From Kendall Bauer
Dear Investor,
Liverpool FC is one of the most storied football clubs in English Premier League soccer. It’s seen its share of ups and downs.
Just last season, under a new manager, they reclaimed the Premier League title — not because of one superstar, but because of a well-balanced squad. A blend of experienced veterans, dynamic young talent and reliable role players made the team resilient. If one striker had an off day, a midfielder or defender could step up. Depth and variety carried them through the long season.
That lesson applies directly to investing.
Learn more
Allocation to optimize reward vs. risk, a Money Talk Video with Bob Landaas and Dave Sandstrom
Allocation, a Money Talk Video with Kyle Tetting
Efficiently allocating assets, a Money Talk Video with Steve Giles
Rebalancing: Too important to ignore, by Steve Giles
Beginners Guide to Asset Allocation, Diversification and Rebalancing, from the U.S. Securities and Exchange Commission
Asset Allocation and Diversification, from the Financial Industry Regulatory Authority
Success rarely comes from relying on a single star player. It comes from building a diversified portfolio that spreads risk across different assets so no single setback takes down the whole team.
At its core, diversification means spreading your money across asset classes: Stocks, bonds, real estate, commodities and cash — so your financial future doesn’t hinge on one bet. Think of it like building a ship with multiple compartments: If one springs a leak, the whole vessel doesn’t sink. That’s the buoyancy diversification brings when markets get rough.
A crucial part of diversification is understanding the trade-off between risk and reward.
Every investment carries risk. The ones with higher potential returns often come with more volatility. That’s not a flaw — it’s how the system works.
- Stocks can be bumpy in the short term but rewarding over the long haul.
- Bonds add stability.
- Real estate can provide income but may be less liquid.
Each asset class has strengths and weaknesses, and your job is to match them to your goals, your timeline and your risk tolerance.
History gives us plenty of reminders. Investors who went all-in on tech in 2000 or housing in 2008 learned the hard way what happens when portfolios lack balance.
Taking risk isn’t reckless. Taking unexamined risk is. That’s the difference between speculation and strategy.
That’s why diversification and risk awareness aren’t buzzwords — they’re guardrails. They keep you invested when every headline tells you to run.
As you think about your own portfolio, ask yourself: Does it reflect balance, or is it leaning too heavily on one star player? A well-built plan is one that can weather both the wins and the losses.
Know your risks. Spread them wisely. Be bold where it counts and careful where it matters.
Until next time,
Kendall
Kendall Bauer is vice president and investment advisor at Landaas & Company, LLC.