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Don’t Invest Like Lord Grantham, Diversify Your Investments!

If you’re hooked on Downton Abbey, you probably saw the Season 3 opener this week where Robert Crawley, Earl of Grantham, lost the family fortune on a single investment in a railroad that went bankrupt. The loss devastated the Grantham fortune, created relationship waves for newly-hitched Mary and Matthew, and put the entire family at risk of losing their home, Downton Abbey–all because of a single bad investment.

Lord Grantham and Downton Abbey are fictional, but the idea of diversification is not. Even Robert’s wife Cora questioned whether it was wise to put all of her inheritance into one solitary investment. As we learned in the season premiere, Robert had invested in a Canadian railroad because it was, as he thought, a sure thing on which he and all of his friends would make money. Sound familiar? It’s easy for investors to get caught up in sensationalism and to rationalize a stunning investment (think Facebook, Apple, Citigroup, etc.), even if it grows to constitute a large part of their total wealth. However, history has shown us time and again that even darling investments can lose their luster at a moment’s notice. If investors don’t diversify so as to maintain a reasonable exposure, they could end up losing it all. For example, during the Dot-com era, many became overly concentrated in technology stocks because tech stocks were rising in value. When the tech bubble burst, these people lost significant sums of money. Even without the risk of losing an army of footmen, maids, valets, and chauffeurs who tend to your every need, not diversifying your portfolio can result in the loss of your entire life savings.

Do you need help on how to diversify your portfolio to reduce your risk? Contact me at aoghoorian@acapam.com or 818-272-8511 for a consultation.

Ara Oghoorian, CFA, CFP® is the president and founder of ACap Asset Management, Inc., a “Fee-Only” investment management firm located in Los Angeles, CA specializing in helping doctors and physicians make sound financial decisions. Visit us at www.acapam.com

One Comment

  1. Me says:

    Fun article. Useful advice. Love the Downton Abbey references/analogies!