It wouldn’t be the start of July without the crowd of boats on the lake, the smell of charcoal on the grill, and fireworks popping off to celebrate our Nation’s independence. July also marks the half-way point of baseball season. By the time the All-Star break rolls around later this month, many of the teams will have little chance to contend for a pennant. Candidates for Cy Young awards, MVPs, rookie of the year and home run champion have separated themselves from the pack.
But there are some newly signed players that haven’t helped their teams. Outfielder Jayson Werth signed a $126 million deal to play for the Washington Nationals last year, but hasn’t quite lived up to his billing. He’s only batting .232, or eighth best on the team. The Nationals are in 4th place in their division, have a losing record, and are over nine games back from the leaders. It’s not insurmountable, but the team faces a steep challenge to make the playoffs in the fall. Werth may prove to be a great player, but he only has success less than a quarter of the time and his annual salary of $10 million is over 16 percent of the National’s annual payroll -$63,856,928! That’s a problem that many owners in all professional sports have – they focus on one player that can hopefully provide them with a championship rather than building a team.
The same holds true with your investments. Holding a high concentration in one stock (even if it’s a company that you’ve worked for, or has brought you financial success in the past) is too risky and can be a drag on your overall portfolio. Investors tend to look into the rear view mirror to make their investment choices. They focus on what’s been successful and hope that will provide them with the same or greater level of profit. There’s a lesson to be learned from the Boys of Summer. Teams like the Phillies, Red Sox and Yankees have success because they’ve built a team that works together to get that World Series ring. There are stars, rookies, role players and old timers that work together with purpose lead by a manager who charts a plan for victory.
Who’s drawing up your lineup card for your investments? Be careful not to swing for the fence.