Never Forget Focused Investment Portfolios Are High Risk

We have laboured this point so many times over the years to ensure that when you invest, you should ensure you have a balanced portfolio and not be too focused.

Take last Friday and this Monday for example, President Trump confirmed his nomination for the next Chair of the Federal Reserve (US equivalent of Bank of England) to be Kevin Warsh, a Wall Street, a long time Federal Reserve Board of Governors member and a vocal critic of current Chair, Jerome Powell, and the cautious, ‘hawkish’ approach to interest rate cuts.  A more ‘dovish’ approach to cut interest rates quicker to boost the economy rather than a ‘hawkish’ approach to reduce inflation and protect the economy (hawks protect their nests).

The Result:  A ‘brutal’ sell off, buy back, sell off yo-yo in Gold and Silver and Bitcoin dripping to $77,000.  To put this in perspective:

Updated Gold prices on 04/02/2026:  Gold per ounce fell to $4,629 per ounce on Monday and then hit £5,089 earlier today, that’s +9.93% in a few hours.    Only to hit $4,802 few hours later again, a fall of -5.64%.  That’s what we mean by ‘brutal’.  How can you possible rely on this?

Bitcoin:  Hit $125,000 in October 2025 and hovered around $70,000 to $75,000 today.  That’s a fall in 5 months of 40%-44%.  Again, that’s brutal.   How can you possible rely on this either?

Oil Prices:  Are down, after initial worries about US/Iran, pushing oil share values down 5% in a few days.  If tensions rise, it will start bouncing too.

Focused investing is basically ‘gambling’.

Focused Investing is High Risk

• Individual Shares:  If you buy individual shares, do you understand the market?  Did you read the company’s latest annual report and accounts?  If not, you are gambling.
• Crypto Currency:  Enough said already about volatility here.  Do you understand crypto?  It has no country based ‘precious metals’ and sovereign wealth ‘underpinning’ it.  You are buying some a unique encrypted chain of ‘code’.
• Precious Metals:  Again, enough said earlier, but at least precious metals are tangible i.e., you can touch, feel and trade with physical gold.  Back to the ‘stone ages’ it is then.
• ESG:  Sustainable/Green/Socially Responsible investing has its own problems:
• Greenwashing, i.e., companies pretending to be greener and take larger climate action moves than they are in reality.
• Demand outstripping supply.  Governments that have signed the Paris Climate Treaty, have set unsustainable targets for ‘net zero’.  They are forcing companies to have ‘climate action plans’ and publish them annually.  They are forcing investment fund managers to become greener and invest in companies that that good corporate governance for ESG.  This has created a massive pool of investment monies coming in with a lack of supply of green projects to invest in. 
• Demand exceeding supply drives share prices higher than they should be and then they fall when Trump withdraws from the Paris Agreement, UK and other nations postpone implementation of electric only vehicles. 
• In other extreme example, offshore windfarms - Outer Dowsing Offshore Wind (Devon) will not be grid connected until 2030, West of Orkney Windfarm faces aces potential delays due to  high transmission charges, threatening its planned 2029 completion, Berwick Bank Wind Farm has only just started and will not connect ‘phase 1’ until 2031, a year late.

The point we are making with ESG, is it should really be treated as ‘patient capital’ rather than the main part of your investment portfolio.

Balanced Portfolios are Key

• Investing in a mixed range of different cash funds (investing in multiple cash/money market options).
• A range of bond/gilt/fixed interest/index linked funds (investing globally in different governments and corporate bonds/debt.
• A range of stock market/equity funds, both globally (different countries) and sectors e.g., developed markets, the west, the far east, Europe, UK, South America, Pacific, Emerging Markets, large companies, small and medium sized companies) etc.  also gives you spread.
• Spreading risk helps balance out market shocks in different sectors.  If stock markets fall in the west, this may be cushioned by bond or cash funds or even eastern stock markets.  If interest rate falls, bond markets and equity markets will rise.  If bonds tumble, precious metals may rise and so on.

Focused portfolio market shocks mean 'sell offs' that kill gains.  Spreading and balancing your portfolio, particularly in volatile times like now, can help cushion from market shocks in any sector.

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