The Investment Scientist

Archive for February 2015

Remember When Everybody Wants to Be in Gold?

At the turn of the year, a few clients asked me a very good question: “Why my portfolio is not doing as well as the S&P 500 index? Shouldn’t we invest more in US stocks?”

The answer is very simple, US equity is only one component of the portfolio, it happened to do the best last year. The best component of the portfolio will always do better than the whole portfolio. That does not mean we should not diversify.

In fact, I got similar questions every year. Four years ago, it was like “Why didn’t we invest more in emerging markets? there’s no way the US market will do better than emerging markets.” Two years ago, it was like “Why shouldn’t we put everything in gold? all of my friends are investing in gold.”

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



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