It Could Pay to Stay the Course with a Well-Diversified Portfolio

A mutual fund manager at Dimensional Fund Advisors, Mark Gochonour, delivers presentations that demonstrate it might have served many people well to remain invested in a well-diversified portfolio throughout the financial crisis of the past decade. He uses his parents’ portfolio as an example of how that may have been a successful strategy.

Gochnour’s parents are a former orthodontist and homemaker who have already done through two recessions since his father stopped working in 1997. Their portfolio is divided evenly between stock and bond funds. Their savings have dwindled about 25% from the market peak, but has rebounded since then. The biggest piece of advice that their son gave to them for investments is to focus on the things you can control. Sticking with your plan even during challenging times can be what saves your investments.

His parents invested their portfolio in 15 mutual funds sold through a group of financial advisers. The funds have fees that cost 0.30 percent of assets every year, and it is worthwhile to pay an annual 1% fee to a financial adviser to help you hold the course in your times of doubt. Their portfolio has delivered an annual return of 7.85%. The Gochnours attribute their success to disciplined saving habits and living comfortably, but not too lavishly.

See Tara Siegel Bernard, Why Panic? A Couple’s Nest Egg Better Left Alone, The New York Times, Mar. 21, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.