake tobacco as the No. 1 preventable cause of cancer, according to Otis Brawley, an oncologist and epidemiologist at Johns Hopkins University.

References:

  1. https://www.washingtonpost.com/health/interactive/2023/american-life-expectancy-dropping/

Persistence

Posted on by

Persistence – Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “press on” has solved and always will solve the problems of the human race.  Calvin Coolidge

Three simple rules in life.

  1. If you do not go after what you want, you’ll never have it.
  2. If you do not ask, the answer will always be no.
  3. If you do not step forward, you will always be in the same place.” 

Three simple habits. Go, ask and do.  Austin Miller, VP of Talent Management at Sorenson Capital Partners

Stocks Beat Bonds as Inflation Hedge

Posted on by

“Stocks are great long-term inflation hedges if you are still worried about inflationary risks.” ~ Jeremy Siegel, Wharton School Economist

“If you are worried about the inflationary impacts, stocks are far better hedges than bonds — as companies can pass along their own input cost spikes to consumers,”Jeremy Siegel, Wharton School Economist, wrote in his weekly commentary published Monday for WisdomTree, where he is senior economist.

“If you bought the inflation-hedged bonds at 2% yields, it would take 36 years to double your purchasing power,” wrote Siegel, an emeritus professor at The Wharton School. “The S&P 500, however, is priced around 18 times next year’s earnings, giving a 5.5% earnings yield. This takes just 13 years to double purchasing power.”

“Stocks at the present time—with earnings of just under $250 for the S&P 500,” are preferred states Siegel. “This giving just under an 18x earnings per share valued market. I think that is a favorable multiple for the market. I believe stocks are great long-term inflation hedges if you are still worried about inflationary risks. I think stocks can handle another quarter point rise by the Fed if they deem it necessary.”

References:

  1. https://www.thinkadvisor.com/2023/09/28/jeremy-siegel-stocks-beating-bonds-as-inflation-hedge/
  2. https://www.wisdomtree.eu/-/media/us-media-files/documents/resource-library/weekly-commentary/siegel-weekly-commentary.pdf

It Takes Courage

Posted on by

“You can’t swim for new horizons until you have the courage to lose sight of the shore.”

It takes courage to leave your comfort zone, it takes courage to go after your dreams, it takes courage to live a life worth remembering. It’s very easy to die, it takes courage to live.

It takes courage to grow and become all you are destined to be, it takes courage to embrace the possibilities of your potential, it takes courage to go after what you desire. It’s very easy to stop, it takes courage to keep climbing until you reach the top.

It takes courage to look at your failures and still choose to try again, it takes courage to meet with fierce opposition and still choose to fight, it takes courage to endure pain, and choose to be strong. It’s very easy to fall, it takes courage to stand.

If you have tried and met with defeat, If you have planned and watched your plans fail, If you have given your all and again you lost,

Remember that the great men and women who have lived before us were all products of courage.

Courage doesn’t mean you don’t get afraid, it means you don’t let your fear stop you.

You can’t swim for new horizons until you have the courage to lose sight of the shore. You can’t become all you are destined to be until you have the courage to leave where you used to be.

The great things of life that you so much desire is on the other side of fear, you need courage to go after and possess them.

Don’t be numbered among the fearful ones who neither achieve greatness nor experience defeat, who neither enjoy the thrills of success nor learn the lessons of failure.

Go out into the world, it’s time to start living. Face your fears, fight your battles, it’s time to conquer, that’s what you are made for, that’s why you are here.

Source:  MordyQuotes.

The way you speak to yourself matters. Negative self-talk can be damaging to your sense of self and overall happiness. And contrary to popular belief, it will not motivate you to do or be “better”. Here are several tips for changing your self-talk:

– Listen to yourself and the commentary that runs in your head all day. Get clear on what it is you say to yourself and how it makes you feel.

– Try speaking to yourself in the third person, or using your name to get some emotional distance from your thoughts. This may help you take your thoughts less personally.

