How Smart Investors Insulate Their Portfolios From Excuses

Have you noticed how Main Street investors always come up with excuses to explain the poor performance of their portfolios? They’ll blame any and everything for their failing stocks.

Here are some common excuses:

“There’s no way anyone could have anticipated Russia invading Ukraine and for gas prices to skyrocket.”

“Inflation and unemployment are just dragging down my stocks.”

“Rising interest rates are cratering the bottom lines of my portfolio companies.”

“If that economist hadn’t opened his big mouth on CNBC, my stocks wouldn’t have tanked.”

“Social media and memes are killing the stock market momentum.”

“That hurricane was brutal on my insurance and agriculture stocks.”

When things go south on Wall Street, it’s easy for investors to make excuses and blame anything and everything for their financial misfortunes.

But, let me ask you this:

If you live in an area prone to storms with hailstones the size of golf balls and you buy a new car in the middle of hail season and refuse to park it in a garage or under covered parking, aren’t you partly to blame for the damage to the car when it gets pummeled in a big storm?

Wall Street is always prone to hail storms. We all know this. Wall Street street liquidity combined with herd mentality is a recipe for volatility. There is no shortage of factors that could instantly move the Wall Street needle: geopolitical turmoil, social media, internet buzz, macroeconomic developments, and natural disasters.

Smart investors know Wall Street is a haven for economic hail storms. That’s why they shelter their portfolios from Wall Street storms. In other words, they don’t put themselves in the position to make excuses for poor returns.

No portfolio is completely immune from negative developments. Still, smart investors are savvy about minimizing the effects of outside factors so that they never have to make excuses about the poor performance of their portfolios.

How do smart investors insulate their portfolios from excuses?

​​They neutralize the effects of herd behavior and the madness of the crowds by playing in a different sandbox than Wall Street, where ultra liquidity, behavioral biases, and outside influences fuel market volatility.

These savvy investors gravitate to the private markets to invest in alternative assets like private equity and real assets, where long lockup periods ensure the same factors that fuel wild stock market swings have little to no effect on these illiquid assets. In addition, alternative assets that perform well in recessions and inflationary times offer an additional layer of protection from economic storms.

If you leave your new car exposed to the elements, you bear part of the blame for any damage done by those elements. Investors who play in the Wall Street sandbox bear part of the blame for any financial damage to their portfolios due to factors outside their control.

It’s easy to make excuses and blame these factors, but ultimately, investors don’t realize they have the power to avoid disaster. How? By insulating their portfolios in the private markets.

​​Savvy investors insulate their portfolios from excuses by allocating away from Wall Street, where those excuses thrive.

Is your portfolio insulated from excuses?