Kids teams sports are awesome.  They’re learning new skills, making friends, and as a parent you get to meet some pretty cool moms and dads too.

Now that we’re in the fall, Saturday and Sunday mornings are spent at the rink with our boys.

They learn their skills for most of their time, then finish with a little scrimmage.

At game time, puck is king – where it goes, so does the swarm of kids trying to get a stick on it. At the young age they're more like a smiling swarm of bees than anything.

Eventually the puck squirts loose and they all buzz after it, then the puck comes back and so moves our smiling swarm.

The swarm’s biggest vulnerability is when the whole team is chasing the puck one way, and it goes the other.

Timbits hockey is just like investing.

We’re tempted to follow the shiny object in investing, just like the kids chasing the puck.  They know exactly where it is at the moment, and not a clue where it’s going next.

The hockey players will grow up, they will learn from their coaches, integrate systems, and will no longer be our smiling swarm chasing shiny objects, but rather an organized and more deliberate team where each player is responsible for different positions on the ice.

In wealth management we call it diversification; it has been described as 'the only free lunch in finance'. Different investments tend to benefit in different scenarios, resulting, generally speaking, in a smoother ride for the investor and better risk-adjusted returns overall.

As Dr. Brian Portnoy says, “Diversification also means that we will always be saying we're sorry”. With enough different players working together, there will always be one that performs the best, and likewise, one will perform the worst. The 'safety' piece of a portfolio might seem like an underperformer while the market is rising, or the growth piece might keep us up at night in a falling market. Over time, they are likely to provide pleasing results – but during short-term increments, theses individual pieces may be frustrating.

We have witnessed a lot of wealth lost in ‘alternative investments’ – seen as perhaps the shiniest of objects after 2022 – in part due to people looking at the ‘traditional’ components of their portfolios (stocks and bonds) which pretty much all fell in 2022 – and searching for things that were ‘working’.

Those late to party are finding out that getting rich fast and getting poor fast are opposite sides of the same coin as many of the alternative strategies haven’t played out well since, while those invested in the more traditional diversified portfolios have generally done well.

The 'free lunch' in finance can only be achieved through how we manage the 'known unknowns'. As in, we 'know' there will be plenty of 'unknown' risks or events that will have us take pause, or cause stress over the course of our investment lives.

Each event will be difficult/impossible to foresee in a vacuum, however that these types of events happen shouldn't surprise or deter us from following our plan, and underline why a plan to answer 'what-we-will-do-when' is important. The easiest way to be prepared is to take advantage of the free lunch, and remember:

• Have a diversified portfolio, aligned to with a well-developed risk profile and the goals and needs of a wealth plan, and

• Follow a rules-based and repeatable process to rebalance those investments at least annually, trimming those that have had stronger performance and adding to the ones that have lagged (or to sell high and buy low).  Keep it pre-determined, and not subject to our ‘gut’ feelings.

As we head towards the end of the year, there will be plenty of news about elections, war, the economy, or the state of housing – these are all real-time 'Known Unknowns' that we're living through, and they too shall pass.

Recall previous blogs where we’ve talked about the importance of using a process to be invested for the right reasons over time:

Much like in Timbits hockey, the initial reflex will be to chase shiny objects. However, we must remember – these objects are shiny because of what has already happened – not necessarily what will continue.

Take advantage of diversification, spread your team far and wide across the ice surface that is your portfolio.

I say it all the time, to be 'right for the right reasons' in the long-term, we need to be willing to be 'wrong for the right reasons' over many short-terms.