When designing a portfolio, one might think about it like a baseball team. Obviously we want to build a winning team, but we know it won’t likely be an undefeated team. The strength of the team is in the versatility of the lineup.
Each player brings a skillset. There’s the base-stealer, the defensive replacement, the slugger, the all-star… We’re thinking about how some of these spots play a role in portfolios.
- The Veteran Player. This is an older company that pays a nice dividend. It provides value even if it doesn’t perform as well as the others.
- The Utility Player. This is a durable company providing steady, unexciting performances.
- The Streaky Player. This is a company that has stretches of greatness followed by mediocrity—but it’s bound to turn it around. The potential is there, and the broader patterns suggest patience.
- The Slugger. This company can carry a portfolio some days, strike out other days. It’s getting after it.
- The All-Star. This company is the face of the portfolio: everyone knows it for its all-around performance. It’s a big presence.
No portfolio can be made from just one type of player. A portfolio consisting of only all-stars would be too expensive (and we like a bargain). A team of streaky players would be good during the good times—and tough to watch when they’re all struggling in sync.
A balanced lineup is what we desire. No guarantees on any particular outcome, but we think there are plenty of strengths that come in handy. Clients, when you have questions, please write or call.
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