Diversifying Beyond Investing

A best practice in portfolio management is to own many companies across many sectors, countries and sizes. Reducing the risk of one bad apple spoiling it all. Diversification, the only free lunch in investing, produces better returns with lower risks.

Diversification is helpful beyond investing.

Retirement is a trying time. This is most clear with pro athletes. Countless examples of downward spirals and overnight bankruptcies. We're just as susceptible. Many retirees report depression and anxiety due to loss of identity and structure. So much of us is tied to our careers, when it ends, it's devastating.

This is why we diversify. We're more than our jobs. We are sons, daughters, parents, athletes, book nerds, investors, gamers, and so much more. Work is a single slice of a much bigger pie. It's foolish to save our best self for one and neglect the rest.

When we feed other areas, we become more resilient. A bad meeting doesn't destroy us because we were still able to get a good work out in, and be there for a friend. Expanding ourselves makes it easier to accept any single blow. A concentrated life leaves us vulnerable...and dull.

Leaning into non-work areas counterintuitively makes us better at work. Skills and confidence gained elsewhere can fuel us everywhere. Positives from one area lifts you to new heights in others.

Just like in investing, diversification limits our downside, while improving our upside. It's a free lunch, eat up.

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Herman Ye

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