Flaw in the Design: Why Focusing on the Wrong Strategy Could Be Costly

Are you spending too much time worrying about when to invest your money or take it out of the market? How about trying to find those two or three stocks to bring in great returns? In this week's "Making Sense", I use the analogy of an architect designing a building to illustrate the importance of prioritizing the structure (your allocation) before the interior (market timing & stock selection).

It would be foolish to focus solely on designing the lights, marble floors, and other features without first creating a strong foundation for the building. Similarly, many finance channels, teachers, and others make the mistake of excessively emphasizing single stock picking and market timing instead of considering asset allocation.

Join me as I present key findings about what truly matters in portfolio design and why. You might be focusing on the wrong aspects without even realizing it. Remember to reach out with any questions and share this video with your friends!

Summary:

- 93.6 return and 98% of risk are decided by asset allocation.

- 4.7% of return comes from security selection, while 2.1% of return comes from market timing.

- When deciding on what to invest in, it would be a much more efficient choice to focus on the sector/industry you would want to invest in rather than a particular company or time of the economic cycle.