Defend Your Portfolio (Feat. Home Alone).

We've all watched the Home Alone movies. They used to play a lot during Christmas Holidays.

Kevin's family travel and leave him at home. For the first part of the movie, Kevin is excited. He got his wish of his family leaving because he was punished the night before.

His freedom is cut short when two conmen decide to target his house for a robbery. I mean, it's Christmas. People travel and their abode is a target for thieves.

Kevin had to protect the family home through boobytraps and making sure the conmen do not succeed. He had to protect both himself and the house. His creativity and planning helped him outsmart the conmen and eventually put them in jail.

From using water to make the stairs slippery; to placing pins on stairs; to making the doorknob very hot; to using spiders; etc.

Everything was meant to protect his home.

When it comes to investments, treat your portfolio like Kevin did his house. Your portfolio is the house.

Kevin did not use one boobytrap to protect the house. He used a wide range of booby traps. These booby traps can be thought of as different investments (diversification) or strategies. Kevin is you, the investor, and the thieves are the threats to your investments.

Threats can come in many shapes and forms: economic downturns, company fraud, tax, or even a bitter ex-spouse.

For example, during an economic downturn, your portfolio would be protected if it is defensive in nature. By this, I mean investing in things that can weather the downturn. Think of it like this: what are the things people will still continue to use during a recession? Examples are utilities, healthcare, and food. Investing in companies or sectors that deal with this will see your investments do better than other companies or sectors.

Another example could be tax. Tax reduces your overall return. Investing in products that are tax-efficient helps you increase your wealth. You can max out your retirement plan or even invest in offshore places where tax is little to zero.

Kevin did not give up after the first trap worked. He continuously monitored the different traps he placed and tried to prepare for each eventuality as they came. This is similar to Portfolio Management. The house is the portfolio and therefore, to protect the portfolio, you must protect the investment and the strategies. Doing this can be tedious work. This is where financial advisers (like this guy - - > malikshehu.com) come in handy. They protect your portfolio and advise on what booby trap to set so the thieves don't make off with your valuables.

So to defend your portfolio, always make sure your investments are diversified and you are continuously monitoring it, making sure you have the right booby trap for every threat.

Protect your booby traps, protect your house.