Diversify Your Investments: Are You On a Thrill Ride or Base Jumping?

Let’s talk about Diversify Your Investments: Are You on a Thrill Ride or Base Jumping?

To remind clients to keep saving for their future selves, we try to make the investing process fun. Instead of solely announcing numbers at clients with multiple pages of legal paperwork, we remind clients to focus on what they can control with their investment accounts. To see how we do this, check out this sneak peek below of a Quarterly Email which we send to clients.

We mix up the themes each quarter, and also personally tailor recommendations for the client’s unique situations. My favorite part of these Quarterly Emails is that we attach a Paid Invoice so clients can understand how Well-Rounded Success gets paid and the amount of money which was taken out of their accounts for our services. As you can read in a previous blog post, the smoke-and-mirrors nature of the Personal Finance industry really grinds my gears, so we try to be as transparent as possible.


If you wish to explore a business relationship so you can receive these types of personalized emails, learn more at Well-Rounded Success’ Services.

Email Subject Line

1st Quarter of 2019: Your Quarterly Email from Dan & Well-Rounded Success

Greetings <Insert Name>!

<Personal Note>

Please allow me to put on my ‘Financial Planner hat’ to discuss the below points as well as personalized recommendations for your investment account. Don’t forget to scroll down to the Tweaks For You section as well as your paid invoice.

Market Commentary

You can’t control the markets so we encourage you to focus on what you can control with your investment portfolio.


Let’s discuss Diversify Your Investments: Are You On Thrill Ride or Base Jumping?


You have a lot of responsibilities in life. One fortunate task you may have is how to manage your extra money. You’re at the point where you have some money accumulating in cash savings and you don’t know where to put it.


For the purposes of this article think of this analogy:


Base Jumping Approach:  Individual Investments

Thrill Ride Approach : Diversified Portfolio


Some people may take this extra money and invest it in the latest trend, thus putting all their eggs in one basket. This leap of faith can end in a home run – which the person will brag about for decades – or a facepalm. This is the Base Jumping Approach to investments. It provides a nerve wracking experience which can be exciting, yet financially disastrous.

  • A potential phrase here, “well… that didn’t work.


Then there’s the Thrill Ride Approach. This can be an investing experience that’s not as exhilarating as Base Jumping but still provides some ups-downs-twist-and-turns. You spread the money around in multiple investments which minimizes your risk of putting all your money in one category. This approach may provide some guardrails, or a lap bar, to hopefully prevent you from financial disaster.


Where To Park Your Money?


Many people don’t know what to do with their surplus cash so they harbor the funds in the easiest option: a checking or savings account. Yet, cash is designed to be worth less next year with inflation. This may motivate you to park your money into an investment that may earn more than inflation over time. There are pros-and-cons with every investment decision and the choices may intimidate you.


There are many options out there. Plus you have options within options which can be overwhelming. Here are some examples of where to stash your money:


  • Stocks
  • Bonds
  • Money Market Funds
  • Treasury Bills
  • Checking Accounts
  • High-Yield Savings Accounts
  • Retirement Accounts
  • Certificates of Deposits
  • Annuities and Insurance Products
  • Real Estate
  • Private Businesses
  • Trust Accounts
  • College Savings Plans
  • Cryptocurrency
  • Precious Metals & Commodities
  • Charitable Giving Accounts
  • Artwork and Collectibles
  • Cash Under the Mattress


These lists of options can freeze people from making decisions. Rational economists explain that people want more choices so they have more freedom to make decisions best suited for their unique needs. Yet, some economists understand that people are irrational.


An argument has been made that people are happier when they choose between fewer options.


Think of an ice cream store with Chocolate, Vanilla, and Strawberry. You make your choice and move on. Yet, when you have 31 choices, you can be influenced by “decision paralysis.” This means that people freeze because there are too many options and they don’t want to make the wrong decision. And even after the person makes a choice, they can still be unhappy due to worrying about making the wrong choice.


Investment Choices


From the TEDBlog article titled, Does having choice make us happy? 6 studies that suggest it doesn’t always:


“In his blockbuster TEDTalk “Barry Schwartz on the paradox of choice,” the Swarthmore College professor quotes a study conducted by Iyengar and Emir Kamenica. The pair looked at the retirement savings choices made by half a million employees through the Vanguard Group. Analyzing the data, the pair found that for every 10 additional funds offered to an employee, the chances that an employee would invest in none of the above increased by 2.87%. Schwartz explained the significance in his talk. “With 50 funds to choose from, it’s so damn hard to decide which fund to choose that you’ll just put it off until tomorrow. And then tomorrow, and then tomorrow,” he said. “By not participating, they are passing up as much as $5,000 a year from the employer.””


Now, take this same mindset when addressing the options for stocks and bonds. You can see this fascinating map from the World Bank Group showing that there were around 43,000 publicly listed companies in the world in 2017. A question for you, how are you supposed to analyze 43,000 companies to see which stocks you should buy for your own investment account?


Two words: index funds.


Instead of picking individual stocks (Base Jumping Approach) and worrying about making the right choices, you can invest in index funds (Thrill Ride Approach) which are comprised of multiple companies represented in a certain category.


