INDUSTRY INSIGHT
FINANCIAL PLANNING
SPONSORED CONTENT
Don’ t Put All of Your Eggs in One Basket
One of the oldest principles in investing is diversification – often described as not putting all of your eggs in one basket. This phrase is commonly attributed to Miguel de Cervantes in his 1605 novel Don Quixote. He may have been referring to the reallife risk faced by farmers who could lose everything if they dropped a single basket containing all of their eggs.
As it relates to investments, the suggestion is simple: it is better not to risk your entire portfolio by investing in only one stock or even one particular asset class. The risk of losing is simply too great.
A diversified investment portfolio might include U. S. large-cap stocks, U. S. mid-cap stocks, U. S. large-cap value, U. S. large-cap growth, U. S. small-cap stocks, high-yield bonds, emerging markets, developed international markets, and U. S. investment-grade bonds.
There are indices representing each of these asset classes, including the S & P 500, the Russell 2000, the Bloomberg U. S. Aggregate Bond Index, and the MSCI EAFE Index, among others. In our experience working with families across the region, one of the biggest challenges investors face is staying disciplined when one asset class temporarily dominates headlines.
The Callan Periodic Table of Investment Returns depicts annual returns for key asset classes ranked from best to worst performance for each calendar year. The results illustrate how dramatically leadership among asset classes can change from year to year.
For example, in 2025 emerging markets led all asset classes. In 2023 and 2024 U. S. large-cap growth stocks were the top performers. In 2022 U. S. large-cap value led the way. In 2018 investment-grade bonds performed best, while in 2016 U. S. small-cap stocks led the market.
Investors naturally try to identify patterns in order to predict the future. Finding a discernible pattern typically involves identifying consistent or repeating structures within data, visual sequences, or numerical relationships. Methods often include analyzing changes between numbers, spotting repeating patterns, or using statistical tools such as regression to identify relationships between variables.
However, when studying the Callan Periodic Table of Investment Returns, there does not appear to be any discernible pattern. Past results are not indicative of future performance, and future returns remain unpredictable.
Fidelity Investments has prepared a hypothetical analysis illustrating how diversification may enhance returns over time. The message is clear: while there are no guarantees, diversification may provide improved returns with less overall risk over the long term.
The analysis also demonstrates why attempting to time the market may be a mistake. Based on hypothetical investments of $ 10,000 made at the beginning of each year from 2006 through 2025, Fidelity calculated that the best-performing individual index grew to $ 458,146, while the worst-performing index grew to $ 386,245. In comparison, a diversified portfolio evenly split among nine indices grew to $ 636,004.
A diversified portfolio will never outperform the leading asset class in any given year. In fact, managing a diversified portfolio sometimes means acknowledging that not every investment will perform well at the same time.
A diversified portfolio will always contain the leading asset class, but it will also contain the lowest-performing asset class and everything in between. An aggressive investor may outperform a diversified portfolio in the short term, but without a crystal ball, it is extremely difficult to do so consistently over the long term.
Studies such as the S & P Indices Versus Active( SPIVA) Scorecard suggest that roughly 80 % to 95 % of active investment managers fail to outperform their benchmark indices over long-term periods of 10 to 20 years. This raises an important question: might it be better to simply own the indices?
A diversified portfolio is also generally less volatile than concentrating investments in a single asset class. Fluctuations in value may be reduced by spreading investments across multiple asset classes.
Financial success often begins with focusing on long-term goals and building a diversified portfolio aligned with your risk tolerance. While investing never comes with guarantees, diversification remains one of the most reliable tools available to investors seeking long-term success.
As we enter the Spring season – a time of renewal and fresh beginnings – we wish everyone a wonderful season ahead.
This Industry Insight was written by Garrett S. Hoge, CFP ®, ChFC ®, MS.
H Financial Management is a private wealth manager based in Southpointe serving the ever-changing financial needs of his clients. Please contact Garrett at H Financial Management, 400 Southpointe Blvd., # 420, Canonsburg, PA 15317, Phone: 724.745.9406, Email: garrett @ hfinancial. net, or via the Web: www. hfinancialmanagement. com.
Securities offered through Osaic Wealth, Inc. Member FINRA / SIPC
• Advisory Services offered through H Financial Management. H Financial Management is not affiliated with Osaic Wealth, Inc.
PETERS TOWNSHIP | APRIL / MAY 2026 39