The Herald Bulletin

Morning Update

Columns

March 30, 2013

'Big Joe' Clark: Investing lessons from an Easter egg hunt

The Easter season is upon us and while the weather hasn’t been what we’ve experienced in past years, it’s still a great time to be with family. While I rejoice in what the season means to me, when many think of Easter their minds turn to bunnies and Easter eggs. As my two daughters aged, my wife and I had to improve our strategy to effectively hide the eggs in order for the game to be more fun for the girls. It was easy in the beginning to simply place eggs in the grass or on the carpet. Those were the days! Some families have a ‘finale’ egg with a great prize hidden inside. This egg is always the hardest to find, as it should be! Regardless of your age or your beliefs we wish you a Happy Easter season and a great hunt.

Several similarities can be drawn from the childhood Easter egg hunt to investing today. It is nice to wake up and have a basket of goodies and it seems many people just want an easy way to make millions. We’ve all gotten the spam emails and sometimes even regular mail advertising the get rich quick schemes that just require five minutes of work a day or attending a short 3 hour class on a Saturday afternoon. A little common sense goes a long way in showing if it were only that easy everyone be doing it. Great investments are like the “finale’ Easter eggs, finding the truly rewarding investment requires some skill, ability and more often than not, patience to find them.

We would give our daughters each a basket to hold the eggs they found, and once their basket was full it would be time to come back inside. Well what if that ‘finale’ egg hadn’t been found and yet your basket was full? Good or bad, our portfolios never get full as there is no maximum number you can own. Friends, we must make smart decisions regarding what eggs or investments we allow in our portfolio basket. Proper diversification is a good thing, but loading up our portfolio with too many stocks or other securities increases complexity and may provide a veil of market diversification that can give us undeserved comfort. We must be nimble enough to know which investment eggs to pick up and at the same time have the ability to realize an investment no longer belongs in our basket and discard it.

A good Easter egg hunt shouldn’t be easy. It can be fun to hunt for things, knowing the prize is worth the search. If an investment portfolio is taken seriously, as it ought to be, work must be put in and time must be committed. It’s wise to review what’s in your basket and make sure each investment still makes sense and fits the risk profile you are comfortable with. Have a Happy Easter and enjoy the time spent with your family.

Joseph “Big Joe” Clark, whose column is published Sundays, is a certified financial planner. He can be reached at bigjoe@yourlifeafterwork.com or 640-1524.

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