Tom’s Thoughts on Creating a Balanced Investment Portfolio.
Transcript:
Tom Vaughan: Okay, so Katie’s asking, one of the questions that come in is what is the best way to create a balanced portfolio?
Well, okay, so going back prior to last year, really prior to, you know, kind of February, March of last year, I would have a different answer than I have right now. So, and this went on for decades, literally, I think the best way to create a balanced portfolio is to essentially buy the entire market. I love like the vanguard total stock market index, the vanguard total bond market index, not having to kind of guess where things are going to go and those types of things. And, you know, and then maybe, on the margins, you know, 1015 25% of your portfolio, you’re looking at some targeted areas worse, or what I call targeted index with things that you think might do well, for whatever reason, maybe they’re already doing well, and you think that’ll continue or what have you. So that was our normal methodology, we were always able to do I thought pretty well, with that, I was very happy with that, you can do that fairly inexpensively. But then along comes the pandemic.
And what happened in the pandemic is an entire section of the economy just shut down. I mean, almost completely, I mean, airlines, you know, think airline miles dropped 96%. That was unbelievable to see that. And, and on the converse side, there’s another segment of the economy that just benefited from the, from the virus. Zoom would be a great example, because the best thing that ever happened to him was the pandemic. And so really, we had to shift and create our diversified portfolio, so to speak, in one section of the economy, it was mainly you know, technology, innovative technology, advanced healthcare, you know, clean energy, those types of things. That was what was running, if you were in the other areas, you weren’t making money. In a matter of fact, if you were in the broad market, you weren’t doing that? Well, because there was so much of the broad market that was struggling.
And unfortunately, this year, I see the same exact thing happening. But just on the other side, all of those companies that are doing so poorly last year have a chance to do spectacular this year, just to survive that. They’re called Epicenter, stocks, right Epicenter companies, these are companies that were dramatically impacted by the virus just to survive, they had to cut back. And so now as this demand comes back, and I think the demand is going to be higher, you’re going to see this giant run up in those types of stocks. Well, you’re going to see the other things that did really well last year, probably really struggle. And again, that will mean that there’s a big chunk of the broad market that is doing poorly. So I do think maybe by the end of the year, we’ll be able to get back to this broad market concept with some more targeted indexes. But I think a balanced portfolio now is looking into that segment of the market that is bound to do well here and diversifying within that segment. It’s not the same as what we used to do, but that’s that’s what I’d be looking at right here. I think this is a pretty unique environment that obviously this is our first pandemic, you know, as far as that goes, so