– Question what you are saying to yourself: “Is this true?”,“Is this thought helping me or harming me?”, “Am I over-reacting, or being overly harsh?”

– Be kind. If you wouldn’t say it to a friend, don’t say it to yourself. Practice being encouraging with yourself, as you would your best friend.

China’s Financial System a House of Cards

Posted on by

“China simply does not conform to the conventional wisdom about the factors necessary for sustained high growth: a well-developed financial system, the rule of law, democracy.” ~ PBS

China’s growth model has certainly created enormous risks.

Over the past decade and a half, growth has been driven in large part by massive and inefficient investment and an associated buildup of debt, most noticeably in real estate development, as China’s many uninhabited apartment buildings attest.

A financial system is supposed to allocate a nation’s wealth to its most productive opportunities. But even the most generous interpretation of China’s growth success has to acknowledge the inefficiencies and costs associated with a model that has delivered spectacularly in terms of official GDP, but has led to environmental degradation and a massive waste of resources.

The Chinese economy faces several daunting risks.

The first is a surge of capital flowing out of China — basically, people taking their money out of the country — which could destabilize the financial system as well as the overall economy.

The second is a set of concerns about China’s financial system, including the potential instability of the banking system (too many bad loans), wild swings in the stock market and the size of the shadow banking system (informal banking institutions that are not well regulated).

The third set of risks is related to more fundamental aspects of the Communist Chinese economy, political structure and policymaking. These include the possibility of a dramatic GDP growth slowdown, political instability fed by the government’s desire to further tighten its control domestically, and domestic and foreign policy missteps, specifically related to Taiwan.

References:

  1. https://www.pbs.org/newshour/economy/column-chinas-economy-house-cards

5 investing mistakes you may be making right now

Posted on by

Fidelity Wealth Management

Key takeaways

  • Risk is an essential part of investing, and investors should have the appropriate amount of risk in their portfolio so they don’t feel compelled to flee the market when volatility arises.
  • Regular rebalancing and tax-management techniques may substantially impact a portfolio’s long-term performance.
  • Investors with neither the time nor inclination to maintain their portfolios actively may consider whether engaging with a professional manager might be worth it.
  • Investing can sometimes seem complex and confusing, and you may often be wondering whether or not you’re doing everything you can to help keep things on track—or whether something you’re doing may be hurting your ability to achieve your goals.

Here are 5 things you may be doing that might be having a detrimental effect on your portfolio, and some thoughts on how you might be able to turn things around.

1. Getting out when the going gets tough. When markets become volatile or experience significant declines, it’s natural to want to try to cut your losses and retreat to what seems like safe territory. But rather than preserving your wealth, you may actually be undermining the long-term growth potential of your portfolio.

In general, market declines have tended to be relatively shallow and short-lived compared to expansionary periods. Over the past 72 years, markets have risen an average of 15% per year during expansions—and even 1% per year during recessions.1 So even when things seem most dire, there’s still a chance for positive returns.

Furthermore, because it’s not possible to predict exactly when the market may shift from negative to positive, there’s a chance that you may end up missing out on a rally or recovery when it occurs if you were to take your money out of the market. Being uninvested for even a short time could have a profound impact: For instance, missing just the 5 best days in the market between 1980 and 2022 could have reduced portfolio returns by as much as 38%.2

2. Taking on too much (or too little) risk. Though the very idea of “risk” can be scary, it’s an essential part of investing. The amount of risk you decide to take on could determine how much growth you may be able to achieve in your portfolio and how much volatility you may need to endure to get there.

While there are no guarantees in investing, the key is to take on just enough risk to give your portfolio a chance of reaching your long-term goals, but not so much that it introduces enough volatility to scare you into withdrawing from the market. And one way to achieve that is by diversifying your portfolio, investing in a mix of different asset classes that may behave differently in different market conditions—that way, when some of your investments are down, others may be up, helping to smooth out the bumpiness in the market that can be so disconcerting.

