Jack of All Trades
The saying “Jack of all trades, master of none” is quite a well-known phrase. It was believed to have originated hundreds of years ago to describe a person who helped out theatres set the stage, move the props, help with costumes, etc. This person would also remember lines and even direct at times. Essentially, this “Jack of all trades” dabbled in many different skills and roles. It was once used most often as a compliment, but now has a generally less than flattering connotation.
You may think that it is better to be an expert in a particular company or sector — as that knowledge is expected to flow through to the investment front. Even in the financial industry, analysts and researchers are generally segregated into specific sectors or regions — with the analysis of these areas covered by a select group of people, “experts” in their field or so it would appear.
However, there are various studies to show that even these experts often do not possess a higher predictive power when it comes to being a master of one (their particular field). But how about being a jack of all trades when it comes to investing? Would that be a better approach? The saying that is commonly said today is actually only a part of the full phrase:
A jack of all trades is a master of none,
but oftentimes better than a master of one.
To be diversified, holding an entire basket of stocks around the world, would be like being a jack of all trades in investing. We have discussed the importance of diversification before, as compared to single stocks, in a previous article that can be read here. Let’s take a look at some numbers below.
From 2000-2009, the U.S. stock market went through a 10-year period famously known as the lost decade. Because after investing for 10 years, you essentially went nowhere with your portfolio, and worst still, experienced a loss of -9.1%. However, a globally diversified strategy tells a different story.
US investors or any investor with a high allocation to the US would be left wondering whether investing in stocks made any sense at all. Even putting it in a bank account could have possibly yielded better results.
However, an investor with a global allocation would have had a very different experience compared to the US-centric investor across the exact same period. Investing globally ensures that you do not need to take excessive concentration risk, while simultaneously allowing you to capture all available market returns around the world. Maybe you were an expert in the US market, and so invested everything into it, but being a jack of all trades would have yielded better results.
Today, this premise still holds true. Imagine having gone through the various market cycles if you were an investor focused on only the Chinese market, or the South American market or worse, the Russian market, especially in 2022.
The Global Core Equity Index (shown in the chart above) closely represents the allocation of the equities in all our portfolios that we manage for our clients at GYC, which targets securities from around the world that have been proven to result in higher expected returns. By diversifying broadly and targeting higher expected returns, the portfolio went beyond just retaining its value but grew by +54.7%, while S&P 500 investors lost money over the same 10-year period.
You may find yourself asking questions like:
Which countries should I invest in?
Is it the right time to dive into China or India now?
How do I ensure that I have the lowest probability of experienced a ‘lost decade’?
Should I invest my money? It sounds risky to have no returns after 10 years of investing
In the same way that you would not attempt a high risk activity such as sky-diving without professional supervision, investors can benefit greatly by relying on an adviser — having the peace of mind knowing that their plan is in the hands of a professional.
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