  • Think of the S&P 500. Instead of worrying about which stocks to invest, you can purchase an index fund which follows the overall S&P 500 index. Voila! You’re now invested in around 500 companies with a single purchase.


The investment strategies we discussed when opening your accounts embrace this Thrill Ride philosophy. Within your account are multiple funds which follow indexes across multiple asset classes like US Stocks, US Bonds, International Stocks, International Bonds, and others.


Different Results from Different Asset Classes


A benefit to having your money spread out through multiple areas is that if one sector decreases in value, then the other sectors may minimize your potential losses.


For example: in 2018, cash was the best performing sector listed in this analysis by the Novel Investor. Cash earned 2.0% while the bottom performer was Emerging Markets at -14.3%. Yet, a diversified portfolio comprised of eight sectors was down -5.6%.

Novel Investor Asset Class Returns TableSource: NovelInvestor.com


These quilted charts are some of my favorite education tools. Draw your attention to the white box throughout the quilted chart. This represents a diversified portfolio (Thrill Ride) consisting of multiple asset classes. Notice how this diversified portfolio remains in the middle of the pack. It’s not immune to losses but it provides a less volatile journey. If you want to see a volatile journey, follow Emerging Markets marked in purple.


Going back to choices, instead of putting so much pressure on which asset class to choose, invest in them all in a sensible way with low cost index funds. This is this investment style we discussed when we set up your investment accounts.


The Opposite of Diversification


You might have heard some horror stories of people who put all their eggs in one basket and then lost big.


“Just remember the teary-eyed Enron employees who held nothing but Enron stock in their retirement plans. When Enron went under, they lost not only their jobs but all their retirement savings as well. Whatever the investment objectives, the investor who is wise diversifies.”

Burton G. Malkiel

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing


It’s my philosophy in life and in investments to spread risk into multiple areas. Just like we saw in the Asset Class quilted chart, you won’t be at the peak but you also won’t be at the bottom.


A gentler thrill ride is fine by me and let’s leave the base jumping to the adrenaline junkies.


The End of this Eight-Part Series


We have come to the end of this eight-part series. Remember, you can’t control the financial markets but you can control how you invest and how you react to the markets.


I hope you have enjoyed the material and feel better informed about your investment accounts. If you wish to revisit any of these subjects, here is the list again.


Further Reading Resources


Some General Stats About the Markets: As of the end of the first quarter (03/31/2019), the broad-based Morningstar US Market Index increased 14.09% for the first quarter. The broad bond market (Vanguard Total Bond Market) was up 2.92% for the first quarter. International Markets (MSCI ACWI Ex US NR USD) was up by 10.31% for the first quarter. For more numbers, check out this link: MorningStar Quarter-End Insights.


Please let me know if you want to check-in about your goals or to refresh anything with your portfolio. I’d be thrilled to chat. I nerd-out about this stuff and it’s an honor to help you.

Tweaks For You

[Personalized Recommendations]

Paid Invoice

To be as transparent as possible, attached to this email is a Paid Invoice breaking down the money that came out of your account for our Investment Management services. This is for your reference only and there is no need for any action.

Your Returns, Quarterly Account Statement, and Tax Forms

[Personalized Recommendations]

Update From Dan

Early 2019 was filled with fun excursions near-and-far. I was fortunate to ski multiple Colorado mountains with families and pals, jam out to some awesome bluegrass at Steamboat’s WinterWondergrass for a pal’s bachelor party (new band discovery: The Shook Twins), visit family in San Diego, venture to Scottsbluff multiple times to visit my hardworking wife, and travel to Chile to celebrate a good pal’s engagement with his Chilean fiancee. Our favorite part of Chile: hiking around volcanoes in the area near Pucon provided good workouts, pictures, and peaceful time in nature.


On the career front, I participated in another University of Denver panel with other Colorado Financial Planning Association members sharing our stories with students and also finished my first semester for my Master’s Program. It was enjoyable to learn how to bring coaching skills into the Financial Planning process.


I listened to your feedback from our recent surveys. I heard that people want to be held accountable to get tasks done. We’re launching quarterly webinars titled, Well-Rounded Workshops. We’ll rotate different subjects for education plus also have people work together to get their tasks done where you can ask questions along the way.

  • Join us for this webinar on Monday, June 10th at 12pm (mtn) where we’ll address Freezing Your Credit. If you’ve been procrastinating this and/or you want to freeze your kids’ credits, be sure to join me and invite your pals!

High Five

It’s an honor to help you and please let me know if you have any questions!


Dan Andrews, CFP®

Thanks for reading and if you want guidance on how to navigate your personal finances or you want help with your investment strategies so you can receive these personalized quarterly emails, please get in touch with me or learn more at Well-Rounded Success’ Services on the website.

Daniel C. AndrewsAbout the Author

Dan Andrews is the Leader & CERTIFIED FINANCIAL PLANNER™ of Well-Rounded Success. Dan enjoys guiding and encouraging millennials through their ‘adulting’ responsibilities. His behavioral-finance style focuses on helping individuals in the Well-Rounded Success community define his/her own definition of success, make good decisions, and to also be philanthropic while along their journeys.

Photo by Jason Chen on Unsplash

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