Important information about performance returns. Performance cited represents past performance. Past performance, before and after taxes, does not guarantee future results and current performance may be lower or higher than the data quoted.

Investment returns and principal will fluctuate with market and economic conditions, and you may have a gain or loss when you sell your assets. Your return may differ significantly from those reported. The underlying investments held in a client’s account may differ from those of the accounts included in the composite. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

The above example (of various asset allocations) is for illustrative purposes only and does not reflect actual PAS data. Asset mix performance figures are based on the weighted average of annual return figures for certain benchmarks for each asset class represented. Historical returns and volatility of the stock, bond, and short-term asset classes are based on the historical performance data of various indexes from 1926 through 12/31/22 data available from Morningstar.

How your assets are allocated across these different asset classes can provide a solid foundation upon which your portfolio may be able to grow over time. It can be a major factor in long-term performance: In fact, up to 90% of the variability of a fund’s return over time can be explained by how its assets are allocated.3

3. Not rebalancing your portfolio regularly. Asset allocation is not a one-and-done exercise or something you can “set and forget.” Over time, the appreciation and depreciation of your investments may result in your portfolio drifting from your initial allocation. As this happens, the amount of risk you’re exposed to could change in ways you may not have expected.

For example, consider a hypothetical portfolio that begins with an asset allocation of 70% stocks and 30% bonds. If over the course of 6 months, stock values were to surge and bond values were to decline, that portfolio might end up closer to something like 80% stocks and 20% bonds—a much riskier allocation—just due to market activity. It can work the other way as well: Were stocks to dip to 60% and bonds to rise to 40%, the portfolio may end up being more conservative than the investor initially intended.

Historical standard deviation in conjunction with historical returns to decide whether an investment’s volatility would have been acceptable given the returns it would have produced. A higher standard deviation indicates a wider dispersion of past returns and thus greater historical volatility. Standard deviation does not indicate how an investment actually performed, but it does indicate the volatility of its returns over time. Standard deviation is annualized. The returns used for this calculation are not load adjusted.

Unless the investor proactively monitors and reallocates assets, perhaps by adding more funds to the account in the desired asset class or moving assets from one class to another, they could potentially experience more volatility than they are comfortable with or less growth than they need to help achieve their goals.

4. Paying too much in taxes
Taxes are a part of life, but nothing says you need to pay any more than is required of you. And yet, many investors may do just that because they don’t realize that there are techniques they can employ to help invest more efficiently and potentially reduce their overall tax burden.

“Most investors don’t realize how much they’re paying in taxes,” says Bullard. “Capital gains distributions from mutual funds, for example, can surprise investors when the tax bill arrives.”

Cutting your tax bill can have a big impact on your portfolio over the long term, by allowing you to keep more of your money and keep it invested, where it can potentially benefit from compounding growth in the market.

Techniques such as tax-loss harvesting or tax-efficient asset location, which places particular types of investments in the accounts most suitable for their tax treatment, can potentially pay off. In fact, the average client with a Portfolio Advisory Services professionally managed account using tax-smart strategies4 could save $3,900 per year in taxes.5

5. Going it alone. It’s not always easy to stay on top of these tasks and keep everything running smoothly on your own. And even when you know what you should be doing intellectually, it can be hard to stay the course and keep your emotions in check when markets become challenging. That’s why some investors are more comfortable engaging with a professional investment manager who, for a fee, can oversee many of these important investing duties and provide investors with a backstop of support and guidance that may be able to help them weather the difficulties they encounter on their path to their goal.

The truth is, mismanaging your portfolio has a cost. And whether the mismanagement is the result of an honest mistake, an understandable overreaction, or a simple oversight, ultimately the cost is coming out of your pocket.

Life is complicated enough as it is. There’s no need to make it any more complicated than it needs to be. With just a little more attention to these important portfolio practices and reaching out for professional help when you need it, you may be able to help ensure that these potential mistakes don’t keep you from reaching your important investing goals.