No, this is not a tongue-twister. Or maybe it is, but not the normal kind. Ancient language of Sanskrit, despite its phonetic cleanliness can be a tongue-twisting language, with its combinations of half sounds and compound words. It holds a place in the history of mankind equivalent to Greek and Latin. It lets us peep in the past and see a bygone era of poetry and drama, science and technology, philosophy and religion that transcends time and space. And one of its little gems that have stood all tests of time is “Athi Sarvatra Varjayet” – excess of anything is bad.
This time of the year particularly brings this sage advice to the forefront. As the year starts on a fresh page, it provides a sane perspective to portfolio planning. Concentrated portfolios are a sign of excess – excess of greed or fear or inertia. I know of someone who once had an unrealized gain of over seven million. Only to see it dwindle down to a low hundred thousand after the dot-com bust. The culprit? Not greed, not fear, just inertia. And this is still a happy story. As many in the valley will tell you, not all such stories have a happy ending. And yet, most common issue we see with most of the portfolios that we come across is the concentration – concentration in one security, and equally common, concentration in one sector. And you can guess the sector. It is either technology or bio-tech. One of the portfolios I have seen could have been more easily managed by selling all its holdings and buying a simple index fund or ETF on Nasdaq; giving an added advantage of avoiding the illusion of being diversified!
On the other hand, you will also come across innumerable stories of people who have made fortunes by finding and concentrating on a single idea. It does work and works pretty well when all the stars are aligned. But a single misalignment can be a recipe for failure. For prudent investors with life goals and aspirations, concentrated portfolio is not the recommended approach. Life is not judged by bragging rights; it is judged by achieving your goals on your terms and within your timeframe.
May the New Year bring you and your loved ones good health, cheer and peace!
— Lavina Nagar
— Lavina is a financial planner and founder of Maya Advisors, Inc. She can be reached on 650.704.3074 or
Disclaimer: This article is for information-purposes only, and may not apply to your unique situation. Nothing in this should be interpreted to be a recommendation to anyone to purchase, sell or hold any security or product. It does not replace a lawyer, accountant, financial planner, or other professional advice.