Several years ago I met with a woman from Wyoming. She had come to the Los Angeles area to visit her daughter. She was also here to buy a winter home. It made a lot of sense. Be able to visit family and give Wyoming a break for the winter months. There was only one problem. The home she was buying was up at Big Bear Lake, about 100 miles from Los Angeles. For those who don’t know, Big Bear Lake is at about 7,000 feet, and is almost as cold in Wyoming during the winter. Also it’s a 5 hour round trip from Big Bear to Los Angeles and back. Not really a convenient drive for an older woman, often in the snow during the winter. I chuckled about that for awhile after.
Now I’m sure she had good reasons for the purchase. But it brings up a point about investing. Sometimes we get focused on a particular investment idea. We feel that we need to diversify, or sell an expensive investment. But then we turn around and buy something very similar. Selling Cisco and buying Intel is not really changing a portfolio very much. Neither is trading in a junk bond from one retailer to a junk bond of another.
If you’re making a change to your portfolio make an actually change. If you have too much tech, when you sell Cisco, buy Walmart, not Intel. Don’t trade the 60 inches of snowfall in Cheyenne for the 65 inches of snowfall in Big Bear, and think you’re getting sunny weather out of the deal.