Quick Bite: Wine & rebalance? Diversification with Victoria Devine

about diversification and you're a direct share investor. Historically, when I was putting together direct share portfolios four people, we would have between seven and maybe twelve shares, and like twelve felt like a lot in that but every single share that they held was in a different industry, and we would, you know, hold maybe one that's probably a lie. We maybe hold two banks, like one or two banks

and see what was going on. We'd never hold all of them, but we'd make a decision at the time of investing as to which bank in that sector was performing well enough and was a good investment and was an over valued or underperforming or whatnot to put it into their portfolio. So diversification in that aspect is something that you have to manage ongoing, whereas diversification can be instant.

Like in that situation, these people that I was putting portfolios together for, they were paying a lot of money to have me manage those portfolios on a monthly basis, and I mean every three months, I'd go in and make adjustments and you know, take some profit off some and put it back into another one, because you know, you wanted to make sure that you always were consistent

and met their risk profile as well. But on the flip side, we talk about instant diversification inside an ETF, and that's because you've got a portfolio manager or a fund manager making sure that everything inside that asset that you're purchasing is okay and looked after. But essentially it's making sure that if one industry is not doing so well. Another is if you've got twelve different investment and over that twelve one is actually down like thirty percent, that's terrifying.

Like if you said to me, hey, Ve, would you be comfortable with your portfolio being down thirty percent? Be like, absolutely not, Sonya not willing to take the risk. But last year, if I look at my share portfolio, there was an asset in my portfolio that returned negative thirty two percent. It made me feel sick. But if I look at my portfolio as a whole, because everything else kind of held it up. My portfolio returned about fourteen and a half percent, which is very sexy, but that

means that I wasn't all in on one asset. So if one's doing really well, something else is usually just slugging along. You need the guys that are going to carry the team. Like the team work together. And I think that that's really important to remember because you might see my portfolio and go, oh, v that's a really

good return. But then in isolation, i'd never invest in that particular share and they share that I'm talking about out it did really well for the three years before that, Like that was one of the things that was really propping up my portfolio's returns. So when it was not performing well, I was a bit sulty at it. But that's the beauty of diversification. My personal wealth and my wealth creation journey was not impacted by the performance of

that one share. So we need to make sure that not all our eggs are in one basket, because if you trip over, you've broken all your eggs.

on your website about it. So your risk profile, I was explaining it earlier today to somebody. It's kind of like a pie and you cut up your pie in different amounts and some people say, I'm not that hungry, Victoria, I only want a little bit of pie, or someone will be like, I am ravenous, I need the whole thing. And that's where your portfolio is going to differ from

one person to another. So if you're like a conservative person, you probably asked for a small amount of pie, and not all of your assets are invested in the share market. Whereas if you are like me and pie is on the table, like most of my assets are in the share market. So if most of my assets are in the share market, and I know that of my portfolio, let's say ninety five percent of my money is inside the share market, of that money, I would have then

broken it up. I would have then gone okay. So some of it needs to be exposed to the Australian share market, and some of it needs to be exposed to the international market. And let's pretend I've spent five hundred dollars on an Australian ETF and five hundred dollars on an international you cannot expect them to perform identically

over twelve months. So in twelve months time, we go back and check, and let's pretend ones at seven hundred and fifty dollars and ones at five hundred and fifty dollars. At that point, we want to kind of rebalance our portfolio and go, well, one did better. Should I take some of the money off the table and redivide it across my portfolio? So I e. We maybe sell down some of our Australian and put it back into the international,

so we always maintain about fifty percent. And this happens across the board, so even if you were a direct share investor, you might do that across a number of different options. And I mean an example of that is you know, I was telling you about my portfolio and it was down twenty two percent. I'm still salty on that, but there was another asset that did the same but in opposite so it was like up twenty eight percent. And at the end of the year, because I like

that reminders in my calendar. I don't know if everybody else does this, but remind us in my calendar, and I'm like, I get a wine in a rebalance time. And so I look at my portfolio and I looked at that asset and I thought, wow, that's up twenty eight percent and that's not that reflective of the market. So I made the decision to sell down some of

that asset to redistribute across my portfolio. And over time, investments are going to perform differently, so we need to make sure that we kind of sell down something or maybe we the next month tip a little bit more money into the other one to get it back to that balance. And that's where diversification is really really important. But also rebalancing is going to mean that that diversification doesn't completely go out of whack.