Holland Column

Retirement & Financial Planning

Holland Financial

Too Much Rain Is Not Good for a Pool or a Portfolio

I had an inground pool installed in my backyard last summer. We also added a heater so we can swim most of the year. Since I really don’t understand pool chemistry (and have no desire to learn it), I was quite happy to hire a pool company to keep “my investment” in good shape. If a problem arises, they fix it. I like that. So, aside from the weekly badgering required to get my teenage son to brush the tile and scoop out the leaves, the pool takes up very little of my time.  I already have enough responsibilities. I just want to enjoy it.

The deluge of rain we’ve had in the last three weeks has thrown my pool chemicals off balance. The heater is also running more frequently to warm the cold rain water, and I’ve had to drain the pool several times to keep it from overflowing. Don’t get me wrong, I’m not complaining about the rain; my yard has never looked greener. But, here’s my point – all the rain would have been a much bigger problem if I hadn’t been prepared ahead of time with a: 1. pool service company, 2. heater, and 3. drainage system.

As you have probably already figured out, I am a setting up an analogy. Just like my backyard pool, we need to be prepared for too much “rainfall” – or even potential flooding – in our investment portfolios. When there is a lot of economic “rain,” the stock market doesn’t grow evenly. Some areas grow fast, while others shrink. Technology, demographics, government policies, taxes, inflation – there is a long list of things that can potentially affect a portfolio. Because higher-than-average “rainfall amounts” can throw a portfolio's "chemicals" off balance, it needs to be checked and adjusted on a regular basis, preferably by someone who understands the science of keeping a portfolio healthy. Sometimes, a portfolio will even need to be “drained” so the extra water can be funneled somewhere else.

As I have guided investors over the last twenty-five years, I’ve noted an interesting (and sometimes counterproductive) tendency . . . when the stock market is going up, investors say, “Yay! Don’t touch anything; it is working!” Then, when the stock market is falling, they change their tunes to, “What’s happening?! Hurry, do something!” What’s ironic is that the job of a professional investment manager/adviser is essentially the same, whether the market is up 10% or down 10%. Rain or shine, a portfolio needs to be kept in balance and diversified. If you have the time, like the process, and know how to do this job, that’s great; you can balance and maintain your portfolio yourself. Alternatively, if you are lacking in the time, interest, or skill, then consider hiring an adviser to maintain your investments. Let them do the worrying for you, while you enjoy the benefits of your investments and focus on other things that are important to you.

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